Why is Netflix Stock Down 5% Despite Earnings Beat? Inside NFLX Q4 FY25 Earnings

Netflix delivered another strong quarter of financial results, but the market did not celebrate. On January 20, 2026, the company reported fourth quarter fiscal 2025 earnings that topped expectations, yet Netflix’s share price slid more than 5% in after-hours trading. On the surface, growth looked intact: revenue increased, profit expanded, subscriber count climbed, and advertising revenue gained traction. So why was the reaction so tepid?

Investors and analysts are watching more than just headline numbers. At a time when Netflix is evaluating one of the largest acquisitions in entertainment history, markets are reading between the lines and seeing a future that is less predictable than the recent past.

Let’s break down with this blog what happened in Q4 FY25 of Netflix, why traders are selling into what looks like a solid earnings report, and what to watch for next.

Netflix Q4 FY25 Earnings Snapshot

Sources: Netflix earnings release 

This table captures the core themes of the quarter: top-line growth, profit expansion, and continued subscriber momentum, albeit at a slower pace than in prior years.

Netflix posted $12.05 billion in revenue, growing nearly 18% YoY and slightly above analyst expectations. Profit jumped close to 30% as efficiency improved. Paid subscribers now exceed 325 million worldwide, a meaningful milestone in a highly competitive streaming environment. Ad revenue, still a small share of total sales, more than doubled in 2025, showing promise as a secondary growth engine.

On paper, these are good results. Investors have historically rewarded Netflix for accelerating revenue and expanding margins. And yet… the stock’s price reaction tells a different story.

Did Netflix Beat Analyst Estimates?

Yes. Netflix beat consensus expectations on both key earnings metrics:

• Earnings Per Share (EPS): Reported at $0.56 vs. $0.55 expected.
• Revenue: $12.05 billion vs. ~$11.97 billion forecast.

Beating estimates should be a market-positive event, particularly when the beat is consistent across revenue and profit. But this time the beat was modest, and the real driver of sentiment came from guidance and strategic decisions discussed alongside the results.

How Much Did the NFLX Stock Fall?

Netflix shares are down by about 5% in after-hours trading following the earnings announcement. This decline was sharp enough to outweigh the earnings beat, signaling investor disappointment and raising questions about future growth.

Why Did Netflix Stock Fall?

Despite solid earnings, the stock fell for several interconnected reasons:

Slower Subscriber Growth and Market Saturation

While Netflix added more subscribers, the growth rate has decelerated compared to previous years. In 2025 Netflix added roughly 23 million subscribers compared with 41 million the year before. Markets worry that Netflix may be approaching saturation in some countries, weakening one of its core long-term growth engines.

NFLX Forward Guidance Fell Short of Expectations

Netflix’s projected growth for Q1 2026 and full-year revenue came in lighter than what Wall Street hoped for. 

For Q1 2026, Netflix guided:

• Revenue: $12.16 billion, implying about 15.3% YoY growth, slightly below Wall Street’s consensus of roughly $12.18 billion.
• Earnings Per Share: $0.76, below the roughly $0.81 per share analysts were expecting.

This combination of revenue and EPS guidance came in modestly lighter than forecasts, which triggered investor selling after earnings.

For the full fiscal year 2026, Netflix forecast:

• Annual revenue between $50.7 billion and $51.7 billion, reflecting about 12-14% growth compared with 2025’s $45.2 billion.
• Operating margin of around 31.5 %, with plans to double advertising revenue to roughly $3 billion in 2026.

While the annual outlook was in the range of expectations, it was the near-term first quarter guidance that fell short enough of consensus to temper the otherwise positive reaction to the quarter’s beat.

Share Buyback Paused, Acquisition Overhang and Strategic Uncertainty

Netflix announced that it would pause its share buyback program to build cash in preparation for the looming acquisition of Warner Bros. Discovery (WBD). Many investors view buybacks as a direct way to return cash to shareholders, and halting them, even for strategic reasons, created short-term headwinds.

The company’s all-cash bid to acquire Warner Bros. Discovery has become both a strategic opportunity and a risk factor. While Netflix believes the acquisition could reshape its competitive position, the scale of the deal and regulatory scrutiny has left investors cautious about execution risks and potential dilution.

What the Netflix CEO and Management Are Saying

During the earnings call and shareholder letter, Netflix’s co-CEOs emphasized confidence in long-term growth, highlighting:

• The strength of Netflix’s content lineup and global reach.
• Rapid expansion of advertising revenue.
• Strategic logic for the Warner Bros. transaction.

Management reiterated that long-term market share gains and revenue diversification remain top priorities. However, cautious commentary around near-term growth pacing and investments underscored why markets hesitated.

What to Look Out For Next With Netflix?

Here are the themes and catalysts Netflix investors will be watching closely:

• Subscriber Metrics & Growth Markets: Will Netflix find new growth pockets in emerging regions, or innovate beyond subscription growth?
• Advertising Revenue Trajectory: In 2025, Netflix generated about $1.5 billion from ads. Management expects this to roughly double in 2026, offering a second growth engine.
• Warner Bros. Acquisition Progress: Regulatory approvals and integration plans for the Warner deal will be critical. Successful execution could transform Netflix’s content portfolio but also carries risk.
• Content Strategy & Engagement: With major show finales and new franchises in the pipeline, Netflix’s ability to retain and grow engagement will influence long-term valuation.
• Analyst Outlook: Most analysts remain optimistic on Netflix’s earnings power and cash generation, even if near-term growth appears subdued.

Netflix’s Q4 reporting was strong by many traditional metrics, but markets are forward-looking. A combination of slowing subscriber gains, cautious guidance, strategic shifts, and macro headwinds created the perfect backdrop for a share price pullback despite an earnings beat. 

As always with high-growth assets, investors are pricing future growth, not just past performance, and that is where the questions now lie for NFLX.

Disclaimer:

The content is meant for education and general information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. The securities quoted are exemplary and are not a recommendation. This in no way is to be construed as financial advice or a recommendation to invest in any specific stock or financial instrument. Readers are encouraged to verify the exact numbers and financial data from official sources such as company filings, earnings reports, and financial news platforms and to conduct their own research, and consult with a registered financial advisor before making any investment decisions. All disputes in relation to the content would not have access to an exchange investor redressal forum or arbitration mechanism. INDmoney Global (IFSC) Private Limited,Registered office address: Office No. 507, 5th Floor, Pragya II, Block 15-C1, Zone-1, Road No. 11, Processing Area, GIFT SEZ, GIFT City, Gandhinagar – 382355.