Netflix Stock Surges 13.8% as Company Walks Away from Warner Bros

Netflix Inc. (NASDAQ: NFLX) shares jumped 13.8% on February 27, 2026, closing at $96.24 after the streaming giant announced it would not raise its bid for Warner Bros. Discovery assets, allowing Paramount Skydance to prevail in a months-long bidding war. The decision, coupled with a breakup fee and preserved capital flexibility, fueled investor relief and optimism about disciplined growth.

Netflix had been pursuing Warner Bros.’ studio and streaming assets in a proposed deal valued at around $83 billion earlier in negotiations. On February 26, the company formally declined to match Paramount Skydance’s superior offer, stating in a release that the higher price made the transaction “no longer financially attractive.” Co-CEOs Ted Sarandos and Greg Peters said, “We believe we would have been strong stewards of Warner Bros.’ iconic brands,” but emphasized capital discipline over overpaying.

The withdrawal triggered a significant stock rally, with shares opening sharply higher and trading up to $96.75 intraday before settling at $96.24 on volume exceeding 200 million shares — far above average. The move came amid a broader pullback earlier in 2026, with Netflix down 38% from its June 2025 peak of $134.12 and trading near $75 lows in recent weeks.

The decision frees Netflix from a potentially dilutive acquisition while securing a breakup fee — details of which were not disclosed but expected to provide a meaningful cash influx. Analysts viewed the exit positively, noting it avoids integration risks in a competitive streaming landscape and allows focus on core strengths: content investment, advertising growth and subscriber momentum.

Netflix’s most recent earnings, reported January 20, 2026, for the fourth quarter ended December 31, 2025, showed revenue of $12.05 billion, up 17.6% year over year and beating estimates of $11.97 billion. Earnings per share came in at $0.56, topping consensus of $0.55. The company crossed 325 million paid memberships, with global viewership approaching one billion people. Members watched 96 billion hours in the second half of 2025, up 2% year over year. Advertising revenue more than doubled from 2024, surpassing $1.5 billion for the full year.

Operating income rose 30% to $2.96 billion in the quarter, expanding full-year 2025 margins to 29.5% from 26.7%. Netflix guided 2026 revenue between $50.7 billion and $51.7 billion (12% to 14% growth) and operating margins around 31.5%, including some acquisition-related costs — though the Warner deal’s collapse removes that pressure.

The company paused share buybacks to preserve cash during the bidding process, a move that drew mixed reactions but now positions Netflix for renewed capital returns or aggressive content spending. Advertising remains a bright spot, with projections for roughly doubling in 2026 to around $3 billion, diversifying beyond pure subscriptions.

Analysts upgraded or reiterated positive views post-announcement. Huber Research moved to “Strong Buy,” citing improved valuation and execution. Consensus targets hover around $115 to $130, implying significant upside from current levels. The stock’s forward P/E has compressed to the low 30s from mid-60s peaks, making it attractive for growth investors.

Challenges persist: competition from Disney+, Amazon Prime Video and others intensifies, content costs remain high, and password-sharing crackdowns — while boosting paid subs — risk churn in price-sensitive markets. Yet Netflix’s lead in originals, global reach and ad-tier momentum underpin long-term confidence.

The Warner exit shifts focus back to organic growth. Upcoming catalysts include Q1 2026 earnings (expected mid-April), major releases like anticipated originals, and ad-tier expansion. Management has teased stronger programming slates and international pushes.

As of February 28, 2026, Netflix trades with a market cap exceeding $406 billion, a 52-week range of $75.01 to $134.12, and strong institutional ownership. The surge reflects market approval of strategic restraint, positioning the company to capitalize on streaming’s maturation without the burdens of a massive merger.

Investors will watch for confirmation of the breakup fee and any renewed buyback activity. With the deal drama resolved, Netflix appears poised for a rebound, betting on content, ads and execution to drive returns in 2026.