Netflix Pre-earnings Analysis
At one point last year, Netflix seemed unstoppable. Shareholders enjoyed a massive rally since early 2023 that delivered more than 300% in returns, but that rally came to an end mid 2025, leading Netflix shares 35% lower.
Netflix’s rally was backed by solid fundamentals and financial performance. The company has grown revenue at a steady pace for 24 months, recovering from a dip in revenue deceleration seen in 2022. Profits also rebounded, reaching record levels in 2024-2025. Netflix basically became a cash generator, allowing them to build up their free cash flow and maintain a healthy balance sheet. However the company’s recent aggressive bid to takeover Warner Bros. Discovery Studios has eclipsed their financial strength.
Even if Netflix posts strong earnings today (the report is after market close), investors will likely ignore the numbers and maintain their focus on the acquisition. At $72 billion, the bid for Warner Bros. is extremely expensive and can take years to reflect its true implications. Netflix has enjoyed being a streaming focused business with little overhead for years, this deal changes that and investors don’t know how the company will handle it. Plus, $72B in an expensive debt to tack on, it may erode earnings for a while before the synergies between the two companies make up for it.
Earnings expectations:
Netflix’s revenue is set to modestly grow from the last quarter, but earnings per share are expected to dip. The company missed EPS expectations in Q3, another miss or decline this quarter could put more pressure on shares. The technicals currently look bearish, with the stock unable to recover even above the 10/20 day moving averages (meaning the price is continuously trading below the 20 day average).
Option chain analysis:
Implied volatility on Netflix’s options suggests a move of (+/-) $7 on the January 23rd, 2026 option chain. Looking further out, the February 20th expiration shows an IV reading of 47%, which is about a (+/-) $10 move.
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