Netflix’s shares fell over 5% on Tuesday after the company announced that it expects revenue to be essentially flat in the current quarter, following years of growth. The streaming giant reported a profit of $2.4 billion on revenue of $12 billion in the final three months of last year and forecasted revenue of $12.1 billion for this quarter. Shares were down over 4% to $83.07 in after-market trades.
The company is focused on improving its core business by increasing the variety and quality of shows and films, as well as strengthening its ad business, according to co-chief executive Ted Sarandos. Netflix aims to double revenue from its ad business to $3 billion this year, said chief financial officer Spencer Neumann. The company’s updated subscriber number, which topped 325 million, showed solid membership growth last year.
Sarandos highlighted a strong lineup of shows, including upcoming new seasons of “Bridgerton” and “One Piece,” as well as a deal to stream the coming World Baseball Classic to viewers in Japan. The earnings report came as Netflix presses a bid to buy television and film titan Warner Brothers Discovery (WBD). Co-chief executive Greg Peters described the potential acquisition as a “tremendous and achievable opportunity” to bring the two businesses together.
Netflix revised the terms of the deal to make it all-cash and provide WBD shareholders with more certainty about the transaction. The revision is expected to enable a shareholder vote on the deal, backed by WBD’s board, by April of this year. The acquisition would significantly expand US production capacity and investment in original programming, driving job creation and long-term industry growth, according to Sarandos.
The bid is not without competition, as Paramount Skydance has filed a lawsuit against WBD in an effort to press its own unwelcome bid to buy the company. The lawsuit seeks to compel the WBD board to provide certain information to shareholders that Paramount argues will cast its offer in a more favorable light. The saga has been ongoing for several months, with WBD initially putting out word that it was open to acquisition offers and subsequently accepting Netflix’s bid.
The Netflix offer favored by the WBD board does not include buying WBD television properties such as CNN and Discovery, which would belong to a newly created and publicly traded company called Global Networks if the deal is sealed. Paramount Skydance has stated that it will solicit proxies against the Netflix deal if WBD calls a special meeting to vote on the agreement. The outcome of the bidding war remains to be seen, with significant implications for the entertainment industry.
