After Warner Bros. deal falls through, Netflix CFO says boosting content, ad spend are top priorities

In case anyone’s wondering, Netflix said that, actually, it is doing fine after cutting off its situationship with Warner Bros. Discovery.

Even though Netflix has almost certainly lost its battle for WBD to David Ellison’s Paramount Skydance, the streaming giant’s CFO remains confident that its business is not just healthy, but will grow revenue in the double digits this year.

[In the company’s Q4 earnings call], “we guided you [to] 12% to 14% revenue growth, operating margins increasing to 31.5%, a rough doubling of our ads business to about $3 billion in 2026, [and] about $11 billion of free cash flow,” Netflix CFO Spencer Neumann told attendees of the Morgan Stanley Technology, Media and Telecom Conference last Wednesday.

“But we said all along, this was an opportunity that was nice to have at the right price, not a must-have at any price.”

What’s going to get Netflix to those goals, Neumann said, is “improving our…core content offering around film and series, improving our product experience, continuing to grow that ads business, continuing to expand our entertainment offering, and drive strong, healthy revenue and profit growth.”

Wealth management and advisory firm Wedbush’s SVP of Equity Research, Alicia Reese, has similar confidence in Netflix’s market position, telling CFO Brew that investors really weren’t all that excited about the Warner Bros. deal anyway, given “the high likelihood of intense regulatory scrutiny.”

“Without [Warner Bros.], they still have a global footprint, more money to spend on content—they increased their content spend promise from $17 billion to $20 billion with that extra $2.8 [billion breakup fee] they got from the deal closure—and resuming buybacks. They’re just now, in 2026, starting to see the accretion and the profitability from their growing advertising business,” Reese said.

​​With the aforementioned doubling of ad revenue, and the company’s “overall revenue guidance, which is plus or minus $6 billion of incremental revenue growth year over year, that puts ads at about a 25% contributor to growth,” Neumann said.

John Conca, an analyst at London-based investment research firm Third Bridge, said in an email that “the single biggest driver in Netflix’s success is the scaling of the ads business.”

Conca said that while “missing out on Warner does hurt…as Warner’s would have provided even more premium content for Netflix to sell its premium ads against, acting as a major accelerant to this business…ultimately, there remains plenty of organic runway for Netflix’s advertising business even without the Warner Bros. catalog.”

Smaller deals. Netflix, however, is operating in what Reese called “a new era” of M&A and licensing in film and TV. Not to say Netflix hasn’t had hit originals recently, like K-Pop Demon Hunters and Stranger Things, she said, but there is still something to learn about how sometimes going after smaller potatoes—or studios, in this case—is better than hunting for whales.

“There are a few small studios that would be nice tuck-ins [for Netflix to buy] that have great content. Let them keep operating as they do; you just don’t have to license the content anymore, it just goes directly to your platform…A24, Neon, those might be good examples; they’ve been doing phenomenally well,” Reese said.

On the other hand, she said, “if the Paramount-Warner Bros. deal goes through…it’s kind of a green light for other media and entertainment companies to consolidate.”