After Missing Out on Roku, Netflix Claims It Won't Buy Lionsgate. Here's Why the Market Hates That Answer.

2026 has been rough for Netflix (NASDAQ: NFLX). Shares of the streamer are down 17.5% year to date.

That's not surprising. In February, Netflix lost a bidding war to acquire Warner Bros. Discovery to Paramount Skydance Corporation. Last week, its shares fell about 3.5% on reports that it had been interested in buying streaming platform and device maker Roku (NASDAQ: ROKU) but lost that bid to Fox Corp. (NASDAQ: FOX).

The company's shares sank further after a company spokesperson reportedly denied rumors that Netflix was pursuing Lionsgate (NYSE: LION). Here's why the market didn't like that news, and what it means for the company (and its shareholders) moving forward.

Image source: Getty Images.

Why Warner Bros. Discovery?

All of the Netflix mergers and acquisitions (M&A) chatter stems from its 2025 bid to acquire Warner Bros. Discovery, which owns film and TV studio assets and a massive content library.

Warner seemed like a perfect target for Netflix. Netflix's original business model -- the one that made it a member of the powerhouse "FAANG" stocks of the 2010s -- was to stream other companies' existing content libraries on the cheap while simultaneously creating original content available only on Netflix. That worked because those other companies lacked streaming services of their own.

This perfect world for Netflix was shattered when Disney bought 21st Century Fox in 2019, prompting a wave of consolidation and new streaming service rollouts. Netflix suddenly became the lone major streaming service with no affiliated legacy movie or TV library:

Data as of October 2025; chart by author.

So when AT&T spun off its media assets -- which included the Warner Bros. movie studio, HBO, CNN, DC comics properties, and cable channels like Food Network and HGTV -- as Warner Bros. Discovery in 2022, why wouldn't Netflix try to pick it up?

Deals or no deals

On April's earnings call, Netflix's co-CEO Ted Sarandos seemed to indicate he was interested in pursuing future deals, saying, "We really built our M&A muscle [by pursuing Warner Bros.]. ... M&A for us remains a tool to help us achieve our goals. And as you can see with the WB deal, we'll remain very disciplined in how we approach it."

Since then, rumors have been swirling that Netflix has its sights set on the one remaining major unaffiliated film studio, Lionsgate. Lionsgate separated its film and TV studio from its Starz cable and streaming business in 2025, presumably to make it more attractive as an acquisition target. With the studio releasing 30-40 films per year and ownership of a film and TV library of more than 20,000 titles, including the Saw, John Wick, and Hunger Games franchises, Lionsgate seems like an attractive acquisition target for Netflix.

Roku, on the other hand, looks like less of a natural fit, and there are conflicting reports on whether Netflix was in fact aggressively pursuing Roku or whether it didn't even bother to bid. Even if it had tried to beat Fox's offer for the device maker, regulatory scrutiny would have been intense, since Roku's hardware is a major platform for Netflix's streaming rivals.

But why is the market so desperate for Netflix to do a deal anyway?

Image source: Netflix.

The one that got away

Netflix was on the cusp of a massive acquisition in Warner Bros., so it's natural for the market to assume that it wants to make a large acquisition. And with all of its major streaming rivals having scooped up legacy studios of their own in recent years, naturally, there's a belief that Netflix needs to do the same to remain competitive.

However, Netflix's business model has quietly shifted from its roots as the one-stop shop for streaming. It's now prioritizing original movies and series, and those are seeing the largest number of views. But this lack of content volume doesn't seem to be driving away subscribers. Instead, Netflix's post-pandemic revenue is up 47% over the last three years, while its net income has soared by 215%. Meanwhile, its estimated global subscriber count has risen by over 35%.

When I scrolled through my Netflix feed just now, I was surprised by how few non-Netflix options were on the list, but more surprised that I hadn't noticed this quiet content exodus until now. It's a testament both to Netflix's in-house studio strength and its ability to use subscriber data to identify the best content to pursue. The market -- which doesn't have access to that trove of data -- seems to be substituting guesswork for trust in a winning formula.

John Bromels has positions in Amazon, Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Fool has positions in and recommends Amazon, Netflix, Roku, Walt Disney, and Warner Bros. Discovery. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.