Why the Warner Bros. Deal Will Likely Make or Break Netflix's Stock Performance in 2026

Streaming giant Netflix (NASDAQ: NFLX) is looking to get even larger and more powerful through its planned acquisition of Warner Bros., which is still part of Warner Bros. Discovery (NASDAQ: WBD). Paramount Skydance has been trying to buy the business with what it believes is a superior offer, but for now, Warner Bros. Discovery shareholders believe the Netflix deal is the better one.

How this ends up playing out this year is likely to have a drastic impact on Netflix's share price, which has been struggling in recent months.

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Beating out Paramount may only be the beginning for Netflix

It was only a month ago that Netflix announced its plans to acquire Warner Bros. for $82.7 billion, and already, a lot of drama has gone on since then. Paramount has launched a hostile takeover attempt for all of Warner Bros. Discovery, which has been unsuccessful thus far; shareholders are in favor of the Netflix deal instead.

But beating out Paramount wouldn't be the only obstacle for Netflix. There are antitrust issues that raise questions about whether regulators would even allow a Netflix-Warner Bros. deal to go through. It could simply be too strong a powerhouse for the streaming industry to handle.

Why the Warner Bros. acquisition may hurt Netflix's stock in 2026

If Netflix ends up being successful in acquiring Warner Bros., it will acquire HBO and film and television studios that will broaden and diversify its business. But in doing so, Netflix will also need to take on tens of billions of dollars in additional debt to help fund the deal.

And while the Warner Bros. brands may be powerful, they haven't been leading to stellar results for Warner Bros. Discovery. The company has struggled, incurring a net loss in three of its past four quarters. Although Netflix isn't buying the entire business, just the Warner Bros. piece, it can nonetheless be concerning to Netflix investors as it highlights the challenges the company will likely face in integrating their operations.

Netflix has no problems with profitability, but it does trade at 38 times its trailing earnings, which is a bit of a premium given that the average S&P 500 stock trades at a price-to-earnings (P/E) multiple of just 25. This means investors have high expectations for the business, and if the Warner Bros. deal weighs down Netflix's overall earnings, that could be a big problem for the stock. Investors may be anticipating those problems already, hence, the stock's decline since the announcement.

Should you buy Netflix's stock?

In the past six months, Netflix's stock has declined by around 30%. And news of the Warner Bros. acquisition doesn't appear to be sitting well with investors as the stock continues to fall.

Acquiring Warner Bros. would certainly give Netflix more assets and brands to work with and expand its library, but whether it's worth taking on debt and the effort to make the deal pay off is debatable, given that Netflix is doing just fine on its own. If the deal ends up falling through, it may actually give Netflix's stock a boost.

I do think there could be a big payoff for Netflix if it buys Warner Bros., but it won't be easy, and it could take multiple years to successfully integrate the business in a way that improves its overall profitability. If you're willing to take on that risk and uncertainty, buying the stock now while it's on the decline may be a good move.

However, I'd take a wait-and-see approach with the stock as getting bigger isn't always better for a business in the long run. This year may prove to be a tough one for Netflix if the Warner Bros. deal goes through, as it may not have an easy time convincing investors that such a large deal is necessary and worth the added debt.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.