Is the momentum of "Stranger Things" fading? Netflix's $59 billion loan hints at a growth turnaround for "Stranger"

Netflix reported solid results in Q4 2025, supported by the blockbuster final season of “Stranger Things.” Revenue increased by 18% year-over-year to $12 billion, with global paid memberships exceeding 325 million, and free cash flow (FCF) reaching $1.9 billion. However, market reactions were lukewarm. The reason is that the company announced plans to acquire Warner Bros. Discovery (WBD) for approximately $72 billion, financing $59 billion with bridge loans. This decision forced a temporary halt on share buybacks.

To maintain its competitive edge in the streaming wars, Netflix is now shifting from a mere content company to a “robust media empire.” However, this ambitious strategy also introduces immeasurable financial risks.

Major Shift in Netflix’s Growth Engine—From “User Number-Driven” to “ARM Enhancement” at a Crossroads

Netflix’s real problem isn’t whether its performance is good or bad, but the fundamental challenge of “how to continue growing moving forward.”

Previously, Netflix’s growth engine depended on expanding through new user acquisition. But in mature markets, user growth has begun to slow. The company has pivoted its strategy to focus on increasing “Average Revenue per User (ARPU)” from existing users. Specifically, raising prices and strengthening password-sharing measures are the main pillars.

Advertising is also part of this strategy, but results have been more limited than expected. In 2025, ad revenue surpassed $1.5 billion, but it fell significantly short of initial institutional investor forecasts (between $2 billion and $3 billion). Moreover, the current programmatic advertising system is still in testing, and in the short term, ad slots are more a means of low-cost customer acquisition than a primary revenue source.

Against this backdrop, Netflix has sharply lowered its 2026 growth outlook to 12–14%. Many industry analysts now assess that the company has entered a “low-growth era.” Internal management improvements alone can no longer sustain double-digit growth, breaking the “growth myth.”

Facing these limitations, Netflix has finally begun seeking strong external drivers. This has led to the highly aggressive decision to acquire WBD.

The Double-Edged Sword of the $72 Billion Acquisition—Hidden Risks of Debt Explosion and Cash Flow Pressure

The WBD acquisition transforms Netflix from a lightweight tech company into a traditional media company burdened with heavy debt overnight.

By raising $59 billion in bridge loans for this acquisition, Netflix’s balance sheet will deteriorate dramatically. As of Q4 2025, the company already had $14.5 billion in confirmed total debt and $9 billion in cash, resulting in net debt of $5.5 billion. If the $59 billion loan is executed, total debt will swell to more than four times the current level.

Meanwhile, Netflix’s free cash flow (FCF) is trending upward, expected to reach about $11 billion in 2026. But a serious issue remains: Even if Netflix allocates all of its projected $11 billion FCF in 2026 to debt repayment, it will take over five years to fully pay off the bridge loan.

Another concern is that integrating HBO and WBD’s vast film libraries could significantly increase content amortization pressures. Currently, the content amortization ratio is maintained around 1.1, but this could worsen considerably after the merger.

In other words, Netflix will likely have to enter a “debt repayment mode” for the foreseeable future, prioritizing cash flow to service interest and repay debt. If the integration efficiency of WBD assets falls short of expectations, this massive borrowing could become a growth booster rather than a catalyst, turning into a black hole that drags down valuation.

The Alchemy of Harry Potter and DC Universe—IP Integration as the Key to Success

Why is Netflix willing to take such risks? The answer lies in WBD’s extraordinary content assets.

From the Barnburner studio to its London base, WBD owns Harry Potter Universe, DC Universe hero content, HBO’s high-quality drama library, and other rich IPs that streaming platforms crave. These can serve as a trump card to fill the “content moat” that has long been considered a weakness for Netflix.

The true significance of this acquisition isn’t just short-term financial performance but the potential to rewrite the competitive landscape in the medium to long term.

Firstly, WBD’s IP will greatly strengthen Netflix’s stable content supply, reducing dependence on a single blockbuster. Secondly, with its global distribution network and advanced recommendation system, Netflix can unlock unprecedented commercialization opportunities for these IPs.

However, realizing this ideal scenario will take more time than the market currently expects. Netflix’s current P/E ratio is about 26, already reflecting high growth expectations.

Optimistic investors see the stock price fluctuations as a “bargain buy,” believing that if WBD’s IP is well integrated into Netflix’s content ecosystem, a new growth cycle could restart. Conversely, cautious investors see the series of measures—hundreds of billions in loans, halted buybacks, downward revisions of growth forecasts—as clear signals that Netflix has entered a new stage where risks and returns are both amplified.

This is the root of the market’s conflicting opinions.

Outlook Beyond 2026—Success or Failure

Ultimately, the fate of this “IP alchemy” by 2026 remains uncertain. How much value will Harry Potter and other key WBD content generate on Netflix? How will Netflix handle the time costs of integration and the debt pressures during that period? It will likely take several quarters to find clear answers.

Netflix now stands in a position akin to a “stranger” in the streaming industry. Should it pursue safe operations to defend its established position, or take bold risks to build a new empire? The choice will significantly influence its future corporate value.

Note: This analysis provides macroeconomic insights and market commentary based on publicly available information and does not constitute specific investment advice.