Could Netflix's $82.7 Billion Warner Bros. Acquisition Be a Strategic Mistake? Analyzing Whether This Is Really a Good Move for Investors

The Real Cost: $59 Billion in Debt Is a Heavy Price Tag

Netflix announced plans to acquire Warner Bros., currently owned by Warner Bros. Discovery (NASDAQ: WBD), in what would be valued at $82.7 billion including debt. On the surface, this seems like a game-changing opportunity for Netflix (NASDAQ: NFLX) to dramatically expand its content portfolio, snapping up HBO, HBO Max, and entire TV and movie studios. But here’s where investors need to pump the brakes: the math tells a different story.

To fund this deal through a combination of cash and stock, Netflix would need to take on approximately $59 billion in new debt. As of Q3, Netflix carried just $14.5 billion in long-term debt. That means this acquisition would quadruple the company’s debt load overnight. While Netflix’s robust free cash flow of nearly $9 billion over the past year positions it to gradually chip away at the debt, the interest costs alone would climb significantly—a headwind for future profitability.

Why Warner Bros. May Not Be the Golden Goose It Appears

Here’s the uncomfortable truth: Warner Bros. Discovery has been underperforming. Over the trailing twelve months, the company generated $37.9 billion in revenue but only $482 million in net income—translating to a razor-thin 1.3% profit margin. Compare that to Netflix’s consistent 24% profit margin, and you start to see the problem.

The history isn’t encouraging either. AT&T spun off Warner Bros. in 2022, and since it merged with Discovery, the business has struggled rather than thrived. Adding an underperforming asset to Netflix’s lean operation could introduce operational complexity, integration costs, and most critically, margin compression. Netflix isn’t just acquiring a content library; it’s acquiring decades of organizational baggage and structural challenges that have proved difficult to solve.

The Regulatory and Competitive Gauntlet Ahead

Even if Netflix believes this is a good move strategically, the deal faces two major obstacles. First, federal antitrust regulators and President Donald Trump’s administration will scrutinize whether such a mega-merger serves competition. Second, Paramount Skydance has entered the ring with a higher hostile bid for Warner Bros. Discovery, potentially triggering a bidding war that would drive the price even higher.

If Netflix gets caught in an acquisition arms race, the deal becomes exponentially worse for shareholders. Overpaying would only amplify the concerns about whether this gamble makes financial sense.

The Bottom Line: Netflix Doesn’t Need This Deal

Netflix has already proven it can dominate the streaming market without major content acquisitions. Its competitive strength comes from its platform, its subscriber base, and its operational excellence—not from owning old Hollywood assets. Adding Warner Bros. would be a massive leap of faith requiring the company to prove it can turn around underperforming operations while managing a significantly higher debt burden and potentially compressed margins.

While the opportunity appears tantalizing, the risks significantly outweigh the rewards. Netflix’s current trajectory doesn’t require this level of consolidation. Whether through regulatory rejection or a pricing battle that makes the deal untenable, there’s a reasonable chance this acquisition never closes—and that outcome might be the best one for Netflix shareholders.