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Paramount Gets Warner Bros. Discovery, But Netflix Comes Out a Winner
27 Feb 2026
Transcript generated automatically by AI and may contain errors.
Chapter 1: What does Paramount's acquisition of Warner Bros. Discovery mean for Netflix?
Warner Brothers Discovery has a buyer again. Motley Fool Money starts now.
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From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoy. I'm joined today by Lou Whiteman and John Quast. And guys, our plans were all thrown out the window last night when we found out that Netflix is apparently not going to be buying Warner Brothers Discovery. Paramount has swooped in again. John, what did we learn?
And is this saga going to finally be over? Are we going to continue debating this for the next six months?
Well, yeah, I think the saga is finally over. I think that Netflix shareholders should breathe a deep sigh of relief. I didn't like this deal from the start for Netflix. In my view, Netflix's business is humming along just fine. Why saddle itself with a mountain of debt to buy an asset that is inferior to itself? That simply didn't make sense for me.
And I think that Netflix shareholders are coming out good here now that Paramount is the winner for the Warner Brothers assets.
Lou, let's go through some of these details. Paramount Skydance is gonna be paying $31 a share for Warner Brothers Discovery. The prior agreement was $27.75 per share from Netflix. That was cash. The difference between those two numbers is this spinoff of some cable assets that was an unknown value, but could be more than the delta there, $3.75. It could be worth less.
Is this actually a better deal for Warner Brothers Discovery? It seems like we're increasing uncertainty with, does this deal actually close? We'll get to some of the huge weight that's hanging over this from a regulatory standpoint in a second. But just from a numbers standpoint, why does this make sense?
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Chapter 2: How did Netflix's stock react to the Warner Bros. Discovery acquisition news?
But yeah, $31 in cash is cash. At the end of the day, almost always in these deals, cash is going to get valued higher in terms of a fairness opinion or trying to figure out what's what.
Lou, I also want your thoughts on some of these other details. There's the $31 per share in cash, but there's what's called, I'm reading from the press release here, a daily ticking fee equal to 25 cents per share per quarter beginning September 30th, 2026, as well as a $7 billion regulation or regulatory termination fee that would be payable if regulators block the deal from
That seems like this deal could get really expensive. And by the way, Paramount Skydance is only about a $12 billion company today. So has Larry Ellison just swooped in and said, hey, I'll write a blank check as long as we get this out of the hands of Netflix?
Yeah. Basically, it's fun to look at the relative size of these companies. Certainly, Netflix had a lot more they could do if they wanted to because of their relative size advantage. At the end of the day, if someone is willing to write big checks, that does even the playing field. I think the cleverness of Paramount here is, I think some of those
sweeteners, that's what might have been hard for Netflix to match or match in a way that was financially viable for them. I think Netflix shareholders should be happy that Netflix isn't just going to say, all-in, whatever it takes. I do think, though, I trust this management team. I like the Netflix management team. I do think that they weren't willy-nilly here when they just went for this asset.
I do think it spoke to, if not a need, I think it spoke to, you know, our life is getting harder with getting content. And this is a source of content that we can just pay one price for and have. So I don't I think this is more than a like to have for Netflix. I think they really did want it. But I don't think I don't think they're in trouble if they don't have it.
John, Netflix does now get to go back to kind of being what they were. I agree with you that this was probably a headache that they didn't even really want to take on. But it was better than creating a new competitor with Warner Brothers Discovery and Paramount combining. But now we are going to potentially have that competitor.
It's not going to close likely until late this year, maybe even into next year. But... Is a Paramount, Skydance, Warner Bros. Discovery combination going to be a viable competitor to the Netflixes, the Disneys of the world? We even still have NBC and Peacock out there. Is this going to be one of the big players? And do they have the financial wherewithal to do that?
Because this is going to be a company saddled with debt.
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Chapter 3: What financial implications does Paramount's deal have for Warner Bros. Discovery?
But I think that it would make a great script of Succession or something like that, but I don't really believe it.
That's going to be the next show.
Let's be honest, if I'm a Netflix shareholder and they did just put their balance sheet on the line in hopes that Paramount would be slightly more risk-on than them, I need to rethink my admiration for that management team. You are really, really throwing the management team under the bus if you think they were playing that game, just from my perspective.
Do you think do either of you think that it's going to be possible in the next, let's say, three to five years that we find some deal between Netflix and Paramount Warner Brothers Discovery, whatever this entity is going to be called, where they go, you know, we're just going to license a bunch of this content that we just acquired to Netflix because Netflix can write us the biggest check. John.
Sure, anything is possible. And there are some assets here that I think that Netflix would have liked to have had its hands on, in particular, the DC Comics intellectual property. I think that Netflix can do a lot of things like that a la Disney. So yeah, there is a possibility that it's willing to license this from the new entity.
The other potential winner here is potentially movie theaters. I think it's probably more likely that we'll see more movies in theaters with this combination versus with Warner Brothers Discovery going to Netflix. When we come back, we're going to get to a flood of earnings news this week. You're listening to Motley Fool Money.
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Welcome back to Motley Fool Money. We had a lot of earnings come out this week and the big one was Nvidia. That was obviously the one that drives the market, both the S&P 500 and the NASDAQ. John, what did we learn from Nvidia and was it as bad as the market's 5% decline in the stock indicates?
Really, the investment community is wondering about future growth more than anything, and long-term. It just reported 73% revenue growth in the most recent quarter. It's expecting an acceleration to 77% in the upcoming quarter.
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Chapter 4: What are the regulatory challenges surrounding the Paramount deal?
But OpenAI isn't raising this money to park it in the bank. It is going to be spending this money on infrastructure, on AI. So, yeah, I think that the capital expenditures can keep rising and Nvidia can keep growing. How much is the question?
Lou, my question here is around whether this was just the market getting certainty around how much of that revenue that John said that hyperscalers are going to be spending over the next year, somewhere around $650 billion, $700 billion. We now have a matchup between what the growth of their spending is going to be in 2026 and what Nvidia is expecting to grow in 2026.
Now the question, it almost seems like it's already turning to 2027. Are those hyperscalers going to spend a trillion and a half dollars, and this is going to be a continued growth story? Or have we hit some sort of peak or we're near a peak?
Because when you look back at the capital spending in the late 90s and early 2000s, that was actually the warning sign that we were... When you started decelerating, that was when companies like Cisco really, really took it on a chin. I don't want to get... too caught up into those analogies, but that is the real only historical comparison that we can make right now.
Certainly, the market thinks so. I find it interesting, if you look at Nvidia stock, it's been a wonderful stock, up 50% over the past year, but basically flat in the last six months. It has done nothing in the last six months. I think this is the exact conversation that investors are having. There's nothing wrong with this business, but how much higher can it go?
I mean, look, Meta and some of these companies using off-balance sheet, it feels like we're getting to the point where we just can't go higher. NVIDIA pushed back at this though. Yes, 50% of data center revenue came from the top five hyperscalers, so there is market concentration.
They talked a lot in this quarter about the diversity of demand coming from model builders, enterprises, sovereign customers are a big part of this. There could be other levers to pull here, but I think that's what the market is debating here. There is no question about the strength of Nvidia's business. All of the metrics are off the charts.
I don't think they are relative to what they're doing now. unreasonably valued. But how much more can we squeeze this as far as upside? That is the debate. And I think it's a fair question. I think there could be an answer. I don't think it's set in stone. But I do think that, yeah, there is just no way that the growth we have seen could continue indefinitely.
Even these cash-producing hyperscalers just don't have the cash to keep jumping the way they have.
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