Netflix to Buy Warner Bros. in $72 Billion Cash, Stock Deal

Summary

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Bloomberg Intelligence Podcast

Episode: Netflix to Buy Warner Bros. in $72 Billion Cash, Stock Deal
Date: December 5, 2025
Hosts: Scarlet Fu and Paul Sweeney

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Overview

This episode explores the blockbuster announcement that Netflix will acquire Warner Bros. Discovery in a $72 billion cash and stock deal. Bloomberg Intelligence analysts break down what this historic merger means for the streaming industry, competitor strategies, the regulatory landscape, and implications for consumers. The episode also covers earnings from Hewlett Packard Enterprise and the airline industry’s post-shutdown outlook, but the headline focus remains the seismic shift in media triggered by Netflix’s acquisition.

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Main Theme

The main thrust of the episode centers on Netflix’s acquisition of Warner Bros. Discovery, examining its strategic rationale, impacts on rivals, regulatory challenges, and what it might mean for content, consumers, and the future media landscape.

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Key Discussion Points & Insights

1. Netflix’s Strategy Behind the Warner Bros. Deal

• Netflix playing the “long game”:
  • Geetha Ranganathan (Media Analyst, Bloomberg Intelligence) stresses that Netflix isn’t reacting to existential pressures, but proactively seeking to deepen its content library and global reach, especially with valuable franchises, as content production costs drop in the age of generative AI.
    • “Netflix kind of sees the writing on the wall and says that they really need to play the long game here and deepen their library with a lot of the beloved and global franchises that Warner Brothers Discovery has to offer.” (Geetha Ranganathan; 02:41)
• Winners and losers:
  • Paramount and Comcast are the short-term losers, as the deal exacerbates their sub-scale positions in streaming compared to Netflix’s new dominance.
    • “This is pretty much game over...without a shred of doubt, they are going to cement their dominance.” (Geetha Ranganathan; 03:41)

2. The New Streaming Landscape: Pressure on Paramount and Comcast

• Numbers illustrate the new reality:
  • Netflix + Warner Bros.: 450 million global subscribers
  • Paramount+: 70 million
  • Peacock: ~40-45 million
• Both Paramount and Comcast “really have to come up with some kind of strategy to fortify their businesses. Maybe they have to look at a potential combination.” (Geetha Ranganathan; 03:41)

3. Regulatory Scrutiny & Potential Remedies

• Complex, multifaceted antitrust review expected:
  • Jennifer Reed (Litigation Analyst, Bloomberg Intelligence) anticipates US, UK, and EU regulators will scrutinize horizontal overlaps (streaming-service consolidation), vertical integration (content creation + distribution), and “monopsony” risks (fewer buyers for scripted content, harming writers and artists).
    • “You have a big streaming service buying a big movie and TV producer...When a company is really strong in both levels of a supply chain, when they vertically integrate this way, that can raise concerns, too.” (Jennifer Reed; 10:26)
• Possible regulatory outcomes:
  • DOJ may demand asset divestitures (e.g., HBO Max) or behavioral remedies (promises on operations and content). If no deal, DOJ could pursue a full court block:
    • “A negotiated settlement could mean agreeing to divest a product such as HBO Max...or agreeing to behavioral remedies...if something like that can't be agreed upon, then the only thing the DOJ has left to do is go to trial and seek a permanent injunction from a judge that blocks the companies from closing the deal.” (Jennifer Reed; 11:49)
• Political overlay:
  • The politics are unpredictable. The administration is signaling displeasure, allegedly preferring Paramount as a buyer, and politics could skew usual antitrust analysis.
    • “At least for right now, we know that the administration doesn't look happy about this buyer. They would have preferred Paramount.” (Jennifer Reed; 13:27)

4. Consumer Experience: Bundling or Integration?

• Will consumers see a single, unified Netflix-Warner streaming service?
  • Management has not clarified yet. Analysts suggest it’s likely HBO Max content will be folded into Netflix for engagement and cost savings, similar to Disney+ “tiles.” But for now, it’s not specified.
    • “At some point they basically fold in HBO Max, all of that content onto Netflix ... But again, no specifics from the Netflix management team just yet.” (Geetha Ranganathan; 06:44)

5. Impact on Hollywood, Content Licensing, and Theatrical Releases

• Theatrical release controversy:
  • Netflix, historically “anti-theatrical,” promises to continue Warner’s movie releases in cinemas (15-20 movies annually) to appease Hollywood and regulators.
• Content for rivals (e.g., Apple TV’s “Ted Lasso”):
  • Netflix states they won’t automatically cut off Warner’s content supply to other platforms, but analysts are skeptical on how sustainable that is.
    • “Ted Sarando said ... Warner Studio is going to continue to do whatever it has been doing. But again, you know, not really sure how that's going to work for Netflix if they just continue to do that.” (Geetha Ranganathan; 04:42)

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Notable Quotes & Memorable Moments

• On streaming dominance:

  • “This is pretty much game over. You know, we already knew that Netflix had won the streaming wars. Now without a shred of doubt, they are going to cement their dominance.”
    — Geetha Ranganathan (03:41)

• On the regulatory bar:

  • “You have a big streaming service buying a big movie and TV producer ... that can raise concerns, too. So the Department of Justice is going to have to dig into both of those issues.”
    — Jennifer Reed (10:26)

• On political unpredictability:

  • “It makes it so hard nowadays to actually really do a true antitrust analysis of a deal because we have seen the Department of Justice and the Federal Trade Commission ... aligning with the Trump administration in antitrust outcomes for deals and pushing the policy priorities of the administration and listening to what the president has to say.”
    — Jennifer Reed (13:15)

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Timestamps for Key Segments

• 02:03 – Headline introduction: Netflix to buy Warner Bros. Discovery
• 02:41 – Analyst breakdown: Netflix’s strategic rationale (Geetha Ranganathan)
• 03:41 – The impact on Paramount, Comcast, and market dominance
• 04:20 – The looming regulatory gauntlet and Netflix’s attempts to allay concerns
• 06:44 – Will HBO Max merge into Netflix or be offered as a bundle?
• 10:03 – Detailed analysis of the regulatory framework (Jennifer Reed)
• 11:41 – What happens if DOJ pushes back? Possible remedies and trials
• 13:15 – The unpredictable politics of major M&A

Note: Subsequent segments discuss topics outside the main theme (Hewlett Packard earnings, airline industry impacts of the shutdown) and are not detailed here.

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Additional Industry Insights (Briefly Noted)

• Hewlett Packard Enterprise:
  • Missed Q1 sales guidance but raised EPS outlook thanks to Juniper deal and “sovereign” (government) AI server deals. Margin discipline means smaller-scale revenue vs. peers like Dell and SuperMicro. (17:15–22:34)
• Airlines & Shutdowns:
  • $200M+ impact on Southwest Airlines was in line with Delta. Transition to premium seating, less growth in low-cost airline space predicted. Fuel price tailwinds waning. (26:14–29:43)

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Conclusion

This episode underscores that Netflix’s acquisition of Warner Bros. Discovery is poised to redraw the streaming, content production, and entertainment landscape globally. The panelists agree that rival players now face existential questions, regulators have a daunting case on their hands, and consumers should prepare for seismic changes in how they access and experience entertainment content.

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For listeners who want to understand the future of digital media, this episode is essential, featuring candid expert analysis and real-time industry context.

Transcript

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[Paul]

It is merger Friday here. Netflix agrees to buy Warner Brothers Discovery in a historic combination, joining the world's dominant paid streaming service with one of Hollywood's oldest and most revered studios. To get the bottom of this, get some real analysis with this return to Geetha Ranganathan. She covers all the media companies for Bloomberg Intelligence here. You know is interesting Geetha, you could argue that Paramount, Skydance and Comcast arguably needed this Warner Brothers Discovery company more than Netflix. Yet Netflix comes out on top here. What do you think the strategy for Netflix is?

[Geetha Ranganathan]

Yeah, thank you so much Paul. So definitely Netflix here kind of really looking at the future. I mean we are I think at you know, this discuss of the media landscape kind of Completely changing with the advent of Gen AI. And I think the barriers to entry for anybody is going to come down substantially because the costs to produce content are going to come down substantially. And I think Netflix kind of sees the writing on the wall and says that they really need to play the long game here and deepen their library with a lot of the beloved and global franchises that Warner Brothers Discovery has to offer. So absolutely not seen as existential for Netflix at all. But I think they see it as existential from a long range perspective. But of course, the big losers here, definitely Paramount and Comcast, at least in the short run.

[Nora]

And talking about Paramount and Comcast here, how are we thinking about the added pressures that they may be potentially facing if we think about the fact that they are lower or subscale, I should say, in terms of their streaming in comparison to Netflix?

[Geetha Ranganathan]

Yeah, this is pretty much game over. You know, we already knew that Netflix had won the streaming wars. Now without a shred of doubt, they are going to cement their dominance. I mean, you just look at the numbers. 450 million global streamers. Yes, Paramount plus was already a subscale streamer with only about 70 million subscribers. Peacock is even in worse, worse shape with, you know, only close to about 40 to 45 million. So this really kind of puts, you know, tremendous pressure on them and they really have to come up with some kind of strategy to, to, you know, fortify their businesses. Maybe they have to look at a potential combination. I don't know what it's going to look like.

[Paul]

Keith, we spoke earlier this morning to Jen Re. She covers all the antitrust stuff for Bloomberg Intelligence and she suggested that this will face a very difficult regulatory review. What if that is in fact the case? What do you think Netflix would be willing to do to maybe get this deal done? Would they think about selling some assets here?

[Geetha Ranganathan]

They definitely could. So, so far, Paul, they're, they're saying all the right things. They're saying everything, you know, that should assuage any regulatory, regulatory fe. That said, I mean, you are combining the number one streaming service in the world with the number three streaming service. Obviously a lot of red flags there potentially. They are, however, saying that this is going to be good for consumers. This, you know, it's going to provide more consumer choice tax, actually going to lower costs for consumers because, you know, they're going to be able to sell a bundle of HBO Max with Netflix potentially lowering costs by, I don't know, 30, 40%. So that's one thing they're saying the Second thing where there was obviously a lot of concern and not just from regulators, but also from Hollywood content and Hollywood moguls would be that, you know, Netflix has typically been very anti theatrical. So they talk always about day and date releases, how, you know, movies should be released directly to streaming. And so obviously there's been a lot of backlash from the exhibitors, from the theater, from the creative community. But Netflix, again, kind of placating everybody, saying that they are going to continue the Warner theatrical strategy by continuing to release those 15, 20 movies year after year in the theaters. And the last thing that, you know, everybody has been worried about is we have to remember Warner is actually a huge content supplier. So they supply all of these big shows. Or you think of Ted Lasso on Apple tv, that's a Warner show. So, you know, again, are they going to pull. The big question is, is Netflix going to pull back on that, on all that content? And just this morning, Ted Sarando said on the call that no, we're not. You know, Warner Studio is going to continue to do whatever it has been doing. But again, you know, not really sure how that's going to work for Netflix if they just continue to do that. But so far they're saying all the right things from a regulatory standpoint.

[Nora]

So from a consumer experience standpoint here, if it's Netflix and they've got Warner Brothers Discovery here, we're thinking about HBO Max and things of that sort, essentially. Are you going to maybe see some sort of merger of experience when you go on to Netflix? You're also accessing hbo or will it be more of a bundle mindset here?

[Geetha Ranganathan]

Yeah, so that is what has been really difficult to parse out. Nora. So they were asked this question again repeatedly this in this morning's call, is HBO Max kind of going to be like one of the tiles that you would see on a Disney plus, right? You go and you see Pixar and Marvel and is HBO going to be something similar to that, that or are they just going to continue to run the two services completely independently? If you kind of run the math, it just doesn't make sense for them to have two separate streaming platforms because you have all of the overhead expenses and the corporates and all of that to accompany it up. So that doesn't really make sense. I think at some point they basically fold in HBO Max, all of that content onto Netflix, although they haven't necessarily clarified that. But I think that in, you know, basically helps them from a cost perspective, helps them from a content perspective, and then really helps them with engagement, which is really what they're looking for. Deepen engagement on the Netflix platform. How do you do that? By increasing the amount of content. So I think eventually that is the game plan. But again, no specifics from the Netflix management team just yet.

[Paul]

Stay with us. More from Bloomberg Intelligence coming up after this.

[Baillie Gifford Representative]

What is actual investing? We believe that it's a real world task to deliver thoughtful capital deployment. It's not about speculating over the short term. It's about understanding the long term opportunities for companies through technological progress or new business models. So we seek out those exploring big new ideas that will change the world. Then we back them to give those ideas time to flourish. Baillie Gifford Actual investors Find out [e-mail].

[Paul]

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[Paul]

Additional offers in January 5, 2026. Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is, you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public you can put together a multi asset portfolio for the long Stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com markets and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC. Crypto trading provided by Zerohash complete disclosures [e-mail] disclosures.

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[Paul]

Big deal of the day. Netflix acquiring Warner Brothers Discovery. What's the regulatory framework? Are the regulators going to take a look at this deal? This is a monster deal in terms of dollars, you know, $80 billion of enterprise value. Let's check in with Jennifer Reed, Bloomberg Intelligence senior litigation analyst. So, Jen, this is a big deal. How are the regulators going to view this?

[Jennifer Reed]

It really is, Paul, and I think, and we've seen a lot of opposition to it coming out already. I think it's going to get really significant scrutiny, not just in the United States by the Department of Justice, but likely also in Europe and by the UK and possibly some other jurisdictions as well. But you know, they're going to look at these overlaps, which in this case are both horizontal. That's in streaming. They both provide street, both companies provide streaming services, but they're also vertical. You have a big streaming service buying a big movie and TV producer and a big content library of content, and that creates vertical issues. And when a company is really strong in both levels of a supply chain, when they vertically integrate this way, that can raise concerns, too. So the Department of Justice is going to have to dig into both of those issues. And last, Paul, I'll say this because we haven't seen very much about it, but there's also what we call a monopsony concern here. Monopsony is when there are a merger results in too few buyers of a service or product. So in this case case, you've got two huge creators of scripted content that are coming together and that could have a negative impact on the artists, the production people, the writers that go into making all the TV and movie content that the companies make.

[Nora]

Jennifer, walk us through. What exactly happens to the deal if the DOJ or regulators more broadly decide to push back on this.

[Jennifer Reed]

Sure. So there are a couple of different things that can happen. I'll start by saying this in depth investigation usually starts by issuing what are called second requests for information. Those are like really big subpoenas where they're going to get a lot of business documents, a lot of data and information from the companies. Now, once the DOJ has looked at all that material, they have to decide either they clear it outright, they clear it with a negotiated settlement with the companies, or they sue to try to block it in trial. A negotiated settlement could mean agreeing to divest a product such as HBO Max and or agreeing to behavioral remedies such as making promises about the way the post merger firm will behave in the marketplace. But if something like that can't be agreed upon, then the only thing the DOJ has left to do is go to trial and seek a permanent injunction from a judge that blocks the companies from closing the deal. They did that when AT&T tried to buy Time Warner several many years ago. But I'll contrast that to when Comcast bought nbcu. They also had some concerns there, but they entered a settlement agreement with respect to that deal.

[Paul]

Jen, politics. I think politics is going to come into this deal, maybe more so than some others here. Generally. I guess on the one hand we have an administration that presumably is more open to consolidation across industries taking a lighter touch. But then there's also a president who makes it personal oftentimes. Do we have any idea how that might shake out?

[Jennifer Reed]

You know, Paul, you're exactly right. And it makes it so hard nowadays to actually really do a true antitrust analysis of a deal because we have seen the Department of Justice and the Federal Trade Commission, I could say.

Aligning with the Trump administration in antitrust outcomes for deals and pushing the policy priorities of the administration and listening to what the president has to say. So where the president and the administration is against a deal is a higher risk, I would say, of that deal having to defend itself in court and the Department of Justice seeking a block. But on the other hand, Paul, we don't really know what's going on behind the scenes. You know, we've seen some of these companies to mergers, hire some Trump aligned lobbyists, powerful people in Washington that have helped them to push through the deal. That was the allegation with respect to the settlement the DOJ entered when Hewlett Packard bought Juniper. We don't know what other kinds of concessions or agreements are being made. You know, this is all sort of the backroom channels. And without knowing that, it's hard to understand where the administration may come out months from now in the end on the deal. But at least for right now, we know that the administration doesn't look happy about this buyer. They would have preferred Paramount.

[Paul]

Stay with us. More from Bloomberg Intelligence coming up after this.

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[Paul]

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[Nora]

We did get some earnings out of Hewlett Packard Enterprise. That's Ticker hp. We did see that this essentially disappointed what investors were looking for here. We did see the company gave an outlook for sales in the current quarter that fell short of the high expectations, particularly for its AI server business. And we've got the best person to help us break this down. We're looking at going to be chatting with Bloomberg Intelligence Senior Tech Analyst Woo Jinho. He's coming to us out of Princeton, New Jersey. Tell us a little bit about what you took away from this earnings report.

[Woo Jinho]

Yeah, thanks for having me. So I actually like it. I know there was a high focus on the revenue numbers for the upcoming quarter, but EPS, they actually raised the EPS guidance from 220 on the low end to 225 and 240 on the high end to 245. So essentially, the strategy that Antonio laid out with the Juniper acquisition is working out as planned. It is cushioning some of these higher commodity costs and the higher AI mix. So, you know, despite the disappointed 1Q sales outlook, the overall year should be fine.

[Paul]

So the company's talking about, you know, substantial interest in its AI servers and they call out governments. And that's kind of new for me at least. I guess I'm kind of used to the talking about the hyperscalers, whether it's Microsoft or Amazon. Talk to us about maybe other categories of people that may be making some AI investments in servers.

[Woo Jinho]

Yeah. Hey, Paul, so let's, let's think about the sovereigns. Let's think about The Saudis, the U.S. the U.S. federal government, they are going to start ramping up their own.

AI initiatives as well. Right? The Department of Energy, Department of Defense, they're customers of HPE's SuperCompute, and they're going to convert from supercomputing to AI servers as some of these configurations start rolling out. They already, you know, HP already has some agreements with the Saudis, but, you know, that's one of the issues with, with HPE's outlook. It's more on the timing of when these deals are flowing through. It's being pushed out more towards the second half of the year versus the first half. But they are going to play a much more meaningful role in the future, not only for hpe, for Dell and Supermicro as well.

[Nora]

Well, so how are they doing in terms of comparison to competitors in this market?

[Woo Jinho]

Well, I mean, you know, HP has.

Made the strategic intent on not going after these lower margin server deals. If we look at some of the competitors the way I have Dell modeled out, they're going to do roughly about $40 billion in AI server revenue. Super Micro, around the similar level. HP for next year is probably going to do roughly about $5 billion in several revenues in fiscal 26. Now look, that $5 billion is nothing to sneeze at, but you know, relatively speaking, it's going to be much smaller in scope and scale.

[Paul]

Why are they smaller? Why are they lagging and is there a plan for them to kind of narrow that gap?

[Woo Jinho]

Yeah, you know, I found that to be disappointing in terms of lagging. I do think they had the assets, assets to, to do so. But at the end of the day, you know, the management team at HP is very focused on shareholder and shareholder value. These server deals are very low in margin and highly competitive. So they're not chasing after these lower margin deals. And one of the strategic reasons on why they're going after HPE is going after these sovereign deals is because they think it's going to be higher in margin. And hopefully that does pan out for them, which is one of the reasons why that, you know, we're talking about one fifth the size of the deal flow for them.

[Nora]

So out of, outside of hp, what else are you really keeping an eye on right now in this tech space?

[Woo Jinho]

Well, well, the play is going to be pretty important. But I will tell you, the DRAM story is actually going to start materializing in as a potential headwind for all of the hardware space. One thing that we didn't discuss on HP is the 300% rise in DRAM prices is going to affect the server sales. They think they're going to pass that through to customers. I have, I'm a little bit skeptical, but I think, you know, the rise in commodity costs and DRAM is going to be the new tariff story in 2026 that's going to affect a lot of these hardware vendors.

[Paul]

Why are drams up so much?

[Woo Jinho]

AI, AI.

You know, these hyperscale, the hyperscale cloud guys are sucking up so much of this memory and the DRAM vendors aren't raising the capacity. So when demand is tilting over one way and some of the standard drams, they're not producing as many drams and the capacity is not growing. You know, there's no nowhere else to go for the price to go higher.

[Nora]

I mean, when we think about, I'm talking about on HP right now in particular, are expectations just too high? Are people putting so much pressure on these companies? And we're seeing these, you know, these estimates and we're not really seeing them delivering or what's your read on that?

[Woo Jinho]

Well, so let's, let's, let's talk about HP in particular. Right. You know, the way I wrote my earnings outlook commentary was it depends on the lens that you look at, right. From an earnings, from a sales lens, the sales that you disappoint. Right. But if we think about it from an earnings and a cash flow lens, the networking business actually did as well as it should have and it's doing the work that it's supposed to be doing in terms of cushioning some of the lower margin business. And quite frankly, I still think that there's potential for earnings upside if networking execution strengthens going into the rest of the year.

[Paul]

Stay with us. More from Bloomberg Intelligence coming up after the this.

As a contractor I don't pay for materials I don't use. So why would I pay for stuff I don't need in my mobile plan? That's why my biz plan from Verizon Business is so perfect. Now I can choose exactly what I want and I only pay for what I need right now with my biz plan.

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Get our best price as low as $25 a line. Visit verizon.combusiness to get started today. New lines only. Price per month with five plus lines includes auto pay and paper free billing and promotional discount, taxes fees, economic adjustment charge applicable. Add ons prices and terms apply. Guarantee applies to base monthly rated stated discounts only. Add on prices.

[Paul]

Additional offers in January 5, 2026. Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss including loss of principal. Brokerage services for U.S. listed registered securities, options and bonds and a self directed account are offered by Public Investing Inc. Member FINRA and SIPC Crypto trading provided by ZeroHelp Complete disclosures [e-mail] Disclosures when.

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[Nora]

Let's switch gears and dig a bit into the industrial space. I mean, just last month we had fears of a government shutdown continuing and we saw it was the longest government shutdown in U.S. history. But this did drag on a lot of the major airlines. And we have a wonderful person to discuss this here with us today, George Ferguson, of course, he's Bloomberg Intelligence Senior Aerospace, Defense and Airlines analyst. And we want to chat a bit about what's going on in terms of Southwest west earnings and how government shutdown actually weighed potentially on this company here. George, what is your takeaway here from what we're hearing from Southwest?

[Baillie Gifford Representative]

Yeah, I mean it was a little bit more than we expected. I think the impact was about $200 million on the quarter. It was in line with what Delta Airlines had reported. We probably, we thought, you know, perhaps Southwest a little bit less impacted as they're not as heavily into the sort of the high volume airports, you know. And actually I think I was a bit surprised as well that they talked about the booking curve we think most people, you know, typically book well before the holiday season. So we wouldn't have expected their booking curve to be as impacted. But I mean again, I think it's, you know, largely in line with what we expected, a couple hundred million dollar hit. I don't think it'll be, it's not going to be terrible.

[Paul]

Stock is up 4.6% today, 52 week high for Southwest Airlines. George, I know you either have published or working on your 2026 outlook here. What's the call for the airlines in the next six to 12 months?

[Baillie Gifford Representative]

Yes, as we look at 2026, we get visibility about six months worth of schedule. We've already started to look at schedules for the new year. In the first half of the year, the domestic business appears to be growing. The domestic capacity for US airlines is growing around GDP ish to 2 and a half percent. And we see less of that growth in the low cost airline space. Now Southwest is in the middle of migrating between, I don't know if I'd call them low cost. I call them budget. They're in the middle of migrating from budget to an airline that's going to offer.

Premium seating and some premium services in the new year. So, so look, you know, it looks like there is a, not a restructuring but an adjustment underway again in that budget, low cost world is going to be less growth than you're seeing in the full service. The trend we've seen here in 2025. So we're thinking that premium seating, full service seating could be a bit excess and could see continued push on the unfairs. We're thinking budget ought to get a bit better. We were projecting kind of a 3% increase in Southwest yields originally before the government shut down. Now we're kind of thinking two and a half percent. I mean that's, that's really not bad for 4Q. So again, we think that sort of carries into the new year. Another big issue in the new year is going to be a lot of the US Airlines got a bit of a kicker, got a tailwind from lower fuel prices. We don't see fuel prices going much lower from here. So that tailwind sort of peels away in the new year and that's something they're going to have to manage as well. Even as they try to get sort of yields sorted out. We don't see yields improving dramatically right now, but we see yields probably firming a bit and maybe not not falling as, you know, falling.

[Nora]

George, you have a broad view between aerospace, defense, airlines and you know, as we're kind of of wrapping up earnings season, if you want to call it that. Did you hear about tariffs at all during this earnings season? Are you expecting to hear about this in 2026?

[Baillie Gifford Representative]

The truth is tariffs really there was a little bit of commentary around tariffs. We heard I think most of it from the engine makers in a couple hundred million, five hundred million here and there, which really doesn't matter a lot on their business. So largely tariffs look to have been, you know, sort of, I don't know if they were sidestepped but avoided by the Arabs. Aerospace supply chain One of the things about the aerospace supply chain is that it definitely bridges the US And Europe and it's definitely sort of a, you know, a nafta. NAFTA is the old word, whatever that North American free trade zone is. There's a lot of componentry that moves around that those two regions and, and so it's going to be, I think in everyone's best interest to keep tariffs off of aerospace. So you know, I think some of that had to play obviously with the European agreements. In North America. We've seen some give and take right as Trump got got mad at, at Canada here and there and decided he was going to put some tariffs on them. But again, largely it's been sidestep. The biggest problem was I think Brazil and late in the, you know, late or recently we've seen the Canadian issue. But I think it's going to go away. I don't think it's going to be a big issue.

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