Prof G Markets: "Netflix Stumbles on Earnings — While Warner Bros. Looks for a Buyer"

Date: October 22, 2025
Host: Ed Elson (Vox Media Podcast Network)
Guests: Jason Bazinet (Citigroup), Alex Heath (Sources newsletter & Access Podcast)

Overview

This episode breaks down two headline-making developments shaking the capital and tech markets:

1. Netflix’s Q3 earnings stumble, primarily due to a major one-time settlement, despite otherwise strong business momentum.
2. Warner Bros. Discovery’s (WBD) potential sale, with speculation around possible buyers and the larger implications for the streaming ecosystem.

The hosts and guests also analyze the impact of OpenAI’s new AI-powered web browser (Atlas) on Google, browser wars, and big tech valuations.

Key Discussion Points & Insights

1. Netflix Earnings Miss and Market Reaction

[02:10 – 06:22]

• Stock Drop:
  Netflix fell as much as 7% after missing Q3 earnings expectations. The miss was mainly attributable to a $619 million tax settlement with Brazilian authorities — a “one-off” event.

  • "Beyond that, it was a solid quarter. Revenue rose 17% year over year to $11.5 billion... a record quarter for ad sales." — Ed Elson [02:48]

• Analyst Perspective:

  • Jason Bazinet (Citigroup) explains the market’s reaction:
    "The shortfall was largely due to a $619 million settlement ... one of the Street's primary metrics. So that's why the stock is down primarily after hours." [04:03]
  • Despite strong ad sales growth (on track to double this year to approx. $2B), ads remain only 4% of total Netflix revenue, so aren’t the main story yet.
    • "2 billion out of 50 ... it's only going to be about 4% of their revenues this year." — Bazinet [05:49]

• Why the Sell-off?

  • Fast-money investors and funds had expected Netflix not only to meet but to raise guidance. The one-off event dashed that narrative, resulting in quick sell-offs.
    • "If that was your narrative ... and this one time event means they don't really raise the full year guide, you sort of didn't get it right and so you're selling your position." — Bazinet [05:09]

2. Warner Bros. Discovery (WBD): Exploring a Sale

[06:22 – 11:17]

• Stock Surge:
  WBD shares jumped over 9% after signaling openness to a sale; CNBC floated Netflix as a potential buyer.

  • "Warner Brothers Discovery stock popped more than 9% after the company signaled it was open to a sale. And CNBC reported Netflix could be a potential buyer." — Elson [02:48]

• Who Will Buy?

  • Bazinet’s take: Netflix is unlikely to buy WBD due to high costs and integration complexity.
    • "Netflix is undeniably on the hunt for intellectual property, but it's very expensive ... so I would put very low odds that Netflix ends up being the contender, the winner for this asset." — Bazinet [07:14]
  • Main contenders: Paramount (60% chance) and Comcast (15%).
    • "We have a 60% likelihood that Paramount walks as the winning bidder ... the next most likely would be Comcast, but it's only 15% likelihood in our view." — Bazinet [08:30]
  • The deal is shaped by “scarcity value” — only so many apps can reach scale, and consolidation is inevitable.
    • Memorable analogy: "It's a little bit of a game of chicken ... Who's going to take the bad part of Warner Brothers to get the good part?" — Bazinet [10:33]

• Sale Mechanics:

  • Recent corporate moves (Comcast spinning off linear cable; WBD splitting its cable and studio/streaming) have set the stage for an asset sale.
    • "That was essentially hanging a for sale sign out around Warner Brothers neck." — Bazinet [10:03]

3. Streaming Valuations & Sector Outlook

[11:17 – 13:33]

• Netflix Valuation:

  • Netflix trading at 53x earnings with a $500B+ valuation — higher than Disney, Comcast, and WBD combined.
    • "It is the juggernaut, more than Disney, Comcast, Warner Brothers Discovery put together." — Elson [11:17]

• Why So Pricey?

  • Investors sought “safe” mega-cap tech stocks unaffected by risks plaguing peers (tariffs, antitrust, AI disruption, recession), inflating Netflix’s multiple.
    • "Everybody landed on Netflix because it's sort of a tech company that didn't have any of those attributes that caused the multiple to expand..." — Bazinet [12:08]
  • Now, Netflix is "growing into" its elevated valuation.
    • "I'm neutral on Netflix. I don't think it's particularly compelling value right now." — Bazinet [11:46]

4. OpenAI’s Atlas Browser & the ‘New Browser Wars’

[16:31 – 25:13]

• Atlas Browser Launch:
  OpenAI launches ChatGPT Atlas, an AI-powered browser for Mac (Windows & mobile coming soon), integrating ChatGPT with real-time browsing and task automation.

  • "Atlas users can access ChatGPT alongside any web page ... agent mode, where ChatGPT will take over your keyboard and your mouse and start executing tasks on your behalf" — Elson [16:33]

• Why Is This a Big Deal?

  • Contextual AI: Can access browser tabs, summarize, infer, search history, execute actions ("agentic").
    • "The key difference is that it understands the context of your browser ... All that stuff." — Alex Heath [17:36]
  • Market Impact:
    • Google fell >3% on announcement (~$100B in market cap).
    • Concerns that OpenAI/Atlas could threaten Google’s browser/search dominance and data flywheel.
      • "Google is behind ... Pretty wild, probably an overreaction." — Heath [19:16]

• Google’s Position:

  • Atlas is built on Chromium (the open-source foundation of Chrome), meaning OpenAI can easily port Chrome users’ data.
  • Google could restrict competitor access to Gmail, Maps, Calendar, etc.— but this would raise antitrust scrutiny.
    • "If they made it more difficult for a competitor agentic browser ... it would probably also be an antitrust issue." — Heath [21:07]

• Browser Power & Data Moats:
  Browsers drive massive data and distribution advantages. Atlas may give OpenAI a “tremendous database of profiles on people.”

  • "The Data from your ChatGPT memory ... the better prompt responses that will give you in the chatbot." — Heath [23:05]
  • "This is going to help them build a tremendous database of profiles on people to target advertising..." — Heath [23:05]

• Switching Costs & Future Outlook:

  • Users are slow to change browsers; Chrome and Safari dominate.
    • "Browsers are really embedded in how we live and work and use the Internet and use technology." — Heath [24:23]
  • OpenAI has a push notification lever to get users to try Atlas, but the transition will take time. Declaring Chrome’s demise is “premature.”
    • "I do think calling the end of Chrome right now is very premature." — Heath [24:23]

5. Final Market Sentiment: Google’s True Moat

[25:23 – 28:57]

• Despite Atlas, Google remains deeply entrenched:

  • 96x higher search traffic than ChatGPT (as of May)
  • Dominates YouTube, search, ads (~90% market share), and AI (Gemini).
  • Extensive software ecosystem (Maps, Drive, Gmail, etc.)
    • "Let’s just remind ourselves of how dominant Google really is ... All of this, and yet Google trades at around 27 times earnings." — Elson [25:23]

• Market Position: Prof G Markets remains bullish on Google, seeing market reaction to Atlas as an overreaction.

  • "We were long Google at $200 a share. Since then, the stock has risen to $252 per share. And we are still long Google today." — Elson [27:41]

Notable Quotes / Memorable Moments

• On Netflix’s business momentum vs. street expectations:
  "It's a one-off, but so many of these platform funds are very fast money ... if you didn't get it right, you're selling your position." — Jason Bazinet [05:09]
• On Streaming M&A:
  "It's a little bit of a game of chicken ... Who's going to take the bad part of Warner Brothers to get the good part?" — Jason Bazinet [10:33]
• On Netflix’s Valuation Leap:
  "What changed was tariff risk, recession risk, DOJ risk, AI risk. It was stuff around Netflix. It wasn't Netflix related." — Jason Bazinet [13:16]
• On the significance of Atlas:
  "Everyone has coalesced around this idea of bringing the chatbot into the browser because it has so much more context ... It was only a matter of time." — Alex Heath [18:07]
• On Google’s challenge:
  "If OpenAI starts to replace Gmail ... then Google has a real threat on its hands." — Alex Heath [21:54]
• On browser switching costs:
  "Browsers are really embedded in how we live and work ... it will take a lot of time." — Alex Heath [24:23]

Timestamps for Key Segments

• [02:10] – Market check & Netflix’s Q3 narrative
• [04:03] – Jason Bazinet breaks down the earnings miss
• [06:22] – WBD stock moves; discussing potential buyers
• [07:14] – Why Netflix probably won't buy Warner Bros.
• [08:30] – Who could buy WBD? Paramount/Comcast odds
• [10:33] – The “game of chicken” for WBD assets
• [11:17] – Streaming sector valuations
• [12:08] – How macro risk perception has affected Netflix’s stock
• [16:31] – OpenAI Atlas browser details
• [17:36] – Alex Heath on features and significance
• [19:16] – Why Google stock sold off, and “Chromium problem”
• [21:07] – Could Google weaponize their stack?
• [23:05] – Browser as data double moat
• [24:23] – Realities of browser switching
• [25:23] – Prof G Markets’ bullish final word on Google

Conclusion

In this episode, Prof G Markets skillfully unpacks significant financial and tech market moves — Netflix’s earnings stumble (but underlying strength), blockbuster M&A speculation in streaming, and the dawn of the browser/AI interface wars. Analysts and guests provide depth, context, and a sharp reality check for investors haunted by headlines. The big picture: market narratives can swing dramatically on headline news, but true moats and business fundamentals tend to persist — especially for giants like Google and Netflix.

For further questions or comments: markets@profgmedia.com
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