Netflix has long been a “builder, not a buyer.” Are those days over?

For many years Netflix Senior management will tell investors that they are builders, not buyers. Now, that sentiment about growth may be changing.

On Thursday, Netflix reported quarterly earnings. Netflix’s financial reports typically focus on metrics such as engagement, content spending, price growth, and membership numbers. Those factors remained in place on Thursday’s conference call, but analysts also had doubts about Netflix’s merger and acquisition intentions. warner bros discovery sales process.

Late last year, Netflix emerged as a potential bidder for WBD, surprising many in the industry and market. Even more shocking was the announcement in December that Netflix had reached an agreement to acquire WBD’s movie studio and streaming assets for $72 billion.

The deal initially raised eyebrows, but now opens the door to questions from media members and insiders about whether the company should move forward with other deals as streaming competition intensifies.

Netflix co-CEO Ted Sarandos said Thursday that there were also internal and external questions about the company’s ability to pull off such a huge deal.

“But what we learned is that our team was more than up to the task,” Sarandos said. “We learned a lot about deal execution and early integration.”

Netflix said the reason for its pivot toward major acquisitions was simple. Despite being the biggest streaming service ever in terms of subscribers (reported 325 million paid members worldwide in January), the company wanted to strengthen its franchise and intellectual property base and move more seriously into the movie studio business.

paramount skydance It ultimately overturned the deal in February with a superior bid, and Netflix walked away (quickly collecting a $2.8 billion penalty).

“But for the most part, we’ve really flexed our M&A muscles,” Sarandos said. “But the most important benefit of this whole exercise is that it tested our investment discipline.”

Sarandos’ newfound openness to M&A has some wondering whether the streaming giant might seek out new targets.

At the end of the day, the company’s intellectual property library and relationship with its movie studio business remain as they were before the deal with WBD.

While Wall Street clearly didn’t like Netflix’s proposed acquisition of WBD (the stock was down 15% from the time the deal was announced to the day it collapsed, and has since risen about 26%), the media landscape will no doubt change if Paramount’s deal is approved.

Paramount is acquiring WBD’s entire business, including its cable TV network, movie studio, and streaming. That would create a huge competitor for Netflix and its media peers on many fronts.

“How the WBD card falls is very important. The likely combination of Paramount+ and HBO Max changes the streaming landscape in a way that Netflix hasn’t really had to fight for before,” said Mike Proulx, vice president and research director at Forrester, ahead of Netflix’s earnings release.

“Remember, we said from the beginning that the deal with WB was not a must-have, but a nice to have. We’re very confident in our core business,” he said Thursday. He added that Netflix believes the biggest risk in the deal process is losing focus on its core business.

“As you can see from our first quarter results, we never lost focus,” he said.

Still, Netflix’s earnings report, particularly its forward-looking guidance, appears to have disappointed investors.

The company’s stock price fell about 10% in after-hours trading after the streamer maintained its full-year outlook despite first-quarter revenue growth and the end of its WBD contract.

“The bigger surprise this quarter is that our full-year margin outlook remains unchanged despite exiting the Warner Bros. deal and related M&A charges,” MoffettNathanson analyst Robert Fishman said in a research note Friday.

Netflix didn’t spend much time on M&A during its earnings call, instead focusing on more familiar issues like user engagement, growing its advertising business, and spending on content to retain members (and justify price hikes).

Netflix’s return to typical storytelling seems to be a welcome one.

“Post-WBD, the company could return to a relentless focus on revenue and profit growth by leveraging its global subscriber scale,” Fishman said in a note Friday. He added that Netflix executives “highlighted the success of recent price increases and noted strong retention” and said the company is on track to double its ad revenue this year.

Still, Forrester’s Proulx said in a note after the earnings call that Netflix is ​​back to “committed to executing on its proven strategy,” but questions remain.

“None of this changes the reality that the streaming market is more competitive than it was a year ago,” Proulx said. “Pricing power must be won every quarter, and maintaining engagement even as prices rise has become a central challenge across the streaming market. Netflix is ​​betting that by consistently executing on its core business, it can win in a more crowded and consolidated market.”