What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-01-23 compared with 2025-01-27 · 101 added, 106 removed, 177 unchanged (54% of the section changed)

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The following represents our consolidated performance highlights (1) :

As of/Year Ended December 31, Change

Year Ended December 31, Change

2025 2024 2023 2025 vs.

(in thousands, except revenue per membership and percentages)

(in thousands, except percentages)

Financial Results:

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DVD revenues (2)

$ — $ — $ 82,839 $ — — %

Total revenues $ 45,183,036 $ 39,000,966 $ 33,723,297 $ 6,182,070 16 %

Constant currency change in revenues (3)

Operating income $ 13,326,603 $ 10,417,614 $ 6,954,003 $ 2,908,989 28 %

Operating margin 29.5 % 26.7 % 20.6 % 2.8 %

Global Streaming Memberships:

Paid net membership additions 41,350 29,529 8,903 40 %

Paid memberships at end of period (2) 301,626 260,276 230,747 16 %

Average paying memberships 277,730 240,889 222,924 15 %

Average monthly revenue per paying membership $ 11.70 $ 11.64 $ 11.76 1 %

Constant currency change (3) 4 %

Net income $ 10,981,201 $ 8,711,631 $ 5,407,990 $ 2,269,570 26 %

(1) During the year ended December 31, 2025, we discontinued the reporting of membership numbers, including average paying memberships and average monthly revenue per paying membership, focusing instead on revenue and operating margin as the primary financial metrics that we believe best represent our business performance.

(2) We discontinued our DVD-by-mail service in the year ended December 31, 2023.

The discontinuance of our DVD business had an immaterial impact on our operations and financial results.

(2) A paid membership (also referred to as a paid subscription) is defined as a membership that has the right to receive Netflix service following sign-up and a method of payment being provided, and that is not part of a free trial or certain other promotions that may be offered by the Company to new or rejoining members.

Certain members have the option to add extra member sub accounts.

These extra member sub accounts are not included in paid memberships.

A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date.

Voluntary cancellations generally become effective at the end of the prepaid membership period.

Involuntary cancellations, as a result of a failed method of payment, become effective immediately.

Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company’s internal systems, which utilize industry standard geo-location technology.

(3) We believe the non-GAAP financial measure of constant currency revenue is useful in analyzing the underlying trends in average monthly revenue per paying membership (“ARM”) absent foreign currency fluctuations.

However, this non-GAAP financial measure should be considered in addition to, not as a substitute for, or superior to other financial measures prepared in accordance with GAAP.

In order to exclude the effect of foreign currency rate fluctuations on ARM, we calculate current period revenue assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period and exclude the impact of hedging gains or losses realized as revenues.

Constant currency percentage change in ARM is calculated as the percentage change between current period constant currency ARM and the prior comparative period ARM.

The impact of hedging gains or losses is excluded from both the current and prior periods.

For the year ended December 31, 2024, our revenues would have been approximately $1,424 million higher, excluding the impact of hedging and had foreign currency exchange rates remained constant with those for the year ended December 31, 2023.

The unfavorable foreign exchange rate impacts in the year ended December 31, 2024 were primarily driven by the devaluation of the Argentine peso relative to the U.S.

dollar coupled with significant price increases in the local currency in this jurisdiction.

Operating margin for the year ended December 31, 2024 increased six percentage points as compared to the prior comparative period, primarily due to revenues growing at a faster rate as compared to the growth in cost of revenues, sales and marketing, and technology and development expenses, coupled with lower general and administrative expenses.

Streaming Revenues

(3) See the “ Non-GAAP Constant Currency Information” section below for additional details on our use of constant currency revenue.

Operating margin for the year ended December 31, 2025 increased by approximately three percentage points as compared to the prior comparative period, primarily driven by the growth in revenues outpacing the growth in cost of revenues, sales and marketing, and general and administrative expenses.

Net income for the year ended December 31, 2025 increased $2,270 million as compared to the prior comparative period, primarily due to a $2,909 million increase in operating income, driven by a $6,182 million increase in revenues and partially offset by a $2,237 million increase in cost of revenues primarily due to the increase in content amortization and other cost of revenues.

The impact of higher operating income was partially offset by a $487 million increase in the provision for income taxes.

We primarily derive revenues from monthly membership fees for services related to streaming content to our members.

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We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

We also earn revenue from advertisements presented on our streaming service, consumer products, live events and various other sources.

Revenues earned from sources other than monthly membership fees were not a material component of streaming revenues for the years ended December 31, 2024, 2023, and 2022.

We also earn revenue from advertisements presented on our streaming service, consumer products, live experiences and various other sources.

Revenues earned from sources other than monthly membership fees were not a material component of revenues for the years ended December 31, 2025, 2024, and 2023.

Year Ended December 31, Change

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(in thousands, except percentages)

Streaming revenues

$ 39,000,966 $ 33,640,458 $ 31,469,852 $ 5,360,508 16 %

Streaming revenues for the year ended December 31, 2024 increased 16% as compared to the year ended December 31, 2023, primarily due to the growth in average paying memberships and price increases, partially offset by unfavorable changes in foreign exchange rates.

The following tables summarize streaming revenues and other streaming membership information by region for the years ended December 31, 2024, 2023 and 2022.

Hedging gains of $124 million are included in “Streaming revenues” for the year ended December 31, 2024.

No hedging gains and losses were recognized as “Streaming revenues” in the comparative prior year periods.

Revenues $ 45,183,036 $ 39,000,966 $ 33,723,297 $ 6,182,070 16 %

Revenues for the year ended December 31, 2025 increased 16% as compared to the year ended December 31, 2024, primarily due to the growth in memberships, price increases, and increased advertising revenue, partially offset by unfavorable changes in foreign exchange rates, net of hedging.

The following table summarizes streaming revenues by region for the years ended December 31, 2025, 2024 and 2023.

Total streaming revenues are inclusive of hedging gains (losses) of $(91) million and $124 million for the years ended December 31, 2025 and 2024, respectively.

No hedging gains and losses were recognized in total streaming revenues for the year ended December 31, 2023.

See Note 8 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

United States and Canada (UCAN)

As of/Year Ended December 31, Change

Year Ended December 31, Change

2025 2024 2023 2025 vs.

(in thousands, except revenue per membership and percentages)

Streaming revenues $ 17,359,369 $ 14,873,783 $ 14,084,643 $ 2,485,586 17 %

Paid net membership additions (losses) 9,497 5,832 (919) 3,665 63 %

Paid memberships at end of period 89,625 80,128 74,296 9,497 12 %

Average paying memberships 84,112 76,126 74,001 7,986 10 %

Average monthly revenue per paying membership $ 17.20 $ 16.28 $ 15.86 $ 0.92 6 %

Constant currency change 6 %

United States and Canada (UCAN) $ 19,957,152 $ 17,359,369 $ 14,873,783 $ 2,597,783 15 %

Europe, Middle East, and Africa (EMEA) 14,514,646 12,387,035 10,556,487 2,127,611 17 %

As of/Year Ended December 31, Change

2024 2023 2022 2024 vs.

(in thousands, except revenue per membership and percentages)

Streaming revenues $ 12,387,035 $ 10,556,487 $ 9,745,015 $ 1,830,548 17 %

Paid net membership additions 12,320 12,084 2,693 236 2 %

Paid memberships at end of period 101,133 88,813 76,729 12,320 14 %

Average paying memberships 94,200 80,928 73,904 13,272 16 %

Average monthly revenue per paying membership $ 10.96 $ 10.87 $ 10.99 $ 0.09 1 %

Constant currency change 1 %

Latin America (LATAM) 5,357,521 4,839,816 4,446,461 517,705 11 %

As of/Year Ended December 31, Change

2024 2023 2022 2024 vs.

(in thousands, except revenue per membership and percentages)

Streaming revenues $ 4,839,816 $ 4,446,461 $ 4,069,973 $ 393,355 9 %

Paid net membership additions 7,330 4,298 1,738 3,032 71 %

Paid memberships at end of period 53,327 45,997 41,699 7,330 16 %

Average paying memberships 48,954 42,802 40,000 6,152 14 %

Average monthly revenue per paying membership $ 8.24 $ 8.66 $ 8.48 $ (0.42) (5) %

Constant currency change 21 %

Asia-Pacific (APAC) 5,353,717 4,414,746 3,763,727 938,971 21 %

As of/Year Ended December 31, Change

Total Streaming Revenues $ 45,183,036 $ 39,000,966 $ 33,640,458 $ 6,182,070 16 %

Non-GAAP Constant Currency Information

We believe the non-GAAP financial measure of constant currency revenue is useful in analyzing period-to-period comparisons in revenues absent foreign currency fluctuations.

However, this non-GAAP financial measure should be considered in addition to, not as a substitute for, or superior to other financial measures prepared in accordance with GAAP.

In order to exclude the effect of foreign currency rate fluctuations on revenue, we calculate current period revenue assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period and exclude the impact of hedging gains or losses realized as revenues.

Constant currency percentage change in revenues is calculated as the percentage change between current period constant currency revenue and the prior comparative period revenue.

The impact of hedging gains or losses is excluded from both the current and prior periods.

The table below summarizes constant currency streaming revenues by region for the year ended December 31, 2025 and the constant currency percentage change in streaming revenues by region for the year ended December 31, 2025 as compared to the year ended December 31, 2024:

Year Ended December 31, Change

2025 2024 2025 vs.

(in thousands, except revenue per membership and percentages)

Streaming revenues $ 4,414,746 $ 3,763,727 $ 3,570,221 $ 651,019 17 %

Paid net membership additions 12,203 7,315 5,391 4,888 67 %

Paid memberships at end of period 57,541 45,338 38,023 12,203 27 %

Average paying memberships 50,466 41,033 35,019 9,433 23 %

Average monthly revenue per paying membership $ 7.29 $ 7.64 $ 8.50 $ (0.35) (5) %

Constant currency change (3) %

As Reported Constant Currency Adjustment Hedging (Gains) Losses Included in Revenues Constant Currency Revenues As Reported Hedging (Gains) Losses Included in Revenues Revenues

Less Hedging Impact Reported Change Constant Currency Change

(in thousands, except percentages)

UCAN $ 19,957,152 $ 36,991 $ (29,791) $ 19,964,352 $ 17,359,369 $ (11,181) $ 17,348,188 15 % 15 %

EMEA 14,514,646 (374,174) 137,768 14,278,240 12,387,035 (25,303) 12,361,732 17 % 16 %

LATAM 5,357,521 457,000 54,108 5,868,629 4,839,816 (58,454) 4,781,362 11 % 23 %

APAC 5,353,717 59,740 (70,942) 5,342,515 4,414,746 (29,073) 4,385,673 21 % 22 %

Total Streaming Revenues $ 45,183,036 $ 179,557 $ 91,143 $ 45,453,736 $ 39,000,966 $ (124,011) $ 38,876,955 16 % 17 %

Cost of Revenues

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Delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering content over the internet.

Other operating costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs directly incurred in making our content available to members.

Other operating costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs incurred in making our content available to members.

Year Ended December 31, Change

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As a percentage of revenues 52 % 54 % 58 %

The increase in cost of revenues for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to a $1,104 million increase in content amortization relating to our existing and new content.

The increase in cost of revenues for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to a $1,121 million increase in content amortization relating to our existing and new content, coupled with a $1,116 million increase in other cost of revenues, primarily driven by non-income tax assessments in Brazil.

We do not expect that non-income taxes incurred in Brazil will materially impact our results of operations in future periods.

See Note 9 Commitments and Contingencies in the accompanying notes to our consolidated financial statements for further detail on our non-income tax matters.

Sales and Marketing

Sales and marketing expenses consist primarily of advertising expenses and certain payments made to marketing and advertising sales partners, including consumer electronics ("CE") manufacturers, multichannel video programming distributors ("MVPDs"), mobile operators, and ISPs.

Marketing expenses include promotional activities such as digital and television advertising.

Sales and marketing expenses consist primarily of expenses for promotional activities such as digital and television advertising, and certain payments made to marketing and advertising sales partners.

Our marketing partners include consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators, and ISPs.

Our advertising sales partners include advertising technology providers and advertising agencies.

Sales and marketing expenses also include payroll, stock-based compensation, facilities, and other related expenses for personnel that support advertising sales and marketing activities.

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As a percentage of revenues 7 % 7 % 8 %

The increase in sales and marketing expenses for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily driven by a $131 million increase in personnel-related costs due to the growth in advertising sales headcount.

Other sales and marketing expenses increased $129 million primarily due to a $54 million increase in marketing expenses due to the timing of marketing spend on our content slate, coupled with an increase in expenses incurred in connection with our advertising offering, including increased payments to advertising sales partners and other advertising distribution expenses.

The increase in sales and marketing expenses for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily driven by a $222 million increase in marketing expenses, coupled with a $149 million increase in personnel-related costs due to the growth in advertising sales headcount.

Technology and Development

Technology and development expenses consist primarily of payroll, stock-based compensation, facilities, and other related expenses for technology personnel responsible for making improvements to our service offerings, including testing, maintaining and modifying our user interface, our recommendations, merchandising and infrastructure.

Technology and development expenses also include costs associated with general use computer hardware and software.

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As a percentage of revenues 4 % 4 % 5 %

General and administrative expenses for the year ended December 31, 2024 as compared to the year ended December 31, 2023 remained relatively flat.

The increase in general and administrative expenses for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to a $92 million increase in personnel-related costs and a $64 million increase in third-party expenses.

The increase in personnel-related costs was primarily driven by higher share-based compensation expense, while the increase in third-party expenses was attributable to higher legal fees and transaction-related costs, including those associated with the WBD transaction.

Interest Expense

Interest expense consists primarily of the interest associated with our outstanding debt obligations, including the amortization of debt issuance costs.

Interest expense consists primarily of the interest associated with our outstanding debt obligations and the amortization of debt issuance costs.

See Note 7 Debt in the accompanying notes to our consolidated financial statements for further detail on our debt obligations.

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Interest expense primarily consists of interest on our Notes of $716 million for the year ended December 31, 2025.

The increase in interest expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to the increase in debt.

The increase in interest expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily driven by higher amortization of debt issuance costs, including approximately $60 million related to financing arrangements entered into in connection with the WBD transaction.

See Note 7 Debt for additional details regarding the financing arrangements associated with the WBD transaction.

Interest and Other Income (Expense)

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As a percentage of revenues — % 1 % — %

Interest and other income (expense) increased for the year ended December 31, 2024 primarily due to foreign exchange losses of $18 million, net of the impacts of derivatives and hedging, compared to the losses of $293 million for the corresponding period in 2023.

In the year ended December 31, 2024, the foreign exchange losses were primarily driven by the remeasurement of cash and content liability positions in currencies other than the functional currencies, partially offset by a non-cash gain of $122 million, net of hedging impacts, from the remeasurement of our €5,170 million Senior Notes.

The foreign exchange loss in the year ended December 31, 2023 was primarily driven by a non-cash loss of $176 million from the remeasurement of our Senior Notes denominated in euros, coupled with the remeasurement of cash and content liability positions in currencies other than the functional currencies.

Interest and other income (expense) decreased for the year ended December 31, 2025, primarily due to foreign exchange losses of $123 million, net of the impacts of derivatives and hedging, compared to losses of $18 million for the corresponding period in 2024.

ended December 31, 2025, the foreign exchange losses were primarily driven by the non-cash loss of $72 million from the remeasurement of our Senior Notes denominated in Euro, net of hedging impacts, coupled with the remeasurement of cash and content liability positions in currencies other than the functional currencies.

The foreign exchange losses in the year ended December 31, 2024 were primarily driven by the remeasurement of cash and content liability positions in currencies other than the functional currencies, partially offset by a non-cash gain of $122 million from the remeasurement of our Senior Notes denominated in Euro, net of hedging impacts.

Provision for Income Taxes

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Effective tax rate 14 % 13 % 13 %

The effective tax rate for the year ended December 31, 2024 remained relatively flat as compared to the year ended December 31, 2023.

The increase in our effective tax rate for the year ended December 31, 2025, as compared to the year ended December 31, 2024, is primarily due to a decrease in tax benefits associated with federal research and development tax credits as well as the growth in income before taxes exceeding the growth in excess tax benefits from stock-based compensation.

See Note 11 Income Taxes to the consolidated financial statements for further information regarding income taxes.

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Short-term and long-term debt 14,462,836 15,582,804 (1,119,968) (7) %

Cash, cash equivalents, restricted cash and short-term investments increased $2,447 million in the year ended December 31, 2024 primarily due to cash provided by operations, issuance of debt, and proceeds from issuance of common stock, partially offset by the repurchase of stock and repayment of debt.

Debt, net of debt issuance costs and discounts, increased $1,040 million primarily due to the issuance of $1,800 million in additional Senior Notes, partially offset by the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes and the remeasurement of our euro-denominated notes in the year ended December 31, 2024.

The amount of principal and interest due in the next twelve months is $2,487 million.

As of December 31, 2024, no amounts had been borrowed under our $3 billion Revolving Credit Agreement.

Cash, cash equivalents, restricted cash and short-term investments decreased $518 million in the year ended December 31, 2025 primarily due to the repurchase of stock and repayment of debt, partially offset by cash provided by operations.

Debt, net of debt issuance costs and discounts, decreased $1,120 million primarily due to approximately $1,833 million in repayments of debt, partially offset by the remeasurement of our Euro-denominated notes in the year ended December 31, 2025.

The amount of principal and interest on our outstanding notes due in the next twelve months is $1,690 million.

See Note 7 Debt in the accompanying notes to our consolidated financial statements.

Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery, and personnel-related costs.

Cash payment terms for non-original content have historically been in line with the amortization period.

Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content.

For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized.

We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity.

Our other uses of cash include strategic acquisitions and investments, as well as share repurchases.

See the “ Material Cash Requirements ” section below for further detail on our expected use of cash in connection with the WBD transaction.

Financing Arrangements

On April 12, 2024, we entered into a five-year, $3 billion unsecured revolving credit facility that matures on April 12, 2029 (the “Revolving Credit Agreement”).

In May 2025, we established a $3 billion commercial paper program (the “Commercial Paper Program”) under which we may issue short-term unsecured commercial paper notes.

On December 4, 2025, we entered into a bridge commitment letter pursuant to which the commitment parties agreed to provide, subject to customary conditions, a $59 billion senior unsecured bridge term loan facility to finance the purchase price for the WBD transaction, to pay fees, costs and expenses incurred in connection with the WBD transaction and, at our option, to refinance certain indebtedness (the “Bridge Facility Commitments”).

On December 19, 2025, we replaced a portion of the Bridge Facility Commitments with a $5 billion unsecured revolving credit facility and a $20 billion unsecured delayed draw term loan facility (collectively, the “Transaction Credit Facilities”), which reduced the outstanding Bridge Facility Commitments to $34 billion.

As of December 31, 2025, no amounts have been borrowed under the Revolving Credit Agreement, Commercial Paper Program, Bridge Facility Commitments, or the Transaction Credit Facilities.

On January 19, 2026, in connection with the Amended and Restated Merger Agreement (as defined below), the Company entered into a bridge facility incremental commitments agreement (the "Incremental Commitments Agreement").

The Incremental Commitments Agreement increased the existing commitments under the Company's Bridge Facility Commitments from $34 billion to $42.2 billion of senior unsecured bridge term loan commitments for the purpose of financing the purchase price under the Amended and Restated Merger Agreement, paying certain other fees, costs and expenses incurred in connection with the WBD transaction and, at the Company's option, refinancing certain indebtedness.

See Note 7 Debt and Note 14 Subsequent Event for further information on the financing arrangements the Company has entered into in connection with the WBD transaction.

We anticipate that we may periodically raise additional debt capital.

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If we raise additional funds through the issuance of equity or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution.

Share Repurchases

In September 2023, the Board of Directors authorized the repurchase of up to $10 billion of our common stock, with no expiration date, and in December 2024, the Board of Directors increased the share repurchase authorization by an additional $15 billion, also with no expiration date.

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We may discontinue any repurchases of our common stock at any time without prior notice.

In the fiscal year ended December 31, 2024, the Company repurchased 9,861,935 shares of common stock for an aggregate amount of $6,211 million (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022).

In the fiscal year ended December 31, 2025, the Company repurchased 86,536,215 shares of common stock for an aggregate amount of $9.1 billion (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022).

As of December 31, 2025, $8.0 billion remains available for repurchases.

Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery and personnel-related costs, as well as strategic acquisitions and investments.

Cash payment terms for non-original content have historically been in line with the amortization period.

Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content.

For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized.

We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity.

We currently anticipate that cash flows from operations, available funds and access to financing sources, including our revolving credit facility, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.

Material Cash Requirements

We currently anticipate that cash flows from operations, available funds and access to financing sources, including under our Revolving Credit Facility, Commercial Paper Program, the Bridge Facility Commitments and the Transaction Credit Facilities, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.

Our material cash requirements from known contractual and other obligations primarily relate to our content, debt and lease obligations.

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Content obligations (1)

Debt (2) 19,841,462 2,486,945 17,354,517

$ 24,039,228 $ 11,528,030 $ 12,511,198

18,091,887 1,690,445 16,401,442

Operating lease obligations (3)

2,898,017 558,051 2,339,966

Total $ 45,029,132 $ 13,776,526 $ 31,252,606

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Content obligations include amounts related to the acquisition, licensing and production of content.

An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements and other production related

An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements and other production related commitments.

An obligation for the acquisition and licensing of content is incurred at the time we enter into an agreement to obtain future titles.

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Operating lease obligations also include additional obligations that are not reflected on the Consolidated Balance Sheets as they did not meet the criteria for recognition.

As of December 31, 2024, the Company has additional operating leases for real estate that have not yet commenced of $38 million which has been included above.

As of December 31, 2025, the Company has additional operating leases for real estate that have not yet commenced which has been included above.

The lease obligations associated with these leases were not material.

See Note 5 Balance Sheet Components in the accompanying notes to our consolidated financial statements for further details regarding leases.

As of December 31, 2025, we had gross unrecognized tax benefits of $566 million, of which $409 million was classified in “Other non-current liabilities” in the Consolidated Balance Sheets.

At this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.

In addition, we may be required to pay deposits of approximately $800 million related to certain direct and indirect taxes in the next twelve months, which are in excess of our typical annual obligations.

In addition to the material cash requirements summarized in the table above, we expect to pay deposits of approximately $700 million related to non-income tax assessments in Brazil as described further in Note 9 Commitments and Contingencie s.

During the year ended December 31, 2025, we also paid tax deposits of approximately $200 million related to certain direct taxes that exceeded our regularly recurring obligations.

Other Planned Uses of Cash and Debt Capital

On December 4, 2025, we entered into a definitive agreement and plan of merger with WBD to acquire WBD's streaming and studios businesses, including its film and television studios, HBO Max and HBO, which was amended and restated by the parties thereto on January 19, 2026 (as so amended and restated, the “Amended and Restated Merger Agreement”).

WBD is a leading global media and entertainment company and will separate its Global Linear Networks business, Discovery Global, into a new publicly-traded company prior to the closing of the WBD transaction.

Under the terms of the Amended and Restated Merger Agreement, each WBD stockholder will receive $27.75 in cash (as may be adjusted in accordance with the terms of the Amended and Restated Merger Agreement) for each share of WBD common stock outstanding as of immediately prior to the closing of the WBD transaction, for a total equity value of approximately $72.0 billion and an enterprise value of approximately $82.7 billion (in each case, as of December 4, 2025).

The total equity value and enterprise value of the WBD transaction may fluctuate based on WBD's capitalization as of the closing of the WBD transaction.

We expect the WBD transaction to close in 12-18 months from December 4, 2025, subject to receipt of required regulatory approvals, approval of WBD stockholders, the consummation of the separation and distribution of Discovery Global and other customary closing conditions.

See Note 6 Acquisitions and Note 9 Commitments and Contingencies for further information.

The following table summarizes our cash flows:

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(10,345,623) (4,074,427) (5,950,803) 6,271,196 154 %

Net cash provided by operating activities for the year ended December 31, 2024 increased $87 million as compared to the year ended December 31, 2023, primarily driven by a $3,304 million or 61% increase in net income, an increase in adjustments for non-cash expenses, and favorable changes in working capital, partially offset by an increase in payments for content assets.

The payments for content assets increased $3,862 million, from $13,140 million to $17,003 million, or 29%.

Net cash provided by (used in) investing activities for the year ended December 31, 2024 decreased $2,724 million as compared to the year ended December 31, 2023, primarily due to there being no maturities of investments in the year ended December 31, 2024, as compared to maturities of investments of $1,395 million in the year ended December 31, 2023, coupled with an increase in purchases of investments of $1,237 million and an increase in purchases of property and equipment of $91 million.

Net cash used in financing activities for the year ended December 31, 2024 decreased $1,876 million as compared to the year ended December 31, 2023, primarily due to proceeds from the issuance of debt of $1,794 million in the year ended December 31, 2024 and a $663 million increase in the proceeds from the issuance of common stock.

These cash inflows were partially offset by the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes in the year ended December 31, 2024 as compared to no repayments of debt in the corresponding period in 2023, coupled with a $218 million increase in the repurchases of common stock.

Net cash provided by operating activities for the year ended December 31, 2025 increased $2,788 million as compared to the year ended December 31, 2024, primarily driven by a $2,270 million or 26% increase in net income and a $1,646 million increase in adjustments for non-cash expenses, partially offset by a $705 million increase in payments for content assets and $423 million in unfavorable changes in working capital.

Net cash provided by (used in) investing activities for the year ended December 31, 2025 increased $3,223 million as compared to the year ended December 31, 2024, primarily due to net cash inflows of $1,747 million from maturities, sales and purchases of investments in the year ended December 31, 2025 as compared to cash outflows of $1,742 million from purchases of investments in the corresponding period in 2024, partially offset by a $249 million increase in purchases of property and equipment.

Net cash used in financing activities for the year ended December 31, 2025 increased $6,271 million as compared to the year ended December 31, 2024, primarily driven by changes in cash flows related to the issuance and repayment of debt.

The increase in financing cash outflows was primarily driven by no proceeds from the issuance of debt in the year ended December 31, 2025, as compared to proceeds from the issuance of debt of $1,794 million, in the corresponding period in 2024, coupled with a $1,433 million increase in repayments of debt.

In addition, repurchases of common stock increased $2,863 million in the year ended December 31, 2025 as compared to the corresponding period in 2024.

Indemnifications

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For licensed content, we capitalize the fee per title and record a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming.

For produced content, we capitalize costs associated with the production, including development costs, direct costs and production overhead.

Based on factors including historical and estimated viewing patterns, we amortize the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use or ten years, beginning with the month of first availability.

For produced content, we capitalize costs associated with the production, including development costs, direct costs and production overhead, as costs are incurred.

Based on factors including historical and estimated viewing patterns, we amortize the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability, estimated period of use or ten years, beginning with the month of first availability.

The amortization is on an accelerated basis, as we typically expect more upfront viewing, and film amortization is more accelerated than TV series amortization.

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In general, tax incentives are realized as cash receipts and may be received prior to or after a title launches on our service.

Upon a title’s launch, any amounts we are eligible for through qualified production spend but have not received, are recognized in “Other current assets” or “Other non-current assets” on the Consolidated Balance Sheets as receivables.

Any amounts we are eligible for through qualified production spend but have not received, are recognized in “Other current assets” or “Other non-current assets” on the Consolidated Balance Sheets as receivables.

Tax incentives are generally accounted for as a reduction to the cost basis of content assets (presented in “Content assets, net”) and reduce content amortization over the life of the title (as presented in “Cost of revenues”) on the Consolidated Statements of Operations.

Our business model is subscription based as opposed to a model generating revenues at a specific title level.

Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost.

Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed in the aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost.

To date, we have not identified any such event or changes in circumstances.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis