Netflix was long “a builder, not a buyer.” Is that era over?

For years, netflix Top brass would tell investors that they are builders, not buyers. Now, that sentiment toward growth may be changing.

On Thursday, Netflix reported its quarterly earnings. Typically, Netflix earnings calls focus on metrics such as engagement, content spending, price increases and membership. While those factors were still present on Thursday's call, analysts also questioned Netflix's M&A aspirations following the Warner Bros. Discovery sales process.

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

While the transaction initially raised eyebrows, it has now opened the door to questions from media observers and insiders about whether the company needs to pursue other deals as streaming becomes more competitive.

Netflix co-CEO Ted Sarandos said Thursday that questions have also been raised both internally and externally about the company's ability to close such a mega deal.

“What we did learn, however, was that our teams were more than up to the task,” Sarandos said. “We've learned a lot about deal execution, about early integration.”

Netflix had said its reasoning was simple for pivoting toward a big acquisition. Despite being by far the largest streaming service when it comes to subscribers (325 million paid members worldwide reported in January), it wanted to deepen its bank of franchises and intellectual property, and get more directly into the movie studio business.

supreme skydance it eventually reversed the deal in February with a higher offer, and Netflix pulled out (collecting its $2.8 billion breakup fee in short order).

“But above all, we really built our muscle in mergers and acquisitions,” Sarandos said. “And the most important benefit of this entire exercise, however, was that we tested our investment discipline.”

Sarandos' new openness to mergers and acquisitions has left some wondering if the streaming giant could be looking for new targets.

After all, its library of intellectual property and its relationship with the movie studio business remain exactly where they were before agreeing to the deal with WBD.

While Wall Street was clearly not a fan of Netflix's proposed acquisition of WBD (shares fell 15% between the deal's announcement and the day it fell apart, and have since risen about 26%), the media landscape will be undeniably different if the Paramount acquisition is approved.

Paramount is looking to buy the entire WBD business: cable networks, movie studios, streaming and all. That would create a giant competitor to Netflix and its media peers on several fronts.

“The way WBD cards fell is very important. A likely combination of Paramount+ and HBO Max changes the streaming landscape in ways that Netflix hasn't had to deal with before,” Mike Proulx, vice president and director of research at Forrester, said before Netflix's earnings release.

“I just want to remind you that we said from the beginning that it was good to have the agreement with the WB, not a necessity. We are very confident in the core business,” Sarandos said Thursday. He added that Netflix considered its biggest risk in entering the deal process was losing focus on its core business.

“As you can see from our first quarter results, we did not lose focus,” he said.

Still, Netflix's earnings report, and particularly its forward-looking guidance, appeared to disappoint investors.

The company's shares fell about 10% in extended trading after the streamer maintained its full-year guidance despite a rise in first-quarter revenue and the termination of the deal with WBD.

“The biggest surprise this quarter was the unchanged full-year margin guidance despite abandoning the Warner Bros. deal and related M&A costs,” MoffettNathanson analyst Robert Fishman said in a research note Friday.

Netflix, for its part, didn't spend much time on mergers and acquisitions during the earnings call, instead focusing on its more familiar talking points, such as user engagement, a growing advertising business, and spending on content that retains members (and helps justify price increases).

The return to typical Netflix storytelling seemed welcome.

“After WBD, the company could return to its relentless focus on growing revenue and profits by leveraging its global subscriber scale,” Fishman said in Friday's note. He added that Netflix management “emphasized the success of its recent price increases and noted that retention was strong,” and that it remains on track to double advertising revenue this year.

Still, Forrester's Proulx said in a note after the earnings conference call that while Netflix had become “squarely focused on executing its tried-and-true playbook,” questions remained.

“None of that changes the reality that the streaming market is more competitive than it was a year ago,” Proulx said. “Pricing power must be gained quarter by quarter, and maintaining commitment as prices rise remains the central challenge across the streaming market. Netflix is ​​betting on continued execution of its core business to succeed in a more crowded and consolidating market.”