Zillow Predicts Major Mortgage Rate Change, Homebuying Shift in 2026: What It Means for You

 

# Zillow Predicts Major Mortgage Rate Change, Homebuying Shift in 2026: What It Means for You

**Published: February 27, 2026**

You know that feeling when you've been waiting to buy a home, watching mortgage rates and home prices, wondering if you'll ever catch a break?

According to Zillow's latest forecasts, 2026 might finally be the year things start moving in your direction.

The real estate giant has released its housing market predictions for the year, and the headline is simple: **mortgage rates are expected to ease gradually, home values will rise modestly, and more people will finally feel ready to buy** .

But here's the thing—this isn't a return to the pandemic boom. It's not a crash either. It's something in between: a slow, cautious recovery that could finally give buyers and sellers some breathing room.

Let me walk you through what Zillow is predicting, what other experts are saying, and what this actually means for your wallet and your homebuying plans.

---

## The Short Version

**What Zillow predicts for 2026:**

- **Mortgage rates:** Expected to stay above 6% but ease into the low-6% range by year-end 

- **Home values:** Forecast to rise 1.9% nationally 

- **Existing home sales:** Projected to reach about 4.2 million, a 3.9% increase from 2025 

- **Rent growth:** Multifamily rents up just 0.2%, single-family rents up 1.6% 

**What's already happening:** Homebuying power hit its highest level in nearly four years in January, with a median-income household able to afford $30,000 more home than a year ago . Monthly mortgage payments are 8.4% lower than last year .

**The bottom line:** 2026 is shaping up to be a year of gradual improvement—not dramatic change, but meaningful progress for buyers who've been waiting on the sidelines .

---

## The Mortgage Rate Outlook: Above 6%, But Trending Better

Let's start with the number everyone cares about most: mortgage rates.

Zillow's economists put themselves on record predicting that rates will **stay above 6% throughout 2026**, despite some gradual easing . They expect rates to move into the **low-6% range by year-end**, providing modest support to the housing market .

**Why this matters:** Borrowers already saw some relief in 2025, pushing affordability to a three-year best . Gradual rate moderation should help more buyers reenter the market in 2026, even if ultralow pandemic-era rates remain far out of reach.

**Zillow acknowledges the challenge:** Forecasting mortgage rates a year ahead is difficult. However, the company points to its track record accurately predicting shelter inflation, which makes up 40% of the consumer price index .

### What Other Experts Are Saying

Zillow isn't alone in this outlook. Here's how other forecasts compare:

**Table 1: 2026 Mortgage Rate Forecasts Compared**

| **Source** | **2026 Rate Outlook** | **Key Details** |

| :--- | :--- | :--- |

| Zillow | Low-6% range by year-end | Above 6% throughout 2026  |

| Morgan Stanley | 5.75% by end of 2026 | Gradual improvement, but affordability still pressured  |

| Bankrate | ~6.1% average for 2026 | Potential low around 5.7%, high near 6.5%  |

| MBA | 6–6.5% range | Expected to hold over next several years  |

| Redfin | Low-6% range | Borrowing costs to "ease slightly"  |

**Morgan Stanley's view:** The investment bank expects the 30-year fixed rate to end 2026 around **5.75%** . Co-Heads of Securitized Product Research Jay Bacow and James Egan note that lower rates in the front end should help, and they expect some compression between primary mortgage rates and Treasury rates given their bullish outlook for the mortgage asset class .

**Bankrate's forecast:** Senior industry analyst Ted Rossman predicts the average 30-year fixed rate will "fall below 6% for the first time since the summer of 2022." He adds, "It could go as low as 5.5%, given anticipated Fed rate cuts and a recession scare. But stubbornly high inflation readings and rumblings of a less independent Fed could apply upward pressure at other times of the year" .

**The common thread:** Every forecast points to rates in the 5.5% to 6.5% range—a meaningful improvement from 2023's 8% peak, but nowhere near the sub-3% rates of the pandemic era .

---

## Home Values: Modest Growth Ahead

Zillow forecasts U.S. home values to rise **1.9% in 2026**, after national values stayed roughly flat in 2025 . The forecast reflects expectations of gradually improving affordability and steady buyer demand .

**Earlier projections** from January suggested 1.2% growth, but Zillow's official forecast page now shows the higher 1.9% figure .

**What's already happening:** Home values have fallen for six consecutive months through January, according to the Zillow Home Value Index . The typical U.S. home value was $358,968 in January, down 0.4% month over month and just 0.2% higher than a year earlier .

**Regional differences matter:** The number of major markets seeing annual price declines will drop sharply. Home values fell in 24 of the 50 largest markets as of October 2025. Zillow forecasts that number will be cut in half to 12 major markets next year .

**What this means for homeowners:** Stabilizing prices mean more homeowners will continue building equity rather than losing it. Fewer owners will see their Zestimate fall below what they paid for their homes .

---

## Home Sales: Pent-Up Demand Starting to Release

Zillow projects **4.2 million existing home sales in 2026**, representing a **3.9% increase** from 2025 . This is slightly higher than the 4.26 million figure mentioned in earlier reports, which represented a 4.3% increase .

**The context:** Years of limited inventory and high mortgage rates have created pent-up demand to move that should start releasing as affordability improves . A stronger-than-expected fall season in 2025 hinted at what's possible this spring if recent affordability gains persist .

**Morgan Stanley's view:** The investment bank expects about **3% growth in purchase volumes** next year . They note that while affordability is improving, the "lock-in effect" from homeowners with sub-3% mortgages continues to play a very big role in limiting inventory .

**What's happening right now:** In January, 219,644 homes were sold—down 4% from a year earlier, but newly pending listings (a forward-looking indicator) showed 1.8% year-over-year growth . Winter weather impacted many major markets, but sales are expected to bounce back as spring approaches .

---

## Rent Trends: Good News for Renters

For renters, 2026 is shaping up to be a year of relief.

Zillow forecasts:

- **Multifamily rents:** Expected to rise just **0.2%** in 2026 

- **Single-family rents:** Projected to climb **1.6%** 

- **Rent affordability:** Continued improvement, with 37 of the 50 biggest markets seeing incomes grow faster than rents in 2025 

**The current picture:** A median-income household would spend **27.2% of income on the typical U.S. rent** as of October, the lowest share since August 2021 . The typical rent nationwide was $1,895 in January, up 2% from a year earlier .

**What's driving this:** Elevated vacancies, ongoing multifamily completions, and added competition from single-family home listings flipping from the for-sale market to the rental market continue to limit rent growth . Property managers are relying more on concessions or amenities to maintain occupancy .

**The family shift:** Zillow found that **37% of renters have a child at home**—up 4% from last year . As more families shop for rentals, we may see an increase in family-friendly rental buildings with playrooms, green spaces, and homework rooms .

**One exception:** New York City stands out, with StreetEasy economists expecting rent growth there to accelerate in 2026, bucking the national trend .

---

## The New Construction Picture: A Rare Opportunity

The new-home market is showing some unusual dynamics that could benefit buyers.

### Builder Incentives Are Strong

About **40% of builders cut prices** in December, with average reductions around 5% . Nearly two-thirds are also offering other incentives, with mortgage rate buydowns being one of the most common tools .

**What this means:** Builders are using their financial resources to lower buyers' mortgage rates for the first two or three years, helping to ease monthly payment pressures . Other incentives include amenity upgrades and closing cost assistance .

### The Price Gap Has Flipped

This is one of the real oddities in today's data: the median resale home is actually **more expensive** than the median newly built home .

**Robert Dietz**, chief economist at the National Association of Home Builders, explains: "Typically, new homes carry a 10% to 15% price premium because they offer more amenities, lower maintenance costs and newer systems. But today's builder incentives—combined with more construction happening in lower-cost areas—have flipped that dynamic" .

### Construction Slowdown

Despite the opportunity, single-family construction is expected to slow. Zillow notes that 2026 is shaping up to be the **slowest for single-family home construction starts since 2019** . Builders are holding back because a large stock of new homes already sits built or under construction .

Single-family starts were trending 5% below 2024 levels as of August 2025, with a further 2% drop expected in 2026 . The NAHB forecasts about a **1% increase** in single-family home building for 2026 .

### Townhomes on the Rise

One bright spot: townhomes. About **18% of single-family construction now consists of townhomes**, up from less than 10% a decade ago . They offer "light-touch density"—a smaller lot, shared walls, but still a front door and a path into homeownership .

---

## The Affordability Picture: Real Progress

This is where the story gets genuinely encouraging.

### Buying Power at a Four-Year High

Homebuying power hit its **highest level in nearly four years** in January, according to a new industry report .

**The numbers:**

- A median-income household could comfortably afford a **$331,483 home** with a 20% down payment in January—**$30,000 more** than a year ago .

- That means about **82,300 more homes for sale** came within reach compared with last year .

- The nearly 447,000 homes a median-income household could afford represented **40.3% of listings**, up from 34.8% a year prior .

**Kara Ng**, senior economist at Zillow, put it this way: "A more than $30,000 gain in buying power is meaningful for households that have been stretched thin by high rates. It can mean the difference between settling and choosing. That doesn't suddenly make this market affordable for everyone, but it does crack open doors that had firmly shut when rates peaked" .

### Monthly Payments Are Down

The typical monthly mortgage payment on a typical U.S. home is **$1,733** with a 20% down payment, excluding taxes and insurance . That's **8.4% lower than a year ago** .

**Mischa Fisher**, Zillow's chief economist, notes: "Housing affordability continues to improve for prospective homebuyers, while modest growth in the Zillow Observed Rent Index points to continued cooling in shelter inflation" .

### Regional Differences

The drop in mortgage rates affects expensive markets the most :

**Table 2: Buying Power Gains by Metro (January 2026)**

| **Metro Area** | **Buying Power Gain vs. Year Ago** |

| :--- | :--- |

| San Jose | +$74,000 |

| San Francisco | +$56,115 |

| Washington, D.C. | +$48,881 |

| San Diego | +$46,506 |

| Boston | +$46,390 |

*Source: Zillow via National Mortgage News *

Inventory recovery also varies. Houston led the country in affordable inventory growth, with almost 4,000 more listings within reach of a median-income buyer than last year, followed by Phoenix (3,434), Dallas (3,267), Miami (2,981), and Atlanta (2,279) .

---

## The Bigger Picture: What's Really Driving This Market

To understand where we're going, it helps to understand the forces at work.

### The Lock-In Effect

This is the single biggest factor shaping the housing market. Millions of homeowners secured 30-year fixed loans near **3% in 2020 and 2021** . Many of those borrowers appear likely to stay put, constraining inventory even if rates edge toward 5.5% .

**Morgan Stanley's Jay Bacow and James Egan** explain: "The lock-in effect is still playing a very big role. We do think that this sustained marginal improvement in affordability will help purchase volumes. But this is not what's going to get us to escape velocity" .

### Inventory Is Improving—Slowly

Listed inventories are up roughly **30% from historic lows in 2023** . However, they're still about **20% below where they were in 2019** . Nationwide housing inventory reached **1.11 million homes** in January, up 6% from a year earlier .

**The dynamic:** Any improvement in affordability from lower mortgage rates is being paired with increasing inventory volumes . That's keeping home price appreciation under control.

### The Buyer-Seller Gap

There were an estimated **44% more home sellers than buyers** in the housing market in January—up from 30% more a year ago, according to Redfin . That's about **600,000 more sellers than buyers** .

This gap helps explain why price growth is moderating and why buyers are gaining negotiating power.

### The Fed's Role

The Federal Reserve's actions matter—but not in the direct way most people think. As Morgan Stanley notes, "the Fed cutting rates in and of itself doesn't actually cause the 30-year fixed rate mortgage to come down" .

However, lower short-term rates do help, and the Fed's announcement that it will continue mortgage runoff from its balance sheet has implications . If they ended mortgage runoff, that would help—but that window seems to have passed .

---

## What This Means for Different People

### If You're a First-Time Homebuyer

This might be your moment. Buying power is up $30,000. Monthly payments are down 8.4%. Inventory is increasing. And you're facing less competition than you would have a year ago.

**The caveat:** Don't expect a steal. Prices aren't crashing—they're stabilizing and growing modestly. The goal is to find a home you can afford now, with a payment you can manage, rather than trying to time the market perfectly.

### If You're a Current Homeowner

If you have one of those sub-3% mortgages from 2020 or 2021, you're probably staying put—and that's the right financial decision for most people. But if you need to move, you'll find a market with more inventory and more motivated buyers than in recent years.

Price stability means you'll likely sell close to what your home is worth, without the wild appreciation of 2020-2021 but also without major price cuts .

### If You're a Renter

You're in a good position. Rent growth is slowing dramatically, with multifamily rents expected to rise just 0.2% in 2026 . Incomes are catching up, and concessions are common . Nearly 60% of renters plan to continue renting in 2026, recognizing that renting still works better for their lifestyles and finances .

### If You're an Investor

The Midwest is worth watching. Markets like Columbus, Ohio, Indianapolis, and Kansas City remain more affordable, are close to major universities, and are well positioned for AI and tech investment . Single-family home construction in the Midwest was already up in 2025, even as it declined nationally .

---

## Frequently Asked Questions

**Q: When will mortgage rates finally drop below 6%?**

A: According to Zillow, rates are expected to stay above 6% throughout 2026 but ease into the low-6% range by year-end . Bankrate forecasts the average 30-year fixed rate could fall below 6% for the first time since summer 2022 . Morgan Stanley predicts rates could end 2026 around 5.75% .

**Q: Are home prices going to crash?**

A: No. Zillow forecasts modest growth of 1.9% in 2026 . Prices are stabilizing, not crashing. The combination of improved affordability and steady demand should support modest price growth .

**Q: Is it better to buy a new home or an existing home right now?**

A: Interesting question. Right now, the median resale home is actually more expensive than the median newly built home—a rare situation . Builders are offering strong incentives, including rate buydowns and price cuts . It's worth comparing both options in your market.

**Q: How much buying power have I gained?**

A: A median-income household gained about $30,000 in buying power in January compared to a year ago . Monthly mortgage payments on a typical home are 8.4% lower than last year .

**Q: Should I wait for rates to drop further?**

A: That's a personal decision. Rates are expected to ease gradually, but waiting carries risks—prices could rise, and competition could increase. If you find a home you love that fits your budget, buying now locks in your payment and starts building equity.

**Q: What's happening with rent?**

A: Rent growth is slowing dramatically. Multifamily rents are expected to rise just 0.2% in 2026, giving incomes a chance to catch up . About 39% of rental listings offered concessions in January .

**Q: Will there be more homes to choose from?**

A: Yes. Inventory is improving, up 6% from a year earlier in January . However, it's still about 20% below 2019 levels . The trend is positive, but we're not back to pre-pandemic normal.

**Q: What's the "lock-in effect" everyone talks about?**

A: It's the phenomenon where homeowners with ultra-low mortgage rates (sub-3% from 2020-2021) are reluctant to sell and take on a new mortgage at today's higher rates . This constrains inventory and limits market activity .

**Q: Are there any government programs that could help?**

A: There's been discussion around a 50-year mortgage program and making mortgages portable or assumable, but these face significant technical and legal challenges . The GSEs are expected to grow their portfolios, which could help mortgage rates by an eighth to a quarter point .

**Q: Where are the best markets right now?**

A: The Midwest is showing strength—places like Columbus, Ohio; Indianapolis; and Kansas City . These markets remain more affordable and are well positioned for tech and AI investment . Texas and Florida markets have cooled after years of rapid growth .

---

## The Bottom Line

Here's what I keep coming back to.

After three years of historically low activity and persistent affordability challenges, the housing market is finally showing signs of life. Not a boom—nobody expects that. But a slow, gradual thaw that could open doors for people who've been waiting.

**Mischa Fisher**, Zillow's chief economist, put it well: "Our forecast for both sales and affordability this year is one of gradual improvement. January was a cautious first step along that path, as potential buyers and sellers dealt with severe winter weather in many major markets. We expect sales to pick up as spring approaches" .

**Morgan Stanley's view** is similar: "The housing market is well supported at these levels. Difficult to see big decreases in sales volumes or prices next year. But also going to be difficult to really achieve any more material growth in this low single digits we're calling for" .

**For buyers,** the math is improving. $30,000 more buying power. Monthly payments down 8.4%. Inventory up. Competition down. It's not 2020, but it's better than 2023 and 2024.

**For sellers,** price stability and more consistent demand should make it easier to sell without resorting to major price cuts in most markets .

**For everyone,** the message is the same: 2026 is a year of transition. Not dramatic, not transformative, but meaningful. A year when the market finally starts moving again.

Whether that means it's your year to buy, sell, or rent depends on your situation. But at least now, there's a path forward.

---

*Got questions about your specific market? Thinking about buying or selling this year? Drop a comment and let me know.*

Bank of America Resets Nvidia Price Target After Earnings: Now Sees $300 on 'Unshakeable' AI Demand

 Bank of America Resets Nvidia Price Target After Earnings: Now Sees $300 on 'Unshakeable' AI Demand

**Published: February 27, 2026**

You know that feeling when a company reports the best quarter in its history, raises guidance, and the stock still goes down?

That's Nvidia right now.

The chip giant delivered another monster quarter on Wednesday—$68.1 billion in revenue, up 73% year-over-year, with guidance for next quarter around $78 billion that smashed expectations . And yet, the stock dropped more than 5% on Thursday, wiping out its year-to-date gains .

So what gives? Is the AI trade finally running out of steam?

Not according to Bank of America.

In a research note released Thursday, BofA analyst Vivek Arya and his team reset their price target on Nvidia to **$300, up from $275**, while reiterating a Buy rating . That's about 53% upside from where the stock was trading before the earnings report .

Let me walk you through why Bank of America is so bullish, what's really driving the stock's post-earnings dip, and whether this is a buying opportunity or a warning sign.

---

## The Short Version

**What Nvidia reported:** Q4 revenue of $68.13 billion, up 73% year-over-year, beating estimates of $65.9 billion. EPS of $1.62 beat estimates of $1.54. Q1 guidance of $78 billion topped expectations of $72.9 billion .

**What the stock did:** Dropped more than 5% on Thursday, extending a pattern where Nvidia shares fall after earnings regardless of how good the numbers are .

**What Bank of America did:** Raised its price target to $300 from $275, based on 28x calendar year 2027 P/E estimates . The firm also raised its EPS forecasts for fiscal years 2027/2028/2029 by 5%/10%/13% .

**Why the stock fell:** Investor concerns about the sustainability of AI spending, pressure on hyperscaler cash flows, and tougher year-over-year comparisons for cloud capex in 2027 .

**The bottom line:** Bank of America sees the selloff as "short-term noise" and believes Nvidia's long-term AI opportunity is still in the early innings .

---

## The Numbers: Nvidia's Quarter by the Numbers

Let's start with the raw data, because it's genuinely staggering.

**Table 1: Nvidia Q4 Earnings vs. Expectations**

| **Metric** | **Actual** | **Expected** | **Beat** |

| :--- | :--- | :--- | :--- |

| Revenue | $68.13 billion | $65.9 billion | +3.4% |

| EPS | $1.62 | $1.54 | +5.2% |

| Data Center Revenue | $62.3 billion | N/A | Massive |

| Gross Margin | 74.9% | N/A | Strong |

*Sources: *

**Guidance for next quarter:**

- Revenue: ~$78 billion (plus or minus 2%)

- Wall Street was looking for: ~$72.9 billion

- Beat: About 7% above expectations 

**The Blackwell story:** Management revealed $11 billion in Blackwell revenue for Q4, calling it "the fastest product ramp in our company's history" . This despite CEO Jensen Huang acknowledging a "hiccup" that cost them "a couple of months" in production .

**The supply chain commitment:** Supply chain obligations rose to $95.2 billion from $50.3 billion in the prior quarter . That's Nvidia's way of saying: demand isn't slowing down, and we're locking in capacity years in advance .

---

## Bank of America's New Price Target: $300

Here's what Bank of America actually said in their research note.

### The New Numbers

Analyst Vivek Arya and his team raised their fiscal year 2027/2028/2029 non-GAAP EPS estimates by **5%/10%/13%** to $8.11, $10.72, and $13.18, respectively . They also noted that these estimates now include stock compensation expenses and embed a higher tax rate .

The new $300 price target is based on a **28x multiple of their calendar year 2027 P/E estimate excluding cash** . That's within Nvidia's historical forward-year P/E range of 25 to 56 .

**The rationale:** Arya believes this multiple is "justified by NVDA's leading share in fast-growing AI compute/networking markets" .

### What BofA Liked

The team said Nvidia "more than delivered, with topline growth accelerating to 77% YoY" in Q1 guidance . They highlighted:

- Strong demand visibility extending through 2027

- The Blackwell ramp exceeding expectations

- Nvidia's dominant position in AI infrastructure

- Expanding supply chain commitments

### The Risks BofA Acknowledged

To be fair, the team also noted several risk factors :

**Table 2: BofA's Identified Risks for Nvidia**

| **Risk Category** | **Details** |

| :--- | :--- |

| Market Rotation | A continued market rotation out of AI semiconductors could work against Nvidia |

| Cloud Capex Slowdown | Expected slower year-over-year growth for cloud capex in 2027 |

| Gaming Weakness | Potential weakness in consumer-driven gaming market |

| Competition | Competition from major public firms (AMD, custom silicon) |

| China Restrictions | Larger-than-expected impact from restrictions on compute shipments to China |

| Sales Lumpiness | Lumpy and unpredictable sales in new enterprise, data center, and autos markets |

| Capital Returns | Potential for decelerating capital returns |

| Regulatory Scrutiny | Enhanced government scrutiny of Nvidia's dominant market position |

---

## Why the Stock Fell Despite Great Numbers

This is the part that's confusing a lot of investors. Let's break down what's really going on.

### The AI Sentiment Problem

Jensen Huang actually explained this phenomenon after last quarter's earnings. "If we delivered a bad quarter, it is evidence there's an AI bubble. If we delivered a great quarter, we are fueling the AI bubble," he said .

In other words: Nvidia is damned if they do, damned if they don't. The stock is so closely associated with the AI trade that any news—good or bad—gets interpreted through the lens of "is this a bubble?"

**TD Cowen analyst Joshua Buchalter** put it this way: "Skepticism continues to pervade large-cap AI stocks." He said Nvidia stock "needs a catalyst to break the AI sentiment holding pattern" .

### The Funding Question

The bigger issue, according to Morgan Stanley's Joseph Moore, is that investors are shifting from "how fast is demand growing?" to "who's funding it?" .

Much of the AI buildout is being paid for by hyperscalers—Microsoft, Google, Amazon, Meta. And Morgan Stanley flagged pressure on those firms' cash flow, which could make today's cloud capital spending harder to sustain .

**Bank of America** also warned that after more than 50% annual cloud capex growth from 2024 to 2026, the comparisons could get tougher in 2027 .

### The China Factor

Nvidia's CFO Colette Kress was blunt on the call: "We are not assuming any Data Center compute revenue from China in our outlook" .

While small amounts of H200 products for China-based customers have been approved, the company has yet to generate any revenue from those shipments .

That's a meaningful headwind, but analysts like Wedbush called Nvidia's performance "only more impressive" given the absence of China revenue .

---

## What Other Analysts Are Saying

Bank of America isn't alone in raising targets. Here's what the Street is saying post-earnings.

**Table 3: Analyst Actions Post-Nvidia Earnings**

| **Firm** | **Analyst** | **Rating** | **Target** | **Key Quote** |

| :--- | :--- | :--- | :--- | :--- |

| Bank of America | Vivek Arya | Buy | $300 (from $275) | "More than delivered, with topline growth accelerating" |

| Wedbush | Dan Ives | Outperform | $300 (from $230) | "Everything they wanted in a present with a red bow" |

| Morgan Stanley | Joseph Moore | Overweight | $260 (from $250) | "Underlying compute demand is clear" |

| JPMorgan | Harlan Sur | Overweight | $265 (from $250) | "Looks like a coiled spring" |

| TD Cowen | Joshua Buchalter | Top Pick | $235 | "Skepticism continues to pervade large-cap AI stocks" |

| Jefferies | N/A | Constructive | N/A | "Significant beat & raise" |

*Sources: *

**Wedbush's Dan Ives** was characteristically colorful: "Watching Nvidia today is like watching Michael Jordan in his first few years for the Chicago Bulls" . He also noted that management may still be leaving room for upside when results are reported.

**Morgan Stanley's Joseph Moore** said he was "surprised by the muted response" given the strong quarter and outlook, but maintained that "the underlying compute demand is clear" .

**JPMorgan's Harlan Sur** described Nvidia stock as "a coiled spring that has been tightened even further post this set of results" .

---

## The Investor Concerns: What Management Addressed

The earnings call revealed several investor concerns that management tackled head-on.

### 1. The Blackwell Ramp

Investors were worried about production complexities and supply chain bottlenecks. Huang acknowledged the "hiccup" that cost them "a couple of months" but emphasized their successful recovery. The disclosure of $11 billion in Blackwell revenue for Q4 served as tangible evidence of their operational resilience .

### 2. Gross Margin Pressure

Margins declined to the "low 70s" during the Blackwell ramp, triggering questions about trajectory. CFO Colette Kress confirmed margins would return to the "mid-70s late this fiscal year," framing the compression as a temporary investment in customer relationships rather than a structural problem .

### 3. Long-Term Demand Sustainability

Huang addressed this with a multilayered framework: near-term signals (purchase orders), mid-term signals (infrastructure investments), and long-term signals (the fundamental shift to AI-based software). He emphasized that reasoning models currently require "100x more compute" than earlier models .

### 4. Competition from Custom ASICs

Huang defended Nvidia's value proposition across five dimensions: architectural flexibility, workflow coverage, deployment breadth, performance cadence, and software ecosystem complexity. His observation that "the software stack is incredibly hard" highlighted barriers to replication that extend beyond silicon .

---

## The Health Care Angle: AI Is Delivering ROI

One underappreciated story from Nvidia's earnings week was the release of its second annual "State of AI in Healthcare and Life Sciences" survey .

**Table 4: Nvidia's Health Care AI Survey Highlights**

| **Finding** | **Percentage** |

| :--- | :--- |

| Organizations actively using AI | 70% (up from 63% in 2024) |

| Open source important to AI strategy | 82% |

| Executives saying AI helps increase revenue | 85% |

| Executives saying AI helps reduce costs | 80% |

| Medical tech using AI for imaging | 61% |

| Pharma/biotech using AI for drug discovery | 57% |

| Expecting AI budgets to increase | 85% |

*Source: *

This matters because it shows AI is moving beyond hype into real-world applications with measurable returns. As Annabelle Painter, clinical AI strategy lead at Visiba U.K., put it: "The organizations seeing impact are those that embed AI into existing workflows instead of layering AI on top as a separate tool" .

---

## The Sovereign AI Opportunity

Beyond the health care survey, Bank of America also highlighted a massive emerging opportunity: **sovereign AI** .

According to BofA, the sovereign AI market represents a **$50 billion annual opportunity**, accounting for 10%-15% of the global $450 billion to $500 billion AI infrastructure market .

**What this means:** Countries around the world are building their own AI infrastructure to train models on local languages and cultures, rather than relying entirely on U.S. hyperscalers. Nvidia has already secured deals in the Middle East, including a multibillion-dollar agreement with Saudi Arabia's Humain to supply over 18,000 Blackwell chips .

These sovereign AI initiatives complement commercial cloud investments and provide geographic diversification that could offset China restrictions .

---

## What This Means for You

### If You Own Nvidia Stock

Don't panic. The post-earnings drop isn't about fundamentals—it's about sentiment. Nvidia delivered a historic quarter and raised guidance. The China issue is real but known. The Blackwell ramp is ahead of schedule. And analysts are raising targets, not cutting them.

**The Jefferies take:** The firm said Nvidia "was already cheap and will look remarkably cheaper," pointing to an upside earnings scenario that could push fiscal 2027 EPS above $14 .

### If You're Thinking About Buying

This might be your moment. Nvidia's stock has been range-bound for months, and the post-earnings dip could be a buying opportunity for long-term investors.

But be realistic. Nvidia is a $4.7 trillion company. The days of 100% annual returns are probably over. The question is whether you believe in the multi-year AI buildout.

**Morgan Stanley's view:** "The bigger investor question is durability, with hyperscale cash flows under pressure, but the underlying compute demand is clear" .

### If You're Just Watching

This is a fascinating moment in the AI story. For the first time, investors are questioning not whether demand exists, but who's going to pay for it. That's a natural evolution of any technology cycle.

The good news? Nvidia's management addressed these concerns directly on the call, and the long-term thesis remains intact.

---

## Frequently Asked Questions

**Q: What did Bank of America do with its Nvidia price target?**

A: Bank of America raised its price target to $300 from $275, while reiterating a Buy rating. The new target is based on 28x calendar year 2027 P/E estimates .

**Q: How did Nvidia's earnings look?**

A: Revenue of $68.13 billion beat estimates of $65.9 billion, up 73% year-over-year. EPS of $1.62 beat estimates of $1.54. Q1 guidance of $78 billion topped expectations of $72.9 billion .

**Q: Why did the stock fall after such good earnings?**

A: Investor concerns about the sustainability of AI spending, pressure on hyperscaler cash flows, and tougher year-over-year comparisons for cloud capex in 2027 . Bank of America called it "short-term noise" .

**Q: What's the Blackwell update?**

A: Nvidia reported $11 billion in Blackwell revenue for Q4, calling it "the fastest product ramp in our company's history" despite earlier production hiccups .

**Q: What about China?**

A: Nvidia is assuming no Data Center compute revenue from China in its outlook. Small amounts of H200 products have been approved, but no revenue has been generated yet .

**Q: What are analysts saying now?**

A: Bullish. Bank of America ($300), Wedbush ($300), JPMorgan ($265), and Morgan Stanley ($260) all raised targets. The consensus remains Strong Buy .

**Q: What's the sovereign AI opportunity?**

A: Bank of America estimates the sovereign AI market represents a $50 billion annual opportunity, accounting for 10%-15% of global AI infrastructure spend .

**Q: Is AI delivering real returns?**

A: Nvidia's health care survey found 85% of executives say AI is helping increase revenue, and 80% say it's helping reduce costs .

**Q: Should I buy Nvidia now?**

A: I can't give investment advice. But Bank of America sees 53% upside from pre-earnings levels, and the long-term AI thesis remains intact. The post-earnings dip could be a buying opportunity for long-term investors.

**Q: What's the next catalyst?**

A: The upcoming GTC conference in March could provide another catalyst, where Nvidia will outline its technology road map .

---

## The Bottom Line

Here's what I keep coming back to.

Nvidia just reported one of the most anticipated earnings in market history. They delivered—by any objective measure, they absolutely crushed it. Revenue up 73%. Guidance above expectations. Blackwell ramping faster than any product in company history.

And the stock fell 5%.

That tells you something about where we are in this cycle. The easy money has been made. The AI trade is no longer a secret. Investors are asking harder questions: who's funding this? How long can it last? What happens when cloud capex growth slows?

**Bank of America's answer** is that these concerns are "short-term noise." They raised their price target to $300, raised their EPS estimates, and reiterated their Buy rating. They see Nvidia's position in AI as "unshakeable."

**Morgan Stanley** is more measured but still bullish, noting that "the underlying compute demand is clear" even as they acknowledge pressure on hyperscaler cash flows.

**Wedbush's Dan Ives** put it in perspective: "Watching Nvidia today is like watching Michael Jordan in his first few years for the Chicago Bulls."

The stock may be volatile. Sentiment may shift. But the fundamental story—that AI is the biggest technology shift in a generation, and Nvidia is the company supplying the picks and shovels—remains intact.

For long-term investors, days like this are either scary or exciting. It depends on whether you're looking at the price or the business.

---

*Got thoughts on Nvidia's earnings? Buying the dip or staying away? Drop a comment and let me know.*

We're Late, Not Early': Jack Dorsey Cuts 4,000 Jobs at Block in AI Overhaul, Stock Soars 25%

 

# 'We're Late, Not Early': Jack Dorsey Cuts 4,000 Jobs at Block in AI Overhaul, Stock Soars 25%

**Published: February 27, 2026**

You know that moment when a CEO says something that makes you do a double-take?

Jack Dorsey just had one of those moments.

The Block CEO announced Thursday that the fintech company is cutting more than 4,000 employees—roughly 40% of its 10,000-person workforce—because artificial intelligence is making them unnecessary . And here's the part that should make every white-collar worker sit up and pay attention: he doesn't think they're early to this trend. He thinks most companies are late .

Let me walk you through what just happened at Block, why the stock jumped 25% after the news, and what this means for the future of work in America .

---

## The Short Version

**What happened:** Block (the company behind Square, Cash App, and Tidal) laid off over 4,000 employees, reducing its workforce from about 10,000 to under 6,000 .

**Why it happened:** CEO Jack Dorsey explicitly cited AI as the reason. "Intelligence tools have changed what it means to build and run a company," he wrote in a letter to shareholders . "A significantly smaller team, using the tools we're building, can do more and do it better."

**The numbers:** Engineer output is up more than 40% since September thanks to AI coding tools . Block will take a $450 million to $500 million hit for severance and benefits . The stock jumped over 24% in after-hours trading .

**The warning:** Dorsey says most companies are "late" to this realization and predicts the majority will make similar structural changes within the next year .

**The paradox:** While cutting thousands of roles, Block is actively hiring senior AI engineers . The company is becoming smaller, flatter, and AI-native.

---

## The Announcement: What Jack Dorsey Actually Said

Let's start with Dorsey's own words, because they're worth reading carefully.

In a letter to shareholders, he wrote: "The core thesis is simple. Intelligence tools have changed what it means to build and run a company. We're already seeing it internally. A significantly smaller team, using the tools we're building, can do more and do it better. And intelligence tool capabilities are compounding faster every week" .

On X (the platform he co-founded), he added: "today we're making one of the hardest decisions in the history of our company: we're reducing our organization by nearly half, from over 10,000 people to just under 6,000. that means over 4,000 of you are…" .

**The timing:** Dorsey pointed to a specific inflection point. "Something happened in December of last year, just last year, where the models just got an order of magnitude more capable and more intelligent, and it's really shown a path forward in terms of us being able to apply it to nearly every single thing that we do," he said on an analyst call .

**The warning to other companies:** "I don't think we're early to this realization," Dorsey said. "I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes. I'd rather get there honestly and on our own terms than be forced into it reactively" .

---

## The Numbers: What We Know About the Layoffs

Let's get specific about the scale of what just happened.

**Table 1: Block Layoffs by the Numbers**

| **Metric** | **Value** |

| :--- | :--- |

| Employees before cuts | 10,205 (as of Dec 31, 2025)  |

| Employees after cuts | Under 6,000  |

| Jobs eliminated | 4,000+ (about 40%)  |

| Severance cost | $450 million - $500 million  |

| Stock reaction | +24% to +27% after-hours  |

| Market cap | ~$31 billion  |

*Sources: *

**The productivity gains:** CFO Amrita Ahuja said that since September, **engineer output is up more than 40%** thanks to AI tools . Work that used to take weeks now takes a fraction of the time.

**The severance package:** Laid-off employees are getting:

- 20 weeks of base salary

- One additional week for each year of service

- Equity vested through the end of May

- Six months of healthcare coverage

- $5,000 in transition assistance 

**Why now, not gradual cuts:** Dorsey said he chose to do one deep round instead of cutting gradually over months or years. "I'd rather get there honestly and on our own terms than be forced into it reactively" .

---

## The AI Tools Behind the Cuts

So what exactly is making these workers unnecessary?

**Goose:** Block has been building its own internal AI tool called Goose, which speeds up coding and other repetitive work . But Dorsey said external tools have actually surpassed Goose's capabilities.

**The December leap:** "Something happened in December last year where the models just got an order of magnitude more capable and more intelligent," Dorsey said . That's a reference to advances in models like Anthropic's Claude and OpenAI's systems.

**What AI is doing:**

- Automating routine coding tasks

- Generating and testing code

- Speeding up engineering workflows

- Handling repetitive work across the company

**The result:** Ahuja said engineering work that would have taken weeks now takes a fraction of the time. Output per engineer is up more than 40% since September .

---

## The Stock Market Reaction: Investors Love Efficiency

Here's the part that might make you uncomfortable: the stock jumped 25%.

**Table 2: Block Stock Reaction**

| **Time** | **Price** | **Change** |

| :--- | :--- | :--- |

| Thursday close | $54.53 | +5%  |

| After-hours | ~$68 | +25%  |

| Premarket Friday | Holding gains | +20%+  |

*Sources: *

**Why investors cheered:** Because the math is simple. Block's gross profit grew 24% in Q4, driven by 33% growth in Cash App . If they can deliver that growth with 40% fewer people, margins explode.

**Stephen Innes** at SPI Asset Management put it bluntly: "For years, we have debated whether AI would dent jobs at the margin. Now we have a public case study in which the CEO explicitly says that intelligence tools have changed what it means to build and run a company" .

**The Citrini factor:** This week's viral Citrini Research report, which modeled an AI-driven economic downturn, made investors hyper-aware of AI's potential impact. Block's announcement landed right in that sweet spot—concrete proof that AI is already reshaping corporate structure .

---

## The Paradox: Hiring While Firing

Here's where it gets interesting.

Block is cutting thousands of workers, but they're actively hiring in one area: **senior AI engineering talent** .

**What they're looking for:**

- Engineers who can build and improve AI systems

- People who can work alongside the new tools

- Talent to help Block become "intelligence-native"

**The quote from Ahuja:** "Although Block is shedding over 4,000 people from its 10,000-strong workforce, it's expanding in one area: senior engineering talent focused on AI" .

This is the new reality. Companies don't just need fewer people. They need different people. People who can build, manage, and work alongside AI systems, not just do the work those systems can now handle.

---

## The Broader Context: AI Job Displacement Is Real

Block isn't alone. This is happening across tech.

### What Other Companies Are Doing

**Table 3: AI-Related Workforce Changes at Major Tech Companies**

| **Company** | **Recent Action** | **AI Context** |

| :--- | :--- | :--- |

| Amazon | Looking for cost reductions | Ramping AI spending  |

| Meta | Preparing for AI-driven changes | Zuckerberg expects 2026 to be the year AI changes how we work  |

| Microsoft | Ongoing restructuring | Shifting focus to AI investments  |

| Google | Workforce adjustments | AI tools changing roles  |

| Cognizant | 30% of code now AI-generated | Still hiring thousands of graduates  |

*Sources: *

**Zuckerberg's prediction:** "We're starting to see projects that used to take big teams now be accomplished by a single, very talented person" .

**The Cognizant example:** The IT services firm now generates about 30% of its code using AI, yet still expects to hire thousands of graduates . That's the paradox—AI doesn't eliminate work entirely, but it changes what workers do.

### The Numbers on AI Job Loss

Goldman Sachs estimates AI contributed to **5,000 to 10,000 monthly job losses** in the most exposed industries last year, accounting for about 7% of planned layoffs in January .

**The IMF warning:** The International Monetary Fund has found that employment levels are already lower in occupations exposed to AI, especially entry-level roles .

**The WEF forecast:** Despite the anxiety, the World Economic Forum estimates that **170 million new roles** could be created globally by 2030, even as 92 million jobs disappear, resulting in a net gain—if workers gain the right skills .

---

## The Citrini Connection: Why This Week Mattered

Block's announcement landed in a uniquely charged moment.

Earlier this week, a research firm called Citrini published a 7,000-word "thought experiment" imagining a 2028 scenario where AI agents have disrupted the economy, causing a 38% drop in the S&P 500 and 10% unemployment .

The report went viral. Markets reacted. The Dow dropped 800 points on Monday .

**Why it matters for Block:** The Citrini scenario specifically modeled AI agents rerouting payments away from card networks and onto cheaper stablecoin rails—hitting payment companies like Block directly .

Dorsey's announcement essentially confirmed that the disruption isn't coming in 2028. It's here now. And his company is adapting.

**Moneycontrol** noted: "For Block, which straddles both payments and fintech, the Citrini scenario lands close to home. Dorsey's bet is that building AI tools internally — rather than being disrupted by them — can sustain a leaner company" .

---

## What This Means for You

### If You're a Tech Worker

This is the wake-up call. Block just proved that AI displacement isn't theoretical—it's happening, at scale, at a profitable company.

The skills that matter are shifting. Routine coding, data processing, and repetitive knowledge work are being automated. The value is moving to people who can build, manage, and work alongside AI systems.

**The good news:** Companies are still hiring—but they're hiring different people. Cognizant generates 30% of its code with AI and still plans to hire thousands of graduates . Block is cutting thousands but actively recruiting senior AI engineers.

### If You're in Fintech

This is your future. Block's move signals that AI efficiency gains are now a competitive necessity. If your company isn't thinking about how to do more with fewer people, it's falling behind.

**The warning from Dorsey:** "Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes" .

### If You're an Investor

Block's 25% stock jump tells you everything. Wall Street rewards companies that get ahead of this trend. The companies that wait will be forced into reactive cuts later, under worse conditions.

**The Evercore ISI note:** The layoffs represent "a seminal moment" in the AI era, offering a glimpse into how the technology may fundamentally reshape the corporate world .

### If You're a Consumer

Your Cash App and Square experiences probably won't change—at least not immediately. But over time, expect faster development, better features, and maybe even lower costs as AI efficiencies kick in.

---

## The Bigger Question: Is This Just the Beginning?

Dorsey seems to think so.

"I don't think we're early to this realization. I think most companies are late" .

**What that means:** If Dorsey is right, we're about to see a wave of similar announcements. Companies across every industry will realize they can do the same work with far fewer people, thanks to AI.

**The economic implications:** This could mean:

- Higher corporate profits (good for investors)

- Lower employment (bad for workers)

- Massive retraining needs

- Potential social and political upheaval

**The productivity upside:** If AI delivers on its promise, we could see a sustained productivity boom. That's good for economic growth. The question is whether the gains are shared broadly or concentrated at the top.

---

## Frequently Asked Questions

**Q: How many people did Block lay off?**

A: More than 4,000 employees, reducing the workforce from about 10,200 to under 6,000—roughly a 40% reduction .

**Q: Why did Block do this?**

A: CEO Jack Dorsey explicitly cited AI efficiency gains. He said intelligence tools allow smaller teams to do more work, and the capabilities are "compounding faster every week" .

**Q: How did the stock react?**

A: Block shares jumped 24% to 27% in after-hours trading following the announcement .

**Q: What severance are laid-off workers getting?**

A: 20 weeks of salary plus one week per year of service, equity vested through May, six months of healthcare, and $5,000 in transition assistance .

**Q: Is Block still hiring?**

A: Yes, but only in specific areas. The company is actively recruiting senior AI engineering talent .

**Q: What's Goose?**

A: Goose is Block's internal AI tool for speeding up coding and other repetitive work. Dorsey said external models have now surpassed Goose's capabilities .

**Q: What happened in December 2025?**

A: According to Dorsey, AI models "got an order of magnitude more capable and more intelligent" in December, accelerating Block's transition .

**Q: Are other companies doing this?**

A: Yes. Meta, Microsoft, Google, and Amazon have all made AI-related workforce changes. Cognizant now generates 30% of its code with AI .

**Q: Will this affect Cash App or Square users?**

A: Not immediately. The changes are internal. Over time, you may see faster development and new features.

**Q: Is this the future of work?**

A: Dorsey thinks so. He predicts "the majority of companies will reach the same conclusion and make similar structural changes" within the next year .

---

## The Bottom Line

Here's what I keep coming back to.

For years, we've debated whether AI would actually eliminate jobs. Economists gave cautious estimates. Tech executives made vague promises. Workers worried but didn't see concrete proof.

Block just provided the proof.

4,000 people. 40% of the workforce. Gone because AI makes them unnecessary. And the stock went up 25%.

**Jack Dorsey's message** is worth remembering: "I don't think we're early to this realization. I think most companies are late."

If he's right, this is the first domino. The next year will bring similar announcements from companies across every industry. Some will be honest about the AI link, as Block was. Others will find different words.

**The paradox** is that Block is also hiring. They need different people now—people who can build and manage AI systems, not just do the work those systems can now handle.

That's the real story. AI isn't eliminating work entirely. It's eliminating certain kinds of work, and certain kinds of workers. The question for everyone reading this is: which kind are you?

**Stephen Innes** put it perfectly: "For years, we have debated whether AI would dent jobs at the margin. Now we have a public case study in which the CEO explicitly says that intelligence tools have changed what it means to build and run a company."

Block is the case study. The rest of corporate America is taking notes.

---

*Got thoughts on the Block layoffs? Worried about your job? Working with AI tools already? Drop a comment and let me know.*

Netflix Is the Big Winner in Warner Takeover Battle as CEO Puts Shareholders Over Ego

 

# Netflix Is the Big Winner in Warner Takeover Battle as CEO Puts Shareholders Over Ego

**Published: February 27, 2026**

You know that feeling when you really want something, but the price gets too high, and you just have to walk away?

That's the moment that defines great leadership.

And that's exactly what Ted Sarandos and Greg Peters just did at Netflix.

In a stunning turn of events, Netflix has officially walked away from its months-long pursuit of Warner Bros. Discovery's studio and streaming assets . After Warner's board declared Paramount Skydance's latest $31-per-share offer a "superior proposal," Netflix had four days to match it. They responded in less than two hours: "No thanks" .

The result? Netflix shareholders cheered. The stock jumped more than 10% . And the company walked away with a cool $2.8 billion breakup fee, paid by Paramount .

Let me walk you through what just happened, why Netflix actually won by losing, and what this mega-merger means for everything from your streaming bill to the future of CNN.

---

## The Short Version

**What happened:** After a months-long bidding war, Paramount Skydance won the right to acquire all of Warner Bros. Discovery for $31 per share in cash (about $111 billion including debt) . Netflix, which had a deal to buy Warner's studio and streaming assets for $27.75 per share (about $83 billion), declined to match the higher offer .

**Why Netflix walked away:** Co-CEOs Ted Sarandos and Greg Peters said the price required to match Paramount's bid was "no longer financially attractive" . They called the deal a "nice to have" at the right price, not a "must have" at any price .

**What Netflix gets:** A $2.8 billion breakup fee, paid by Paramount . Plus a stock that jumped more than 10% on the news .

**What Paramount gets:** All of Warner Bros. Discovery—HBO, HBO Max, CNN, TNT, TBS, DC Studios, Warner Bros. film studio, and a mountain of IP including Harry Potter, Game of Thrones, and Superman .

**What's next:** Regulatory scrutiny, for sure. California Attorney General Rob Bonta already has an open investigation, and Democratic senators are sounding alarms . But with the Ellison family's deep pockets and political connections, the deal has momentum.

---

## The Bidding War That Consumed Hollywood

To understand why this matters, you need to know how we got here.

**Table 1: The Bidding War Timeline**

| **Date** | **Event** |

| :--- | :--- |

| December 2025 | Netflix agrees to buy Warner's studio and streaming assets for $27.75/share (~$83B)  |

| Late 2025 | Paramount launches hostile bid for entire company |

| February 23, 2026 | Paramount raises offer to $31/share, adds $7B regulatory termination fee, agrees to cover Netflix breakup fee  |

| February 26, 2026 | Warner board declares Paramount offer "superior"  |

| February 26, 2026 | Netflix declines to match, walks away  |

| March 20, 2026 | Warner board expected to vote on Paramount merger agreement  |

**The key difference:** Netflix wanted Warner's studio and streaming assets (film and TV production, HBO Max). Paramount wants **all** of Warner Bros. Discovery—including cable networks like CNN, TNT, and Discovery .

**The Ellison factor:** This deal is backed by Larry Ellison, the Oracle co-founder worth nearly $200 billion, who is bankrolling his son David's ambitions . The Ellison Trust is committing $45.7 billion in equity, up from $43.6 billion previously . Bank of America, Citi, and Apollo are providing $57.5 billion in debt financing .

---

## Why Netflix Walked: A Masterclass in Discipline

Here's the part that impressed Wall Street.

Netflix had every reason to want this deal. Warner's studio and streaming assets would have added Superman, Harry Potter, and Game of Thrones to Netflix's library. It would have been a blockbuster combination.

But when the price got too high, Sarandos and Peters said no.

**Their statement said it all:** "We believe we would have been strong stewards of Warner Bros.' iconic brands, and that our deal would have strengthened the entertainment industry and preserved and created more production jobs in the U.S. But this transaction was always a 'nice to have' at the right price, not a 'must have' at any price" .

**Translation:** We wanted it. But not at any cost.

**A Netflix adviser** put it even more bluntly: "There's no point in playing chicken with someone who won't turn the wheel" . That someone is Larry Ellison, who signaled a willingness to pay a price that Netflix viewed as irrational.

**The result:** Netflix shares jumped more than 10% . Investors love discipline. They love CEOs who don't let ego drive decisions.

**What Netflix does now:** Sarandos and Peters said they'll invest about $20 billion in original content this year and resume their share repurchase program . They're sticking to what worked for 20 years: delight members, grow profitably, drive shareholder value.

**The breakup fee:** Netflix walks away with $2.8 billion . That's not a bad consolation prize.

---

## What Paramount Wins: The Combined Empire

If regulators approve this deal, Paramount Skydance will control an absolutely staggering collection of entertainment assets.

**Table 2: What Paramount Gets in the Merger**

| **Category** | **Assets** |

| :--- | :--- |

| **Film Studios** | Warner Bros. Pictures, New Line Cinema, DC Studios, Paramount Pictures |

| **Streaming** | HBO Max, Paramount+, Discovery+ |

| **Cable Networks** | HBO, CNN, TNT, TBS, Discovery, MTV, Nickelodeon, Comedy Central, Showtime |

| **Broadcast** | CBS |

| **IP Libraries** | Harry Potter, Game of Thrones, DC Universe (Superman, Batman), Lord of the Rings, Star Trek, Mission: Impossible, Transformers, Top Gun, The Godfather, Titanic, Barbie, Succession, The White Lotus, and dozens more  |

**David Zaslav**, Warner's CEO, is clearly excited: "Once our board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders. We are excited about the potential of a combined Paramount Skydance and Warner Bros Discovery and can't wait to get started working together telling the stories that move the world" .

**The debt burden:** This would be one of the largest leveraged buyouts in history. Warner ended 2025 with $33.5 billion in debt. Add $57.5 billion in new financing, and the combined company would start with over $90 billion in debt .

**The savings plan:** Paramount's team has talked about $6 billion in cost savings. That means layoffs .

---

## The Regulatory Gauntlet: This Deal Faces Real Hurdles

Here's where things get complicated.

**Federal approval:** TD Cowen analysts think approval from federal regulators "seems likely given the political environment" . That's a reference to the Ellison family's ties to President Trump.

**State opposition:** California Attorney General Rob Bonta, a Democrat, is already pushing back. "These two Hollywood titans have not cleared regulatory scrutiny – the California Department of Justice has an open investigation, and we intend to be vigorous in our review," he said .

**Senate skepticism:** Democratic Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal have voiced concerns that approval could be tainted by political favoritism . Warren called the potential merger an "antitrust disaster" that would let "Trump-aligned billionaires" control what Americans watch .

**International review:** European regulators are also expected to weigh in .

**The breakup fee:** Paramount has raised the regulatory termination fee to $7 billion—meaning if the deal fails to close due to legal issues, they owe Warner that much .

---

## The Political Angle: Trump, the Ellisons, and CNN

You can't talk about this deal without talking about politics.

**The Ellison-Trump connection:** Oracle founder Larry Ellison, David's father, has close ties to President Trump . Paramount's aggressive push comes just months after Skydance closed its own buyout of Paramount—a deal approved weeks after the company agreed to pay Trump $16 million to settle a lawsuit over editing at CBS's "60 Minutes" .

**CNN's fate:** Under Netflix's deal, CNN would have been spun off as a separate public company. Under Paramount's deal, CNN stays inside the combined giant .

That's significant because CBS, already under Skydance ownership, has seen editorial shifts. Free Press founder Bari Weiss was installed as editor-in-chief of CBS News, seen as a move to appeal to more conservative viewers . If the Warner deal goes through, critics expect similar changes at CNN—a network that has long drawn Trump's ire.

**Mike Proulx** at Forrester Research put it bluntly: "Any concerns about Netflix owning Warner Bros. are only heightened by the prospect of Paramount owning all of WBD. But it might not even matter. Politics are playing an outsized role in this deal, and they've been on Paramount's side from the get-go" .

---

## What This Means for Your Streaming Bill

If you're a Netflix subscriber, you dodged a bullet. For now.

**Crystal Gorges**, a media analyst, previously warned that a Netflix-Warner merger would have given the streamer enormous pricing power. "Netflix subscribers should be prepared for price increases," she told the Daily Mail . The combination of HBO hits like "The White Lotus" alongside "Stranger Things" would have made Netflix nearly unstoppable.

**But Paramount's victory doesn't mean you're safe.** A Paramount-Warner tie-up still concentrates massive franchises under fewer corporate roofs. Historically, that gives media giants more pricing power .

**Don't expect one app to rule them all.** Analysts warn that combining libraries under one corporate roof won't mean instant access to everything in one app—and certainly not at today's prices .

---

## The Winners and Losers

Let's tally up who came out ahead.

**Table 3: Winners and Losers in the Warner Battle**

| **Player** | **Outcome** | **Why** |

| :--- | :--- | :--- |

| **Netflix** | Big Winner | Walked away with discipline intact, $2.8 billion breakup fee, stock up 10%+  |

| **Warner Shareholders** | Winners | Get $31/share cash instead of $27.75, plus ticking fee protections  |

| **Paramount** | Winner, but in debt | Gets the empire they wanted, but with $90B+ debt burden  |

| **CNN** | Uncertain | Stays inside merged giant, faces potential editorial shifts  |

| **Streaming Consumers** | Uncertain | Fewer mega-mergers now, but long-term pricing pressure remains  |

**Netflix's discipline** is the story here. As one adviser put it, they were bidding against someone who wouldn't turn the wheel. So they stepped aside .

**Robert Fishman** at MoffettNathanson summed it up: "While the war for Warner Bros. Discovery ended sooner than expected, this result confirms our ongoing view that WBD was a necessity for PSKY while Netflix was being opportunistic. It signals that Netflix believes in its internal growth story enough to maintain M&A discipline" .

---

## What This Means for You

### If You're a Netflix Subscriber

You should feel good about this. Netflix just proved they won't overpay for growth. They'll invest $20 billion in original content this year instead . That means more shows, more movies, and hopefully no sudden price hikes to fund a massive acquisition.

### If You're a Paramount+ or HBO Max Subscriber

Get ready for change. These two services will eventually need to figure out their relationship. Will they merge? Stay separate? Offer bundles? No one knows yet. But the combined company will have enormous leverage.

### If You're an Investor

Netflix's stock pop tells you everything. Wall Street rewards discipline. If you own Netflix, you just saw management prove they put shareholders first.

If you're watching Paramount, be aware of the debt load. Over $90 billion in debt is a lot to carry, even with Larry Ellison's backing.

### If You Care About News

CNN's future is now tied to a company with clear political leanings. CBS has already shifted under Skydance. Watch for similar changes at CNN if the deal closes.

---

## Frequently Asked Questions

**Q: Did Netflix lose the bidding war?**

A: In a sense, yes—they won't acquire Warner's assets. But they walked away with $2.8 billion, a stock pop, and their discipline intact. That's a win by most measures .

**Q: How much did Paramount offer?**

A: $31 per share in cash for all of Warner Bros. Discovery, valuing the deal at about $111 billion including debt .

**Q: How much did Netflix offer?**

A: $27.75 per share for Warner's studio and streaming assets only, about $83 billion including debt .

**Q: Why did Netflix walk away?**

A: Co-CEOs Sarandos and Peters said the price required to match Paramount's offer was "no longer financially attractive." They called the deal a "nice to have" at the right price, not a "must have" .

**Q: What happens to CNN now?**

A: CNN will stay inside the combined Paramount-Warner company, rather than being spun off as Netflix had planned . That puts it under the same roof as CBS, which has already seen editorial shifts under Skydance ownership .

**Q: Will this deal pass regulatory review?**

A: Not a sure thing. California Attorney General Rob Bonta has an open investigation, and Democratic senators are raising alarms. But federal approval seems more likely given the political environment .

**Q: What does this mean for streaming prices?**

A: In the short term, you dodged a bullet. A Netflix-Warner combo would have given them enormous pricing power. But long-term, any consolidation tends to lead to higher prices .

**Q: What's a "ticking fee"?**

A: Paramount agreed to pay Warner shareholders an extra $0.25 per share for every quarter the deal drags on past September 30, 2026 . That's about $650 million per quarter.

**Q: Who is Larry Ellison?**

A: The co-founder of Oracle, worth nearly $200 billion. He's the father of Paramount CEO David Ellison and is backing this deal with massive equity commitments .

**Q: What's next for Netflix?**

A: They'll invest about $20 billion in original content this year and resume share repurchases. Back to basics .

---

## The Bottom Line

Here's what I keep coming back to.

In Hollywood, egos are big. Deals get done because people want to win, want the prize, want to be the one holding the trophy.

Ted Sarandos and Greg Peters just proved that Netflix is different.

They walked away from Superman, Harry Potter, and Game of Thrones because the price got too high. They put shareholders over ego, discipline over desire. And the market rewarded them with a 10% stock pop and $2.8 billion in walking-away money .

**The Netflix statement** said it best: "This transaction was always a 'nice to have' at the right price, not a 'must have' at any price" .

That's leadership.

**For Paramount,** the real work begins now. They've won the prize, but they're taking on over $90 billion in debt to get it . They'll need to find $6 billion in savings, which means layoffs and restructuring . And they'll face scrutiny from regulators, politicians, and a public wary of media consolidation.

**For the rest of us,** we're watching one of the biggest media mergers in history take shape. Two of Hollywood's last five legacy studios will combine. CNN and CBS will sit under the same roof. Harry Potter and Superman will join Mission: Impossible and Top Gun.

It's a new era. And it started with Netflix saying "no thanks" to a deal that didn't make sense.

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*Got thoughts on the Warner battle? Glad Netflix walked away? Worried about the merger? Drop a comment and let me know.*