Netflix shares dropped 8% in extended trading on Thursday after the company reported stronger-than-expected first-quarter results but disappointed with second-quarter guidance and announced that co-founder Reed Hastings will leave the board in June.
The streaming giant posted first-quarter revenue of $12.25 billion, topping the $12.18 billion analysts expected and marking a 16% increase from the $10.54 billion reported a year earlier. Net income rose to $5.28 billion, or $1.23 per share, nearly double the $2.89 billion, or 66 cents per share, from the same period last year. The boost came from higher-than-projected operating income and a $2.8 billion termination fee received after Netflix walked away from its proposed acquisition of Warner Bros. Discovery’s streaming and film assets in February.
Despite the beat, Netflix maintained its full-year revenue guidance of $50.7 billion to $51.7 billion and forecast second-quarter revenue of $12.57 billion, below the $12.64 billion Wall Street expected. Earnings per share guidance for the quarter was set at $0.78, under the $0.84 estimate, while operating income outlook of $4.11 billion fell short of the anticipated $4.34 billion. The company warned that content spending would remain weighted in the first half of 2026 due to title launch timing, with the second quarter expected to see the highest year-over-year content amortization growth rate before declining later in the year.
Netflix said recent price increases across all streaming plans have been well received, reflecting the strong value members perceive. The company reiterated its goal to reach $3 billion in advertising revenue in 2026, a doubling from the prior year, as its ad-supported tier continues to scale. Hastings, who stepped down as CEO in 2023, will depart the board when his term expires in June, shifting focus to philanthropy and other pursuits. In the shareholder letter, he recalled January 2016 as his all-time favorite memory, when Netflix enabled nearly the entire planet to enjoy its service.
Analysts offered mixed takes on the results. Bloomberg Intelligence’s Geetha Ranganathan said the report failed to reassure investors about future growth momentum, questioning whether Netflix could thrive without the Warner Bros. Discovery deal. Wedbush’s Alicia Reese noted the $2.8 billion breakup fee gives Netflix incremental funds for content and ad stack improvements, potentially extending its competitive lead. BMO Research’s Brian J. Pitz argued investors now see a cleaner Netflix story, refocusing on core fundamentals and the long-term potential of a $10 billion-plus advertising business.
Why did Netflix’s stock fall despite beating earnings estimates?
The stock declined because second-quarter revenue and earnings guidance missed Wall Street expectations, raising concerns about near-term growth momentum even as the company benefited from a one-time termination fee and strong advertising prospects.
What does Reed Hastings’ departure mean for Netflix’s leadership?
Hastings will leave the board in June after stepping down as CEO in 2023; day-to-day operations remain under co-CEOs Greg Peters and Ted Sarandos, with Hastings shifting focus to philanthropy and other ventures outside the company.
