Key Takeaways
- Shares of Netflix declined approximately 9% during after-hours trading and early European sessions following disappointing second-quarter revenue and profit projections.
- First-quarter performance exceeded expectations — $12.25B in revenue versus $12.17B projected, with adjusted EPS reaching $1.23 compared to $0.76 anticipated.
- Second-quarter revenue forecast of $12.57B fell short of the $12.64B analyst estimate; profit guidance of $0.78 per share missed the $0.84 consensus.
- Company co-founder and board chairman Reed Hastings announced plans to step down from the board when his current term concludes in June.
- The streaming platform also unveiled its quarterly performance following the unsuccessful pursuit of Warner Bros. Discovery, which ultimately went to Paramount Skydance.
The streaming giant delivered impressive first-quarter numbers, but investors quickly shifted their focus to future prospects rather than past achievements. Shares tumbled roughly 9% during extended trading hours and European morning sessions after the company’s second-quarter outlook fell significantly below analyst expectations.
First-quarter revenue reached $12.25 billion, surpassing the consensus forecast of $12.17 billion. The company’s adjusted profit per share of $1.23 substantially exceeded analyst projections of $0.76. This represents a significant improvement from the $0.66 per share recorded in the same period last year. These figures account for the 10-for-1 stock split the company executed in mid-November.
However, the forward-looking projections for the second quarter triggered the selloff. The streaming service projected Q2 revenue of $12.57 billion, falling short of Wall Street’s $12.64 billion expectation. Profit guidance of $0.78 per share also underperformed the $0.84 consensus, while operating income projections of $4.11 billion came in substantially below the anticipated $4.34 billion.
During the earnings conference call, Co-CEO Greg Peters attempted to ease investor worries. “Of course, it’s early in the year,” he noted. “There’s still plenty of time to go, plenty of work left to do.”
Bloomberg Intelligence analyst Geetha Ranganathan expressed skepticism. “This was supposed to be them telling us why they’re going to do just fine without Warner Bros. Discovery,” she commented, “and I’m not so sure that this report necessarily does that.”
Reed Hastings to Exit Board of Directors
Alongside the financial results, the company announced that co-founder and board chairman Reed Hastings will decline to stand for re-election when his current term ends in June. Hastings played a pivotal role in evolving Netflix from its origins as a DVD-by-mail service into the dominant global streaming platform it represents today.
The company has not yet disclosed succession plans or identified a replacement.
Impact of Warner Bros. Discovery Deal Collapse
This earnings release marked the first quarterly report since the streaming giant withdrew from competing to acquire Warner Bros. Discovery. Paramount Skydance emerged victorious in that acquisition battle and committed to covering the deal termination fee. Warner Bros. shareholders are scheduled to vote on the $110 billion proposal in the coming week.
CFO Spencer Neumann assured investors during the call that the abandoned acquisition would not significantly affect the company’s operating margin projections. “Some of our initially planned costs for the deal, they won’t fully materialize,” he explained, acknowledging that certain expenses were accelerated into 2026.
BMO Research analyst Brian Pitz suggested prior to the earnings announcement that moving past the WBD acquisition attempt could allow the market to concentrate on the company’s fundamental business operations and its expanding advertising-supported membership tier.
The streaming platform also implemented subscription price increases in early 2026 — marking the second adjustment in slightly over twelve months. The advertising-supported Standard package increased by $1 to $8.99 monthly, while the Standard and Premium options rose by $2 to $19.99 and $26.99 respectively.
Bank of America analyst Jessica Reif Ehrlich characterized the price adjustments as a “validator of Netflix’s confidence in their underlying strength and durability.”
BMO’s Pitz calculated that the price increases would generate approximately $1.5 billion in additional revenue during 2026, accounting for 3.3% growth from pricing power alone.
As of 0603 GMT Friday, the company’s Frankfurt-listed shares were trading down 8.7%. Prior to the earnings release, Netflix stock in New York had appreciated roughly 15% year-to-date.
