Key Highlights
- Shares of Netflix declined approximately 9% during after-hours trading and in early European markets following disappointing second-quarter revenue and earnings projections.
- First-quarter performance exceeded analyst expectations — $12.25B in revenue versus the $12.17B forecast, with adjusted EPS of $1.23 beating the $0.76 projection.
- Second-quarter revenue projection of $12.57B fell short of the $12.64B analyst consensus; EPS forecast of $0.78 missed the anticipated $0.84.
- Company co-founder and board chairman Reed Hastings announced he won’t stand for re-election upon his term’s conclusion in June.
- The streaming platform also delivered its initial quarterly report following the unsuccessful attempt to acquire Warner Bros. Discovery, which ultimately went to Paramount Skydance.
While Netflix delivered impressive first-quarter results, investors focused their attention on future prospects rather than past performance. Share prices dropped roughly 9% in extended trading and early European sessions after the company’s second-quarter projections fell significantly below analyst forecasts.
The streaming giant reported first-quarter revenue of $12.25 billion, surpassing the analyst consensus of $12.17 billion. Adjusted earnings per share reached $1.23 — substantially exceeding the analyst projection of $0.76. This represents a significant improvement from the $0.66 EPS recorded in the same quarter last year. The company implemented a 10-for-1 stock split in mid-November, which is reflected in these per-share calculations.
However, the forward-looking second-quarter guidance triggered the stock’s decline. The streaming service projected Q2 revenue of $12.57 billion, falling short of Wall Street’s $12.64 billion expectation. The company’s EPS projection of $0.78 also came in below the $0.84 consensus, while operating income guidance of $4.11 billion significantly underperformed the anticipated $4.34 billion.
During the earnings call, Co-CEO Greg Peters attempted to ease investor concerns. “Of course, it’s early in the year,” he stated. “There’s still plenty of time to go, plenty of work left to do.”
Bloomberg Intelligence analyst Geetha Ranganathan expressed skepticism about the results. “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 Announces Board Departure
Alongside the financial results, the company revealed that co-founder and chairman Reed Hastings will not pursue re-election when his board term concludes 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 announced a replacement candidate.
Impact of Warner Bros. Discovery Deal Collapse
This earnings announcement marked Netflix’s first quarterly disclosure since withdrawing from the competition to acquire Warner Bros. Discovery. Paramount Skydance emerged victorious in that bidding process and committed to covering the deal termination fee. Warner Bros. shareholders are scheduled to vote on the $110 billion acquisition proposal in the coming week.
CFO Spencer Neumann assured investors during the call that the failed acquisition would not significantly affect Netflix’s operating margin projections. “Some of our initially planned costs for the deal, they won’t fully materialize,” he explained, adding that certain expenses were accelerated into 2026.
BMO Research analyst Brian Pitz suggested prior to the results that stepping away from the WBD transaction could enable investors to concentrate on Netflix’s fundamental business operations and its expanding ad-supported subscription tier.
The streaming company also implemented subscription price increases in early 2026 — marking the second such adjustment in just over twelve months. The ad-supported Standard plan increased by $1 to $8.99 monthly, while Standard and Premium subscription tiers 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 for 2026, equating to 3.3% growth attributable solely to pricing adjustments.
By 0603 GMT on Friday, Netflix’s Frankfurt-listed shares had declined 8.7%. Prior to the earnings release, Netflix stock in New York had gained approximately 15% year-to-date.
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