Netflix (NFLX) reported stronger-than-expected profits in the first quarter after it lost the battle for the acquisition of Warner Bros. Discovery (WBD) to Paramount Skydance (PSKY) and raised its subscription prices.
But the stock fell 8% in extended trading after second quarter guidance disappointed.
The company also announced that its co-founder Reed Hastings, who took the company from a mail-order DVD company to the streaming giant it is today, plans to leave the board in June once his term expires.
In Q1, Netflix reported revenue of $12.25 billion, compared with the Street’s $12.17 billion estimate, per Bloomberg consensus data. In the first quarter of last year, the company reported revenue of $10.54 billion.
Adjusted earnings per share came in at $1.23, compared to estimates of $0.76. In the same quarter a year ago, earnings were $0.66. The company issued a 10-for-1 stock split in mid-November.
Netflix’s second quarter revenue and earnings forecast missed estimates, which did little to assuage investors’ concerns about growth momentum, according to Bloomberg Intelligence senior media analyst Geetha Ranganathan.
Q2 revenue is expected to come in at $12.57 billion, compared to the $12.64 billion Wall Street estimated. Earnings per share guidance for the second quarter was $0.78, below the $0.84 per share the Street was expecting. The company’s operating income outlook of $4.11 billion is also well below the $4.34 billion the Street anticipated.
Co-CEO Greg Peters tried to settle those fears on the call, saying, “Of course, it’s early in the year. There’s still plenty of time to go, plenty of work left to go do.”
“We’ve seen really good progress so far in this first quarter that builds on the solid momentum and results from 2025,” Peters added.
Netflix moves on from Warner Bros. Discovery deal
This is the first quarterly report since the company left the negotiating table following a contentious bidding contest to acquire Warner Bros. Discovery. Paramount SkyDance won the bid and agreed to pay for the breakup.
Warner Bros. shareholders will vote next week on the $110 billion offer.
“Some of our initially planned costs for the deal, they won’t fully materialize,” CFO Spencer Neumann said to investors. “But also, some that we were planning to carry into ’27 were pulled forward into 2026. … We’re still in the ballpark, frankly, of the total that we were projecting for M&A-related expenses in the year. There’s no material impact on our operating margin outlook.”
As investors grew wary of the potential merger and the debt associated with the transaction, there was a sigh of relief when it fell through, sending shares higher.
“We see a cleaner Netflix story post-WBD merger break, as investors refocus around core and near-term fundamentals and seek evidence that Netflix can scale a massive $10B+ advertising business over the long term,” BMO Research Brian J. Pitz wrote in a note.
But now, it seems some investors aren’t so sure.
“This was supposed to be them telling us why they’re going to do just fine without Warner Bros. Discovery, and I’m not so sure that this report necessarily does that,” Ranganathan said.
Netflix defends subscription price hikes
This is also the first earnings report since Netflix raised its subscription prices for the second time in just over a year, which Pitz believes will “contribute roughly $1.5B in incremental revenue in 2026 estimates, providing 3.3% growth from pricing alone.”
Netflix increased its ad-supported Standard plan by $1 to $8.99 per month and the Standard (ad-free) and Premium tiers by $2 to $19.99 and $26.99 per month, respectively.
Peters stood by the increase in price, saying the ad-tier “is a great entry point, highly accessible and an incredible value.”
The ability to do so is a sign of strength, Bank of America analyst Jessica Reif Ehrlich wrote in a note to clients.
“Given the overarching concerns regarding engagement over the last 12-18 months, we view these increases as a validator of Netflix’s confidence in their underlying strength and durability.”
