- Netflix posted $1.23 a share in earnings, propped up by its breakup fee, compared with Wall Street’s forecast of $1.34 a share
- Shares of the streamer fell over 9% in after-hours trading on Thursday following the results and disappointing forecast
- Founder and Chairman Reed Hastings will step away from the board after June
Netflix on Thursday sent a clear message to anyone wondering if it would miss a step after its deal to buy Warner Bros.: We’ll be fine.
The streamer’s first-quarter profit grew 82% to $5.28 billion, or $1.23 per share — helped by a $2.8 billion break-up fee — as revenue climbed 16% to $12.3 billion, driven by higher pricing, ad revenue and subscriber growth. Netflix, which no longer discloses its subscribers on a quarterly basis, last reported a total of 325 million globally.
The results came a little less than two months after the company abandoned its $83 billion deal for Warner’s streaming and studio assets in February after declining to match Paramount’s competing $31 per share bid.
“We’ve learned so much about deal execution, about early integration, but mostly, we really built our M&A muscle. And the most important benefit of this entire exercise was that we tested our investment discipline,” co-CEO Ted Sarandos told analysts on Thursday. “When the cost of this deal grew beyond the net value to our business and to our shareholders, we were willing to put emotion and ego aside and walk away. Doing it at this level sets up our teams to understand that that’s the expectation of them day to day.”
Sarandos emphasized that Warner Bros. was a “nice to have, not a need to have” and that it remains “very confident” in its core business.
“Our biggest risk was losing focus on our core business while we were working on the transaction,” he continued. “As you can see from our [first quarter] results, we did not lose focus. We were very encouraged by the team’s ability to stay focused on our core business while exploring this opportunity.”
Missed forecast
Still, Wall Street was disappointed with Netflix’s conservative guidance for the second quarter. It called for 13.5% year-over-year growth in revenue, or around $12.6 billion, short of the $13.1 billion Wall Street is expecting. It expects net income of $3.33 billion, or 78 cents a share.
Shares fell as much as 9% in after-hours trading.
Netflix executives argued that they continue to see a long runway for growth in three key areas: delivering more entertainment, enhancing its technology in areas like generative AI and vertical video and improving monetization through pricing and its ads business.
The streamer also remains on track to hit $3 billion in ad revenue for the year. The ad tier accounted for over 60% of sign-ups during the first quarter in the 12 countries where it’s available and Netflix is working with more than 4,000 advertisers as of the end of 2025, a 70% year over year increase.
Netflix is maintaining guidance of $50.7 billion to $51.7 billion in revenue and an operating margin of 31.5% in 2026.
On AI
Sarandos emphasized that M&A would remain a tool to help achieve those goals, but that it would remain “very disciplined” in its approach. The company notably acquired Ben Affleck’s production startup InterPositive in a deal valued at up to $600 million as it looks to expand generative AI-powered tools available for its creative partners. Generative AI is also being used to improve content recommendations.
As with past calls, Sarandos was keen to point out that human artists would be key to creating content, and that AI would allow for new tools for those artists.
New initiatives
At the end of the month, Netflix plans to launch an updated mobile experience that will include a vertical video feed. The streamer also continues to expand its video podcast offering, with new shows from talent including Brian Williams and Evan Ross Katz. The company noted that video podcasts have over-indexed on daytime viewing and mobile devices.
Additionally, the service will add more titles to Netflix Playground, its new standalone gaming app for kids. The offering has been used by 10% of kids profiles since launch, with almost half viewing content on mobile devices and tablets.
On those price hikes
In addition to expanding its content offerings and improving its tech, Netflix raised prices across all of its U.S. plans, now charging between $8.99 and $26.99 per month, with its add an extra member feature costing ad-supported subscribers $7.99 and ad-free members $9.99 per month.
Co-CEO Greg Peters said the latest round of increases were already baked in to its 2026 guidance and that its pricing strategy remains unchanged.
“When we’ve added more value, we ask our members to contribute more so that we can invest that into delivering them even more entertainment value and we think we are delivering one of the best entertainment values that has ever existed,” Peters said. “In the U.S. right now, Netflix subscribers are paying the least per hour of viewing compared to other SVOD offerings. So in some cases, you’d have to pay two times per hour to get a competitive service. [Our ads plan] is a great entry point, highly accessible and an incredible value. So we’re excited about keeping all of those intact.”
Hastings’ departure
Looking ahead, Netflix executive chairman and co-founder Reed Hastings is stepping down from the board following the company’s annual meeting in June. Sarandos was quick to note that Hastings was a “big champion” for the Warner Bros. deal and that it has “absolutely nothing to do” with his departure.
