ii view: Netflix shares dive as co-founder names exit date

Credit: Ernesto S. Ruscio/Getty Images/Netflix.

First-quarter results to 31 March

• Revenue up 16% year-over-year to $12.25 billion (£9.1 billion)
• Earnings per share (EPS) up 86% from a year ago to $1.23 per share

Guidance:

• Expects second-quarter revenue to grow 13.5% to $12.57 billion
• Expects second-quarter earnings to grow 7.7% year-over-year to $0.78 per share
• Continues to expect growth in annual revenue of 12-14% to $50.7-51.7 billion

ii round-up:

Netflix Inc (NASDAQ:NFLX) last night reiterated forecasts for growth in full-year sales and profit margins, but also announced that co-founder and current chair Reed Hastings (pictured) will step down in June. 

Ad sales, subscription price increases and membership growth all pushed first-quarter sales up 16% year-over-year to $12.25 billion, underpinning existing forecasts for as much as 14% growth in revenue this year. Earnings for this latest quarter soared to $1.23 per share, up from $0.66 a year ago, helped by a fee following its decision to walk away from buying fellow content maker Warner Brothers Discovery.

However, expected revenue and earnings of $12.57 billion and $0.78 per share for the current second quarter missed Wall Street forecasts of $12.63 and $0.84 per share respectively. 

Shares in the Nasdaq 100 company fell 10% in after-hours US trading having come into these latest results up 15% in 2026. The Nasdaq 100 index is up 4% year-to-date, while rival streamer The Walt Disney Co (NYSE:DIS) is down by almost a tenth.

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In late 2024, Netflix decided to focus on sales and profits rather than customer subscription numbers which totalled 325 million at the start of this year versus 232 million in early 2023.

Netflix continues to expect 2% growth in adjusted profit margin over the current full year to 31.5%.

Ad revenues are expected to about double to $3 billion in 2026. The streamer only recently announced further subscription price increases, with all memberships rising by a least $1. 

Reed Hastings stepped down from the chief executive role in 2023, with the position now shared between the former chief operating officer Greg Peters and Ted Sarandos.

Broker Morgan Stanley reiterated its ‘overweight’ stance on Netflix shares post the results, highlighting a fair value share price of $150. 

ii view:

Started in August 1997 sending DVDs to customers, Netflix launched its online streaming service in 2007. Today, the California headquartered media giant employs around 15,000 people.

Geographically, its home US market still accounted for most revenues in 2025 at 41%. That was followed by Europe, the Middle East, and Africa (EMEA) at 32%, Latin America and Asia each at 12%, and Canada the balance of 3%.  

For investors, the stepping down of Reed Hastings potentially sees a big driver of the company’s fortunes sidelined. Soaring energy prices pressuring consumer incomes could see customers cancel or downgrade their subscriptions. Developments in AI could make content easier for others to create, while the lack of a dividend contrasts with payments at Disney, Sky owner Comcast Corp Class A (NASDAQ:CMCSA) and ITV (LSE:ITV). 

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More favourably, revenue now includes both increasing subscription fees and growing advertising sales. An increasing focus on live sports broadcasting may attract customers as well as appetite for corporate advertising. Expected free cashflow of $12.5 billion over 2026 supports ongoing investment, while developments in AI could increase customer content discovery and recommendations.

Competitors are not standing still and investors have been disappointed by some of the Q1 numbers and forecasts for Q2. However, established strong viewer engagement, pricing power and the ongoing global switch from linear TV to streaming, will likely continue aiding this modern-day media giant.

Positives: 

• Management initiatives such as advertising
• Geographical diversity

Negatives:

• Intense competition from Disney, Apple and others
• Subject to currency movements given overseas customer base

The average rating of stock market analysts:

Buy