Netflix reported a strong first quarter revenue and net income of $12.25 billion, nearly doubling year over year, yet its stock still fell 9% in extended trading Thursday.
The culprit was not the numbers themselves, but what surrounded them: a certain lead departure and a guidance range Wall Street had already priced in.
netflix q1 revenue
The company reported revenue of $12.25 billion in the first quarter, better than the $12.18 billion expected by analysts based on LSEG information, and up 16% from the same period last year. Earnings came in at $5.28 billion, or $1.23 a share, nearly double last year’s result of 66 cents a share.
The increase in earnings was primarily due to a special one-time event, which brought in $2.8 billion when Netflix abandoned its plan to buy the streaming and film assets of Warner Bros. Discovery. Analysts estimated earnings per share would reach 76 cents, creating challenges for making direct comparisons.
Reed Hastings will step down from Netflix
A major impact on the market was felt due to the news that Netflix co-founder and current board chairman Reed Hastings will step down from the company’s board when his term ends in June. Hastings recently resigned from his post of chief executive officer, which he had held since 2023.
In the shareholder letter, Hastings explained his reason for focusing more on philanthropy from now on. Sarandos, one of the co-CEOs, refuted claims that Hastings’ move was in response to the collapse of the WBD deal, saying that Hastings was “a big champion of that deal” and had the support of the entire board.
Netflix kept its 2023 revenue outlook between $50.7 billion and $51.7 billion, which investors did not expect to improve on their estimates.
The streaming giant predicted revenue growth of 13% during the second quarter, but warned that content amortization costs would peak in the second quarter before tapering off in the second half.
According to CFO Spencer Newman, although not all WBD costs will be covered, some expenses scheduled for next year (2027) have been moved up to 2026 to ensure that M&A costs remain at the same level as previous projections.
The ad-supported version of Netflix continues to gain popularity. The company said it aims to generate $3 billion in revenue from ads in 2026, which will be double the revenue from last year.
Netflix to launch its less expensive, ad-funded version in 2022; It currently has 325 million paying subscribers globally after announcing the numbers in January.
Regarding content, Netflix said its leading engagement metrics internally were the highest ever recorded during Q1, boosted by the introduction of new video podcasts and coverage of the World Baseball Classic. Speaking on the matter, co-CEO Sarandos said that the company continues to be in talks with the NFL on expanding its partnership beyond showing games on Christmas Day.
