Netflix co-founder and then-CEO Reed Hastings will meet in Sydney with executives from other subscription streaming services on February 25, 2022.
Walter Peters Fairfax Media | getty images
Netflix Shares fell 9% in extended trading Thursday after the streaming giant released first quarter earnings report And announced a major regime change.
The company beat Wall Street expectations for revenue, reporting $12.25 billion for the first quarter, more than the $12.18 billion expected by analysts surveyed by LSEG and 16% more than the $10.54 billion reported in the year-ago quarter.
The company filed its first earnings report on Thursday after backing out of the proposed acquisition. Warner Bros. Discovery’s Streaming and film properties in February.
Netflix reported net income of $5.28 billion, or $1.23 per share, nearly double the $2.89 billion, or 66 cents per share, recorded during the same period last year. The company cited better-than-expected operating income and a $2.8 billion termination fee it received after the WBD deal failed.
Reported earnings per share were well above analyst expectations of 76 cents.
Still, Netflix maintained its previous full-year guidance for revenue between $50.7 billion and $51.7 billion.
The company said it expects revenue to grow 13% in the second quarter and reiterated its prior warning that content spending will weigh on the first half of the year due to the timing of title launches. Netflix said it expects year-over-year content amortization growth rates to peak in the second quarter of 2026, before slowing in the second half of the year.
Despite abandoning the proposed deal for WBD’s assets, this potential transaction would impact Netflix’s finances this year. Netflix Chief Financial Officer Spencer Newman said Thursday that although some of the initially planned costs related to the deal will not “completely pan out,” some costs that were planned to be moved to 2027 will now be moved to 2026. He said the company is “still in the ballpark … where we were estimating for total M&A-related expenses in the year.”
Netflix also announced this on Thursday reed hastingsThe Netflix co-founder and current chairman will step down from the board when his term ends in June.
Hastings resigned from his CEO role in 2023. Greg Peters, who had served as chief operating officer, moved into the role of co-CEO with Ted Sarandos.
“Netflix changed my life in so many ways and my all-time favorite memory was January 2016, when we enabled almost the entire planet to enjoy our service,” said the company’s Hastings. shareholder letter On Thursday. According to the letter, Hastings will now focus on philanthropy and other activities.
One analyst on Thursday questioned whether Hastings’ departure was related to the proposed WBD deal.
Sarandos rejected this, saying that Hastings “was a big champion for that deal. He supported it with the board. The board was unanimous.”
looking around the house
Netflix reiterated Thursday that it is on track to reach $3 billion in advertising revenue in 2026, which the new revenue line said would double year over year. Shows growth.
The company first introduced its cheaper, ad-supported tier in 2022 and has been pushing that path for revenue expansion since then — even as it raises subscription prices and cracks down on password sharing to increase the number of subscribers.
In January, Netflix said it had reached 325 million global paid subscribers. Netflix no longer provides quarterly updates on its subscription numbers.
It said Thursday that “slightly above planned subscription revenue” helped drive an 18% jump in operating income during the first quarter.
And last month Netflix announced it would once again be raising the prices of all its streaming plans.
“Our recent price changes have been good, reflecting the strong value we provide to members,” the company said in a shareholder letter Thursday.
Co-CEO Peters said on Thursday’s call that the price increase was always part of the company’s plan for the year. While Peters said the rollout of the pricing change is still ongoing, everything so far is in line with what Netflix has seen as a result of price changes before – such as members dropping subscriptions or switching to cheaper priced plans.
Peters said, “We want to provide as much value as possible to our members…invest the revenue that we have successfully generated, and sometimes, when we have added more value, we ask our members to contribute more so that we can invest in providing them even more entertainment value.”
The company said Thursday that its expansion into video podcasts, as well as the performance of the World Baseball Classic, helped its “primary internal quality engagement metric” reach a new record in the first quarter.
Live sports has become a big part of Netflix’s platform, and on Thursday co-CEO Sarandos said the company is currently in discussions to “expand the relationship” with the NFL. While Netflix doesn’t have a specific NFL package, it has streamed NFL games on Christmas Day for the past few years.
