Netflix Reports Strong Q1 Earnings, But Stock Prices Decline
Netflix Surpasses Q1 Earnings Expectations, Shares Decline in After-Hours Trading
Netflix has exceeded Wall Street’s expectations for both earnings and revenue in the first quarter of the year, yet its shares experienced a notable decline in after-hours trading on Thursday.
The company’s revenue reached $12.25 billion, reflecting a 16% increase from the same period last year. Meanwhile, diluted earnings per share stood at $1.23, nearly double from a year prior.
Analysts had projected earnings of 76 cents per share and total revenue of $12.18 billion, marking a strong performance relative to these forecasts.
Despite this financial success, Netflix shares, which have risen by 15% thus far in 2026, fell as much as 10% in after-hours trading. This phenomenon of strong financials leading to share price drops has been observed in previous quarters as well. This time, concerns were heightened by the announcement regarding co-founder and former CEO Reed Hastings, who will be stepping down from the company’s board later this year, as noted in the quarterly letter to shareholders.
Hastings, who has shifted focus toward philanthropy and real estate ventures since leaving the CEO role in 2023, has been a key figure in Netflix’s evolution over nearly three decades. His departure signals a significant turning point for the company, which has transformed from a small DVD rental service to a major player in global entertainment.
Shareholders are also apprehensive about a projected 1.5% decline in operating margins for the April to June quarter. Although the company had previously indicated this dip, the formal announcement in the shareholder letter may have prompted some investors to take profits. Operating margins were slightly more than 32% in the recent quarter, and are expected to remain at that level throughout the year.
While Netflix maintains its full-year guidance, its second-quarter projections are slightly below market expectations, putting additional pressure on share prices.
The company highlighted an increase in subscription revenue as a key driver for the revenue gains. Although Netflix no longer regularly discloses subscriber numbers, it reported in January that it ended 2025 with over 325 million global subscribers.
Additionally, Netflix noted that the World Baseball Classic attracted 31.4 million viewers in Japan, making it the company’s top title in the market. This event also resulted in the largest single day of subscription signups in Japan, which led all countries in contributing to subscriber growth during the quarter.
Recently, Netflix implemented another round of price increases, effective at the end of March, although these changes had minimal impact on the quarterly results. Historically, price hikes have prompted some cancellations; however, the long-term financial benefits are often deemed worthwhile, especially if some former subscribers can be re-engaged with appealing content.
This quarterly report is Netflix’s first since it opted out of acquiring Warner Bros. Discovery’s studios-and-streaming unit, a deal now pursued by Paramount for a staggering $111 billion, including debt.
Netflix’s earnings announcement marks the beginning of a new corporate earnings cycle in the media and tech sector, with Comcast set to release its first-quarter results on April 24, followed by Disney and Paramount in early May.
