Netflix co-founder Reed Hastings to exit company, saying it's so strong it doesn't need him anymore

By Lukas I. Alpert

Netflix shares plummet in after-hours trading as the company opts not to raise 2026 guidance despite shattering profit expectations in Q1

Netflix reported late Thursday its first earnings since ending its unsuccessful effort to acquire Warner Bros. Discovery's studio and streaming businesses for $82.7 billion.

Reed Hastings, who helped build Netflix into a major media giant and the king of streaming services, said late Thursday that he would leave the company he co-founded when his term as executive chairman ends in June.

The 65-year-old Hastings, who stepped aside as co-CEO in 2023, said he felt the company had become so strong that it no longer needed him.

"My real contribution at Netflix wasn't a single decision; it was a focus on member joy, building a culture that others could inherit and improve, and building a company that could be both beloved by members and wildly successful for generations to come," he said in a statement. "Netflix's greatness is so strong that I can now focus on new things."

The announcement came as Netflix (NFLX) reported first-quarter profits that shattered expectations, which it attributed in large part to faster-than-forecast subscriber growth, a recent price increase and the $2.8 billion breakup fee it received when its deal to acquire Warner Bros. Discovery collapsed.

The streaming giant reported net income of $5.28 billion, compared to $2.89 billion in the same quarter a year earlier. Analysts had estimated net income of $3.29 billion, according to FactSet.

Earnings per share came in at $1.23, the company reported, nearly double the 66 cents it reported in the same quarter a year earlier. Analysts polled by FactSet had predicted EPS of 76 cents per shares.

Revenue rose to $12.25 billion, up from $10.5 billion in the first quarter of 2025. That came in ahead of the $12.2 billion that analysts had predicted.

Still, Netflix maintained its full-year forecast of $50.7 billion to $51.7 billion in revenue, full-year operating margin of 31.5%, revenue growth of 125-to-14% and advertising revenue of $3 billion.

That unchanged guidance was met with dismay on Wall Street. The stock tumbled 10.2% in recent premarket trading on Friday, enough to pace the S&P 500 index's SPX early decliners. Since Hastings owns 21.16 million Netflix shares, according to the latest filings, that selloff would lower the value of his stake by $231.7 million.

"This quarter was all about guidance for Netflix. The setup going in was as good as it gets: The Warner Bros. Discovery deal collapse freed up hundreds of millions in avoided integration costs, U.S. price hikes kicked in at the end of March, and the ad business appeared on track to double this year," said Thomas Monteiro, senior analyst at Investing.com.

"That combination should have been more than enough for Netflix to raise its full-year profit targets - and that's exactly what the Street was expecting. But what was presented tonight regarding expectations raises the risk that both macro and structural issues may have a greater impact on growth than previously expected," he added.

Netflix's co-CEO Greg Peters said the company believed it has wide latitude for growth, through its expansion into live events, leveraging of AI and better monetization through pricing and increased advertising revenue.

"You can use any metric and see we have tons of room for growth ahead of us," he said in a call with analysts.

Netflix's first-quarter earnings report was the company's first since it ended its fight to acquire Warner Bros. Discovery's studio and streaming businesses for $82.7 billion. The merger effort had been met skeptically by investors, who sent Netflix shares tumbling as much as 30%.

Netflix backed out of the bidding in February after rival Paramount Skydance (PSKY) came in with a higher offer of $110 billion for all of Warner Bros. Discovery (WBD), including its declining television division.

Since then, Wall Street has turned more bullish on Netflix's stock, which has risen 42% to its highest point since early December, when it had initially reached an agreement with Warner Bros.

Investors are now more focused on signs of how Netflix intends to spur growth going forward. While there have been signs that engagement from viewers has slowed over the past year, analysts have pointed to recent price increases and Netflix's efforts to develop an advertising business as potential engines for revenue growth this year.

-Lukas I. Alpert

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