Netflix Inc. saw its share price plunge by over 9% in after-hours trading on Thursday, following the release of its first-quarter earnings report. The sharp decline came despite the company beating revenue and earnings estimates for the quarter, as investor focus shifted to weaker-than-expected guidance for the current period.
The streaming service reported first-quarter revenue of $12.25 billion, a 16% year-over-year increase that narrowly surpassed the consensus estimate of $12.2 billion tracked by S&P Global. Operating income rose to $3.96 billion, roughly in line with analyst expectations.
Earnings Beat Overshadowed by Guidance
Earnings per share (EPS) came in at $1.23, significantly above the $0.77 estimate. This beat was partly attributed to a $2.8 billion breakup fee collected from Paramount Skydance, related to Netflix's abandoned pursuit of Warner Bros. Discovery (WBD) assets.
However, Netflix's second-quarter revenue forecast fell short of Wall Street's projections, triggering the sell-off. The company also announced that co-founder and former CEO Reed Hastings will leave its board in June.
End of an Era and a Failed Deal
In a statement, Hastings reflected on his tenure, stating: "Netflix changed my life in so many ways, and my all‑time favorite memory was January 2016, when we enabled nearly the entire planet to enjoy our service." He described his legacy as "a focus on member joy, building a culture that others could inherit and improve."
The report marks the company's first earnings release since it withdrew its bid for WBD's streaming and studio assets. Netflix's shares had lost about a third of their value during its pursuit of Warner Bros., a deal that was unpopular with Wall Street. Prior to this report, the stock had recovered more than 40% from a late-February low.
Analysts note that the market's reaction highlights investor sensitivity to future growth prospects over past performance, even when quarterly results are strong. The departure of a founding figure like Hastings also signals a definitive transition in the company's leadership era.