Negative surprises arrive from the accounts of Netflix, the American streaming giant. Chairman Reed Hastings is leaving the company, which he co-founded 29 years ago, at a time when it is looking for new avenues of growth amid slowing sales due to competition and after a transformative merger with Warner Bros. Discovery fell through. Additionally, Netflix forecast earnings per share for the current quarter that fell short of analysts’ expectations and quarterly revenue growth that was the slowest in a year.
The numbers for the quarter
Netflix closed the first quarter of 2026 with revenues of $12.25 billion, up 16% year-on-year (+14% at constant exchange rates), driven primarily by subscription growth, price increases and increased advertising revenues. Revenues were slightly higher than the company’s forecast due to higher-than-expected subscription growth and favorable exchange rate movements excluding hedging transactions. The figure also slightly exceeded analysts’ forecasts of $12.18 billion.
Operating profit in the first quarter was $4 billion, up 18% year-over-year, and operating margin of 32.3% was up from 31.7% in Q1 2025. Both operating profit and margin came in slightly higher than expected thanks to higher-than-expected revenue. Earnings per share for the quarter were $1.23 versus $0.66 in Q1 2025 (+86% year-over-year), higher than the company’s forecast of $0.76, driven by higher-than-projected operating profit and the $2.8 billion penalty related to the transaction with Warner Bros.
The guidance
The full-year 2026 outlook remains unchanged with 2026 revenue ranging from $50.7 billion to $51.7 billion, representing growth of 12-14% (11-13% at constant exchange rates), driven by continued solid growth in subscriptions, pricing and an expected approximate doubling of advertising revenues. Similarly, Netflix is still targeting an operating margin of 31.5% for 2026, based on exchange rates as of January 1, 2026, up from 29.5% in 2025.
For the second quarter, it expects revenue growth of 13% (or 12% at constant exchange rates), below the consensus estimate of 14% (according to LSEG data). As indicated in the previous quarter’s letter, content amortization growth will be more concentrated in the first half of the year due to the timing of title launches. It expects the second quarter to see the highest year-over-year content depreciation growth rate in 2026, before slowing to mid-to-high single-digit growth in the second half of the year. As a result, it expects an operating margin of 32.6% for the second quarter, compared to 34.1% in the same quarter a year earlier. Netflix expects year-over-year operating margin growth in the third and fourth quarters to achieve our 2026 margin target.
The new strategy
On the strategy front, Netflix sets three main areas of focus to achieve its objectives: offering greater entertainment value (the main internal indicator of qualitative engagement reached an all-time high in the first quarter and continues to expand the offering with video podcasts, the first live regional event – the World Baseball Classic, which broke all viewership records in Japan – and, in early April, a new gaming app dedicated to children); leverage technology to improve service (it is continually expanding how it can leverage AI to improve the member experience, and in the first quarter, it acquired InterPositive to provide creators with a broader range of GenAI tools. It is also redesigning the mobile experience, including launching vertical video later this month); improved monetization (recent pricing changes have been successful and advertising revenues remain on track to reach $3 billion in 2026, doubling from the previous year).
The co-founder leaves
Co-founder and president Reed Hastings has announced that he will not run for re-election to the board when his term expires, scheduled for the annual meeting in June, to devote himself to his philanthropic activities and other projects. “Netflix has changed my life in many ways, and my fondest memory is of January 2016, when we enabled almost the entire world to enjoy our service,” he said, “My true contribution to Netflix was not a single decision; it was rather a focus on subscriber satisfaction, creating a culture that others could inherit and improve upon, and building a company that would be loved by subscribers and wildly successful for generations to come. Special thanks to Greg and Ted, whose commitment to Netflix’s excellence is so strong that I can now focus on new challenges.”
“Reed has been a unique source of inspiration to me, both personally and professionally, since we first met in 1999,” said Ted Sarandos, co-CEO of Netflix. “I have had the privilege of working for and alongside a true maker of history, and I look forward to seeing all that he accomplishes in the future. He has represented a model of selfless and disciplined leadership for Greg and I who will continue to shape how we lead Netflix in the exciting years ahead.”
