By Angela Palumbo and Adam Levine
Netflix reported good fourth-quarter earnings results Thursday afternoon, but the numbers were overshadowed by disappointing guidance for the second quarter. Its shares were down 9% in after-hours trading.
Earnings-per-share were $1.23, well ahead of Wall Street's consensus estimate of 76 cents, and up from 66 cents last year. Revenue for the quarter reached $12.25 billion, just above expectations of $12.18 billion, and up 16% on the year.
Though the company's annual guidance didn't change from last quarter, management's second-quarter outlook didn't sit well with investors. The company said the weak profitability guidance is a function of 2026 content amortization expense schedules that are heavily weighted toward the second quarter. It said it expects operating margins to strengthen in the second half of the year.
Netflix also announced that co-founder and chairman of the board Reed Hastings will be stepping down "in order to focus on his philanthropy and other pursuits," according to a letter to shareholders.
"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," said Hastings in the letter.
"I've had the privilege of working for, and alongside, a true historymaker and I look forward to marveling at all he will do next," added co-CEO Ted Sarandos.
This is breaking news. Read a preview of Netflix's earnings below and check back for more analysis soon.
Netflix needs to prove that engagement is strong and content spending will pay off in its latest earnings report, now that the pursuit of Warner Bros. Discovery has come to an end.
Netflix is scheduled to report first-quarter financial results after the stock market closes on Thursday. Analysts surveyed by FactSet expect the streaming giant to post adjusted earnings of 76 cents a share on revenue of $12.2 billion.
It's been a very busy time for Netflix over the past few months. The company announced in December that it had agreed to buy Warner Bros. studios and HBO Max. This set off a bidding war with Paramount Skydance, which was also highly interested in taking over the studio responsible for Harry Potter and Game of Thrones.
Netflix shareholders weren't excited about the deal, and the stock took a hit. Shares have since bounced back after the company announced in February it was backing out of the bidding war by not matching Paramount's latest offer. Eric Clark, chief investment officer at Accuvest Global Advisors, says now Netflix can focus on delivering what shareholders care most about.
"Now that the WBD deal is behind them, investors can get back to what matters most: content strategy, pricing levers and guidance, ad-tier growth, any new ways to drive viewership totals," he wrote on Wednesday.
Growing viewership is key for Netflix. The company no longer reports subscriber numbers, but Wall Street tracks viewership in other ways, including its biannual engagement report. The streamer has already seen exceptional growth and needs to prove to investors that it isn't slowing down. That's especially important as the economic environment becomes shaky, with rising inflation risking consumer spending on non-essentials, like entertainment.
Having a lower-priced ad-tier is a positive for Netflix, as the company can prevent users from cancelling outright if they are feeling economically pressured. However, Netflix announced in March that it was raising prices again.
Netflix needs to convince people to stay on the platform. One way to do that is by hosting exciting content -- that's not cheap.
"With all the geopolitical uncertainty, I'm not sure management will do a big guide but I think we should expect them to re-focus everyone's attention on their content spending goals," Clark wrote.
Greg Silverman, global director of brand economics at Interbrand, notes that strong content curation is important as Netflix faces intensifying competition from YouTube and live TV platforms, along with possible consumer pushback on price hikes.
"To sustain its momentum, the company will need to continue innovating across content, technology, and user experience," he said.
Netflix stock has risen 14% this year.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 16, 2026 16:25 ET (20:25 GMT)
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