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Netflix Chairman Reed Hastings will step down from the company he co-founded in 1997 and built from a DVD-by-mail service to a $450 billion streaming giant.
The stock declined after Netflix announced Hastings’ plan to leave the board in June and a weaker-than-expected financial forecast.
The selloff came despite strong first-quarter results, which were boosted by the $2.8 billion break fee it received from Paramount following its decision to withdraw its bid for Warner Bros. Discovery.
Hastings’ departure after nearly 30 years at Netflix comes as the company reorganizes after a failed attempt at an $83 billion deal to buy WBD’s studios and streaming business.
The Warner Bros. acquisition “would have been a good acceleration for our strategy, but only at the right price,” Netflix said Thursday.
Netflix reported first-quarter earnings of $1.23 per share, well above Wall Street’s expectation of 76 cents.
Revenue was better than expected at $12.3 billion while net income was $5.3 billion. Apart from the increase from break fees, Netflix said its operating income was boosted by price increases in the quarter.
However, it forecast earnings per share of 78 cents for the current quarter, below Wall Street’s expectation of 84 cents.
Netflix shares had regained most of the ground lost after entering the bidding war for Warner Bros., but the stock fell 9.6 percent following the disappointing forecast and Hastings’ decision to step down.
Netflix said Hastings “wanted to focus on his philanthropy and other work”. He began to step back from his responsibilities in 2020, when he appointed Ted Sarandos as his co-CEO. Greg Peters replaced Hastings as co-CEO in 2023.
The Netflix co-founder is a large Democratic Party donor and philanthropist through the Hastings Fund, which focuses on education and social equity issues.
Sarandos said Hastings has “built a company of risk takers and a culture where… no one stops in the pursuit of excellence”.
With its early DVD-by-mail business, Netflix rivaled video rental giant Blockbuster, which filed for bankruptcy protection in 2010.
Subsequently, it challenged the American cable television giants, which have been losing subscribers for years due to the streaming revolution. And now Hollywood is being readjusted due to the impact of streaming on the film industry.
Netflix’s bid to take over the century-old Warner Bros. studio is the latest sign of the company’s rise.
Following its exit from the WBD deal in February, some investors have become concerned about signs that Netflix’s audience engagement is declining.
“Engagement is now investors’ most focused metric for the company following the collapse of the WBD deal,” analysts at Raymond James said in a research note published ahead of the results.
Sarandos pointed to the World Baseball Classic in Japan as an example of new ways Netflix was increasing viewer engagement, saying it set records for sign-ups and advertising.
“It was a proof point that not all engagements are created equal,” he said.
He said the recent launch of video podcasts on Netflix was also driving engagement during the day, typically a quiet time on the streaming service.
Still, Thursday’s earnings report largely disappointed investors. Jason Bazinet, an analyst at Citi, said some had expected Netflix to increase its share buybacks and raise its outlook for profit margins for 2026.
“However, management suggested no changes to its capital allocation strategy, maintained the (2026) outlook, and provided worse-than-expected (second-quarter earnings) guidance,” Bazinet said.
Asked about lessons learned from the Warner Bros. bid, Sarandos said the company “really built our M&A strength.”
“We tested our investment discipline, and when the cost of this deal exceeded the net value to our business and our shareholders, we were ready to put emotions and ego aside and walk away.”
