When Reed Hastings stood up in August 1997 and described his plan to rent DVDs by mail, most of the entertainment industry was unimpressed. Blockbuster would not take him seriously. Hollywood studios were sceptical. Even many of his early investors were not entirely sure what they were backing. Twenty-nine years later, Hastings announced on Thursday that he will not stand for re-election to the Netflix board when his term expires at the company’s annual meeting in June — departing a company that now serves hundreds of millions of subscribers across the world, generates more than $50 billion in annual revenue, and has fundamentally reshaped how the human race consumes entertainment.
The announcement came in the same earnings letter as Netflix’s Q1 2026 results, which beat Wall Street revenue expectations. It was classic Hastings in its timing — the co-founder choosing his own exit moment, on his own terms, on a day when his company’s numbers could speak for themselves.
The Earnings Beat than Expectations
Netflix reported first-quarter revenue of $12.25 billion, comfortably above the $12.18 billion that analysts polled by LSEG had expected, representing approximately 16% growth year-on-year. The Q1 2025 comparison stood at $10.54 billion, making the year-over-year growth rate clear.
Net income came in at $5.28 billion, or $1.23 per share — nearly double the $2.89 billion it reported in the same period last year. However, that figure was significantly inflated by the $2.8 billion termination fee Netflix received after walking away from its proposed acquisition of Warner Bros. Discovery’s streaming and film assets earlier in February, after Paramount Skydance won the bidding contest. Stripping out the termination fee, the underlying earnings picture is more modest, with adjusted earnings per share of around 76 cents broadly in line with what analysts had expected.
Netflix maintained its full-year 2026 revenue guidance of $50.7 billion to $51.7 billion and projected second-quarter revenue growth of 13%. The company also noted that content spending would be weighted toward the first half of the year, due to the timing of major title launches, and that Q2 would have the highest year-over-year content amortization growth in 2026 before easing in the second half.
Despite the revenue beat, the stock fell approximately 9% in extended trading on Thursday — a reaction that reflected a combination of factors. The Q2 revenue guidance of 13% growth landed slightly below what some investors had been hoping for. The announcement of Hastings’ departure, while not a surprise given his gradual withdrawal from operational leadership over several years, landed as a symbolic blow. And the ongoing uncertainty around content costs and the WBD deal’s financial aftershocks kept some investors cautious.
The WBD Shadow
This was the first earnings report since Netflix walked away from the WBD deal in February. The significance of that withdrawal has been interpreted in different ways by different market participants. Investors who had been uncomfortable with the scale and complexity of the proposed transaction — Netflix would have been absorbing the streaming and film assets of a company with significant debt and restructuring headwinds — broadly welcomed the exit. Netflix CEO Greg Peters had been explicit: the company’s long-term targets “did not contemplate or assume any M&A.” The termination fee of $2.8 billion provides a substantial windfall that can be deployed in buybacks, content investment, or organic expansion.
CFO Spencer Neumann said that while some costs related to the deal would not materialise, some expenses originally planned for 2027 had been pulled forward into 2026. He described the company as “still in the ballpark” of its total projected M&A-related expenses for the year. That qualification kept some uncertainty in the picture even as the deal’s core financial fallout appeared manageable.
The Strategic Backdrop
Netflix enters Q2 with several meaningful tailwinds that the first quarter does not yet fully reflect. In late March, the company raised subscription prices for the second time in little over a year — the ad-supported Standard plan to $8.99 per month, Standard (ad-free) to $19.99, and Premium to $26.99. Those price increases came after the Q1 period closed and will show up in the Q2 numbers. BMO analyst Brian Pitz estimated the increase would contribute roughly $1.5 billion in incremental revenue for full-year 2026, generating approximately 3.3% of growth from pricing alone.
The advertising business continues to be one of Netflix’s most important growth vectors. Ad-supported revenue more than doubled in 2025 to over $1.5 billion, and the company is targeting approximately $3 billion for 2026. For context, Netflix’s ad business is still young — it launched in late 2022 — but its trajectory has been unusually rapid. Bank of America analyst Jessica Reif Ehrlich described the March price increases as “a validator of Netflix’s confidence in their underlying strength and durability,” noting that the ability to raise prices twice in a year reflects real pricing power in a streaming market where most competitors have been struggling to retain subscribers.
The company’s content slate in 2025 also bore fruit that will sustain momentum. Netflix recorded record viewership with hits including the concluding chapters of Squid Game and Stranger Things, the award-winning Adolescence, and a range of live events including NFL Christmas Day games and the Anthony Joshua vs. Jake Paul boxing match. Members watched 96 billion hours in the second half of 2025 alone.
The Hastings Legacy
The announcement that Reed Hastings will not stand for re-election when his board term expires at the June 4 annual meeting is, in the words of Netflix’s own board statement, “the end of an era.” In a statement accompanying the earnings, the company wrote: “Reed built a culture of innovation, integrity and high performance that defines who we are today. His vision and leadership pioneered how the world is entertained.”
Hastings himself was characteristically understated. “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 added that co-CEOs Ted Sarandos and Greg Peters’ “commitment to Netflix’s greatness is so strong that I can now focus on new things.”
Sarandos, who has known Hastings since they met in 1999 — back when Netflix was still mailing DVDs in red envelopes — called him “a true history maker.” Hastings will step away to focus on philanthropy and other personal pursuits.
The transition is less abrupt than it might appear. Hastings stepped down as co-CEO in January 2023, handing operational leadership fully to Sarandos and Peters. In April 2025, he transitioned from Executive Chairman to a non-executive Chairman role. June’s departure from the board is the final formal link in a severance that has been unwinding for several years.
What It Means Going Forward
For Netflix as a business, the Hastings exit changes little in the near term. The leadership team is experienced, the business model is working, and the strategic direction is clearly established: grow advertising, raise prices where the content justifies it, expand live programming, and compete aggressively for eyeballs in every geography. Netflix surpassed 325 million paid memberships in 2025 and achieved roughly $45.2 billion in revenue with $13.3 billion in operating income.
The stock’s 9% drop in after-hours trading on Thursday was more a reflection of modest Q2 guidance relative to elevated expectations, lingering WBD financial noise, and the symbolic weight of a founder departure than any evidence of structural weakness. The underlying business — growing revenue by 13% to 16% annually, scaling an ad business from zero to potentially $3 billion in four years, raising prices twice without losing subscribers — is producing results that most media companies would trade almost anything to achieve.
Hastings made his all-time favourite memory clear: “January 2016, when we enabled nearly the entire planet to enjoy our service.” On the night he steps away from the final formal role at the company he co-founded in 1997, the service is still running.
Written by Shalin Soni, CMA specializing in financial analysis, global markets, and corporate strategy, with hands-on experience in financial planning and analytical decision-making.
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Source: Based on CNBC and publicly available information.