Netflix posted a strong first quarter on paper $12.25 billion in revenue and net income that nearly doubled year over year, yet its stock still slid 9% in extended trading Thursday. 

The culprit wasn't the numbers themselves, but what surrounded them: a confirmed leadership departure and a guidance range Wall Street had already priced in.

Netflix Q1 revenue

The company registered revenue of $12.25 billion in Q1, exceeding expectations of $12.18 billion that analysts had forecasted, based on LSEG information, and rising 16% compared to the corresponding period of last year. Earnings stood at $5.28 billion, or $1.23 per share, almost doubling last year’s results of 66 cents per share.

The earnings increase happened mostly because of a special one-time event which brought in 2.8 billion dollars when Netflix dropped its plan to buy Warner Bros. Discovery's (WBD) streaming and film assets. The analysts predicted that earnings per share would reach 76 cents, which created challenges for making direct comparisons.

Reed Hastings to step down from Netflix

The bigger impact on the market was felt due to the news that the co-founder and current board chairman of Netflix, Reed Hastings, will be stepping down from the company's board when his term expires in June. Hastings recently resigned from his position of chief executive officer, which he had been holding since 2023.

In the shareholder letter, Hastings gave his reason for focusing more on philanthropy from now on. One of the co-CEOs, Sarandos, refuted claims that Hastings' move was in response to the WBD deal collapse, stating that Hastings was "a big champion of that deal" and was supported by the entire board.

Netflix kept its 2023 revenue outlook at between $50.7 billion and $51.7 billion, giving no upside to investors expecting an upgrade in their estimates.

The streaming giant predicted a revenue increase of 13% during the second quarter but warned that content amortisation costs would peak in Q2 before subsiding in the second half.

According to CFO Spencer Neumann, although not all WBD costs will be materialised, some expenses that were scheduled for 2027 have been accelerated to 2026 to ensure M&A costs remain at a similar level to previous estimates.

The ad-supported version of Netflix continues gaining ground. The company reported being on target to generate $3 billion in revenue from ads in 2026, which would reflect double the revenue made last year.

Netflix launched its less expensive, ad-funded version in 2022; it currently has 325 million paying subscribers globally after announcing the number back in January.

With respect to content, Netflix stated its leading engagement metric internally was the highest recorded yet during Q1, boosted by new video podcast offerings and coverage of the World Baseball Classic. Speaking on the matter, co-CEO Sarandos said the company has ongoing talks with the NFL on expanding their partnership beyond showing games on Christmas Day.