Netflix co-founder Reed Hastings will leave the board when his term expires in June, the company said Thursday, as shares fell roughly 9% in extended trading despite first-quarter revenue that beat Wall Street estimates. Revenue rose 16% to $12.25 billion, and Netflix reiterated full-year guidance of $50.7 billion to $51.7 billion.

The departure closes the chapter on the 65-year-old executive who built Netflix from a mail-order DVD business into a $450 billion streaming giant, weeks after the company walked away from its proposed $72 billion bid for Warner Bros. Discovery's streaming and film assets. Co-chief executives Ted Sarandos and Greg Peters now carry a business facing tougher competition from Paramount Skydance, which is pursuing its own takeover of Warner Bros., and from YouTube and TikTok.

Earnings beat, stock drop

Netflix reported net income of $5.28 billion, or $1.23 a share, nearly double the $2.89 billion, or 66 cents, a year earlier. The quarter included a $2.8 billion termination fee collected after the Warner Bros. deal collapsed in February, making reported earnings per share noncomparable to the 76-cent analyst consensus compiled by LSEG. Operating income rose 18% on what the company called "slightly higher-than-planned subscription revenue."

Netflix said it expects second-quarter revenue to rise 13% and warned that content amortization growth would peak in the second quarter before easing in the second half. Chief Financial Officer Spencer Neumann said some costs tied to the abandoned Warner Bros. transaction that had been slated for 2027 will now hit in 2026.

Hastings focuses on philanthropy

Hastings, who stepped down as co-chief executive in 2023 but stayed on as executive chairman, said in the shareholder letter he will now focus on philanthropy and other pursuits. "Netflix changed my life in so many ways, and my all-time favorite memory was January 2016, when we enabled nearly the entire planet to enjoy our service," he said.

In a filing with the Securities and Exchange Commission, Netflix said Hastings' decision not to stand for re-election was "not as a result of any disagreement with the company." The board has not named a successor. Asked whether the exit was linked to the failed Warner Bros. pursuit, Sarandos said Hastings was "a big champion for that deal. He championed it with the board. The board was unanimous."

Ads and live events

Netflix reiterated it is on track to double advertising revenue to $3 billion this year, four years after launching a cheaper ad-supported tier. Sarandos said the company is in talks with the NFL to "expand the relationship" beyond its Christmas Day games, and pointed to video podcasts and its stream of the World Baseball Classic as drivers of record engagement.

Analyst caveat

Ben Barringer, head of technology research at Quilter Cheviot, said the reaction looked severe. "The share price has subsequently been punished harshly. This may be a slight overreaction, but with a double whammy of mediocre results and the departure of a key figure, it is not surprising investors are trimming positions," he said.

Later this year Netflix is scheduled to broadcast a heavyweight fight in the United Kingdom between Tyson Fury and Anthony Joshua, part of a live-events push Sarandos has framed as central to the next chapter.