Shares of Netflix fell sharply in after-hours trading following news that Reed Hastings, the long-time chairman and co-founder, has stepped down. The stock decline came even as the streaming company reported first-quarter results that slightly surpassed revenue estimates.
Reed Hastings, who played a pivotal role in establishing Netflix nearly three decades ago, has left his position as chairman at age 65. He had handed over operational leadership to co-chief executives Greg Peters and Ted Sarandos at the start of 2023.
Hastings’ departure occurs as Netflix faces challenges from increasing competition, slowing sales, and the collapse of a planned merger with Warner Bros Discovery in February. The failed transaction resulted in Netflix receiving a $2.8 billion termination fee, which helped boost reported net income for the first quarter to $5.28 billion.
Revenue for the period totaled $12.25 billion, narrowly exceeding consensus expectations, while operating profit improved to $3.96 billion. Operating margins expanded to 32.3% and free cash flow rose to $5.09 billion, both metrics benefiting from the one-time payment.
Despite these results, investor focus shifted to guidance for the current quarter. Netflix projected earnings per share of $0.78 on revenue of $12.57 billion, both below market forecasts. The company also cautioned that operating margins would contract compared with the prior year, mainly due to higher upfront content costs.
Netflix confirmed its previous forecast for annual revenue in the range of $50.7 billion to $51.7 billion, along with an expected operating margin of 31.5%.
