Netflix shares fell over 10% in early trading following a disappointing second-quarter revenue forecast, despite the company exceeding first-quarter revenue and profit expectations. The streaming giant reported first-quarter earnings per share of $1.23 on revenue of $12.25 billion, a 16% year-over-year increase, beating analysts' consensus by $80 million. However, the forecast for Q2 revenue was set at $12.57 billion, just under the analyst consensus of $12.63 billion, and Q2 GAAP EPS was projected at $0.78, below the $0.84 consensus.
Adding to investor concerns was the announcement that co-founder and chairman Reed Hastings is stepping down. While his eventual departure was anticipated after he relinquished his co-CEO role in 2023, the timing coincided with a period of growth worries for the company. This news, coupled with the muted financial outlook, led to a projected $44 billion being wiped out of Netflix's market value.
Analysts generally agreed that while Q1 results were strong, the lack of an increased full-year guidance, which remained unchanged at $50.7 billion to $51.7 billion, disappointed investors who had high expectations. Many analysts, including those from JPMorgan and William Blair, maintained a positive long-term view, suggesting the stock could rebound after investors digest the strong Q1 growth and expanding margins. However, Goldman Sachs analysts noted that investors may question the pace of revenue growth and margin trajectory given recent price increases and continued content spending. The stock had rallied significantly, up 15% year-to-date and 21% since scrapping the Warner Bros. Discovery bid, setting a high bar for the earnings call.
