Netflix reported quarterly numbers on Thursday evening that look excellent on paper: Revenue $12.25 billion (+16%), earnings per share $1.23 (expectation: $0.76), net income +83% to $5.3 billion. Free cash flow of $5.1 billion. Ad revenue on track to double to $3 billion.
Yet the stock fell as much as 10% in after-hours trading. Welcome to Netflix — the company where even an earnings beat leads to a selloff.
Why the Stock Is Falling
First: Reed Hastings, co-founder and longtime CEO, is leaving the board of directors. Since stepping down as CEO in 2023, Hastings has focused on philanthropy, a real estate venture, and a board seat at Anthropic. His departure is symbolic — it marks the end of an era.
Second: Netflix no longer reports subscriber numbers. This makes investors nervous. The company only said revenue growth was driven by “slightly higher-than-planned subscription revenue.” Netflix had 325 million subscribers at the end of 2025 — how many there are now, nobody knows.
Third: Guidance. Netflix confirmed its full-year forecast of $50.7-51.7 billion revenue without raising it. For Q2, it expects 13% revenue growth. That’s solid, but for a stock already up 15% this year, “solid” isn’t enough for further gains.
What the Numbers Really Say
Beneath the surface is a strong story. The ad business is exploding — 60% of all new signups in markets with ad options choose the cheaper ad-supported tier. The number of advertising clients surged 70% to over 4,000. Netflix is on track to generate $3 billion in advertising revenue in 2026.
The March price increase will only fully impact Q2 — meaning there’s hidden upside in the next quarterly results.
The termination of the Warner Bros. Discovery deal also has a positive side: Netflix resumed its share buyback program and repurchased 13.5 million shares for $1.3 billion.
For Investors
Netflix after a 10% pullback with strong fundamentals has historically been a buying opportunity. The stock has shown the same pattern for years: beat earnings, stock drops short-term, recovers within 2-4 weeks.
Valuation is more attractive after the drop. With a forward P/E of about 30 and over 16% revenue growth, Netflix isn’t expensive for a company generating $5 billion in cash flow per quarter.
If you don’t own the stock and want to invest long-term: this dip is a gift. Track market sentiment daily with our Fear & Greed Index.
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