Netflix’s first quarter results were met with a significant negative market reaction, as the company’s profit fell short of Wall Street expectations despite revenue exceeding consensus. Management attributed the quarter’s performance to continued growth in paid memberships, strong engagement in Asia-Pacific markets, and the impact of high-profile live events like the World Baseball Classic in Japan. Co-CEO Theodore Sarandos cited “the largest single sign-up day ever in Japan” as evidence of the event’s business impact, while CFO Spencer Neumann noted improved member retention across all regions. However, the company also faced higher operating expenses tied to investments in content, advertising technology, and M&A-related activity, affecting overall profitability.
Is now the time to buy NFLX? Find out in our full research report (it’s free for active Edge members).
Netflix (NFLX) Q1 CY2026 Highlights:
- Revenue: $12.25 billion vs analyst estimates of $12.19 billion (16.2% year-on-year growth, 0.5% beat)
- EPS (GAAP): $1.23 vs analyst expectations of $1.34 (8.6% miss)
- Adjusted EBITDA: $4.20 billion vs analyst estimates of $4.11 billion (34.3% margin, 2.1% beat)
- The company reconfirmed its revenue guidance for the full year of $51.2 billion at the midpoint
- EPS (GAAP) guidance for Q2 CY2026 is $0.78 at the midpoint, missing analyst estimates by 7.3%
- Operating Margin: 32.3%, in line with the same quarter last year
- Market Capitalization: $392.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Netflix’s Q1 Earnings Call
- Robert Fishman (MoffettNathanson) asked how Warner Brothers deal costs and other M&A-related expenses would affect operating margin; CFO Spencer Neumann explained total expected costs are in line with initial projections and not material to margin outlook.
- Sean Diffely (Morgan Stanley) asked if the Warner Brothers experience changed Netflix’s appetite for M&A; Co-CEO Theodore Sarandos emphasized discipline and no change in capital allocation philosophy, highlighting the company’s willingness to walk away from deals when value is insufficient.
- Vikram Kesavabhotla (Baird) inquired about engagement metrics and quality measurement; Co-CEO Gregory Peters explained that member quality metrics achieved another all-time high, with view hours up despite competition from global events like the Winter Olympics.
- Dan Salmon (New Street Research) questioned the shift to programmatic advertising and advertiser base growth; Peters responded that the move to an in-house ad tech stack increased programmatic buying, with programmatic now set to exceed 50% of non-live ad business.
- Eric Sheridan (Goldman Sachs) asked about the integration of generative AI in content creation; Sarandos noted AI is being used for tools like previsualization and VFX, and that the Interpositive acquisition accelerates the company’s GenAI capabilities for filmmakers.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory analyst team will be watching (1) the pace at which Netflix scales its advertising revenue and grows programmatic sales, (2) adoption and engagement metrics for new content formats, including live events and podcasting, and (3) the rollout and impact of new gaming initiatives like Playground. Execution in these areas, alongside disciplined cost management, will be key signposts for performance.
Netflix currently trades at $92.91, down from $107.79 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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