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Just For You
Why Netflix Tanked Despite Big EPS Beat, Outlook AheadBy Leo Miller. Published: 4/17/2026. 
Key Points
- Netflix stock took a huge hit after its latest earnings report, even as EPS rose by over 80%
- A leftover from its failed WBD deal created a one-time earnings uplift
- Meanwhile, a key leader departed, and Netflix extended its live sports success internationally
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Entertainment giant Netflix (NASDAQ: NFLX) recently released one of its more anticipated earnings reports in some time. The firm’s latest report is its first since losing the battle against Paramount Skydance (NASDAQ: PSKY) to acquire Warner Bros. Discovery (NASDAQ: WBD). To Netflix’s dismay, the market did not react kindly to the results. However, understanding why requires looking beyond the firm’s headline numbers. Looking ahead, weighing Netflix’s ability to drive long-term growth against underwhelming near-term guidance leaves the stock’s risk-reward profile fairly balanced. Netflix’s Huge EPS Beat Doesn’t Tell the Full StoryIn its Q4 fiscal 2025 (FY2025), Netflix reported revenue of $12.25 billion, an increase of about 16% year-over-year. This slightly beat expectations of $12.17 billion.
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Netflix posted an even more sizable bottom-line beat. Diluted earnings per share rose to $1.23, an 86% year-over-year increase, well above estimates of $0.76. However, this figure was boosted by a one-time item. When the WBD deal collapsed, Paramount paid Netflix a $2.8 billion termination fee. That payout substantially lifted Netflix’s net income and EPS. On an adjusted basis that excludes this one-time payment, EPS would have missed expectations. That dynamic likely helped drive the firm’s nearly 10% decline in after-hours trading, since the breakup-fee benefit was already public knowledge. Another headwind was Netflix’s below-expectations guidance for the next quarter. It forecast revenue of $12.57 billion, or growth of 13.5% year-over-year, slightly under estimates of $12.64 billion. The company also expects its operating margin to decline by 150 basis points year-over-year to 32.6%, though that would be a 30 basis point improvement versus Q4 FY2025. Netflix maintained full-year guidance of $50.7 billion to $51.7 billion (about $51.2 billion at the midpoint), which is marginally below consensus of $51.37 billion. Hastings' Departure Causes JittersInvestors were also unsettled by Reed Hastings' announcement that he will not seek re-election to Netflix’s board. Hastings was arguably the most important figure behind Netflix’s rise: he co-founded the company in 1997 and served as CEO for 25 years. He remains board chairman and will continue in that role until June, after which he plans to focus on philanthropy and other ventures. On the earnings call, one analyst asked whether the pursuit of WBD influenced Hastings' decision. Hastings has historically favored a “build over buy” approach, preferring to grow organically rather than pursue large acquisitions. If the WBD pursuit had driven his departure, it would suggest misalignment among senior leadership. Co-CEO Ted Sarandos pushed back, saying, “Reed was a big champion for that deal,” adding that the board had unanimously supported it and that it had “absolutely nothing to do” with Hastings' decision. Still, the timing is notable. Netflix has made smaller acquisitions before but has never targeted a company approaching WBD’s scale. Months after pursuing one of the largest potential M&A deals in media history, Hastings decided to step back. Either way, Hastings' departure marks the end of an era for Netflix and raises questions about the future of the company’s board leadership. Live Sports and Ads: Critical Levers for Netflix’s Future GrowthSustained growth will be key to Netflix’s ability to climb over the long term. Live sports remain one of the most promising levers. For example, Netflix was very successful in broadcasting the World Baseball Classic (WBC) during the quarter—Netflix says the WBC was its most-watched program ever in Japan. The event drove the largest single-day sign-ups in the country and led Japan to be the biggest contributor to Netflix’s Q1 membership growth. This success builds on the massive viewership Netflix generated from NFL games and the Mike Tyson vs. Jake Paul boxing match. Notably, the WBC was the company’s first large live event outside the United States. These events create a repeatable playbook Netflix can use in both U.S. and international markets to drive membership growth. Netflix’s advertising business also remains a major growth avenue. The company expects to double ad sales to $3 billion by 2026 and said its advertiser base grew roughly 70% year-over-year to about 4,000 advertisers. A larger advertiser base should improve targeting and allow Netflix to earn more revenue per ad as marketers extract greater value from the platform over time. |
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