- Streamer publishes first results since it lost out in battle to buy Warner Bros
Netflix beat expectations in its first update since it lost out in the battle to acquire Warner Bros, but investors were left disappointed after it announced that its co-founder Reed Hastings will step down.
Shares fell more than 9 per cent in late trading after Netflix announced the departure of Hastings, and a weaker-than-expected forecast.
Hastings, who led the company from a mail-order DVD company to one of the world’s most popular streaming services, will step down as chair in June to focus on philanthropy and other pursuits.
He said: ‘Netflix changed my life in so many ways and my all-time favourite memory was January 2016, when we enabled nearly the entire planet to enjoy our service.’
Netflix said Hastings’ decision to not stand for re-election ‘is not a result of any disagreement with the company.’
Netflix shares sunk after news of Hastings’ departure and a weaker forecast for Q2
Ted Sarandos, co-CEO said Hastings had been a ‘singular source of inspiration’ and ‘has modelled for Greg [Peters, co-CEO] and me a selfless, disciplined leadership style’.
The streaming giant said revenue rose to $12.3billion in the first quarter, a 16 per cent increase year-on-year and ahead of Wall Street forecasts of $12.2billion. Net income rose 82 per cent to $5.3billion, far exceeding forecasts of $3.3billion.
Profits came in higher with earnings per share nearly doubling to $1.23 per share, above expectations of 76 cents, boosted by the $2.8billion termination fee related to the Warner Bros transaction.
In February, Netflix walked away from a bidding war with Paramount to buy Warner Bros Discovery’s streaming and studio assets. Paramount, which bought the studio for $110billion, agreed to cover the fee Warner Bros would owe Netflix if it withdrew from the race.
The deal ‘would have been a nice accelerant for our strategy, but only at the right price,’ Netflix said on Thursday.
The company maintained its previous full-year guidance of revenue between $50.7billion and $51.7billion, but the projected earnings per share of 78 cents in the second quarter undershot expectations of 84 cents.
Ben Barringer, head of technology research at Quilter Cheviot said: ‘With a double whammy of mediocre results and the departure of a key figure, it is not surprising investors are trimming positions.
‘Following the WBD deal falling through, this isn’t exactly what we would expect from Netflix, nor what we have become accustomed to.’
Netflix said it was looking to grow revenue from new formats, including live sporting events, video podcasts and games. It comes after Netflix raised subscription fees in the US again last month, having introduced price hikes and advertising to fund investments in new content.
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