Netflix shares tumbled over 8% despite a slight revenue beat, as co-founder Reed Hastings steps down and the streamer pivots to ads and live sports.
SAN FRANCISCO: Netflix shares plummeted more than 8% as the streaming giant’s quarterly revenue only narrowly surpassed analyst expectations.
The company reported revenue of $12.25 billion for the quarter, a result that slightly topped forecasts.
Investor sentiment was further impacted by news that co-founder Reed Hastings will step away from the company. His term as chairman of the board ends in June.
“Netflix changed my life in so many ways,” Hastings wrote in an earnings letter to shareholders.
He cited enabling global service access in January 2016 as his all-time favourite memory.
The share price slide occurred despite Netflix reporting a profit of $5.28 billion. This figure was significantly boosted by a $2.8 billion termination fee received for ending a deal to buy Warner Bros. Discovery.
Netflix declined to sweeten its takeover offer, effectively ceding the media giant to a rival bid from Paramount Skydance. Executives decided the deal was no longer financially attractive.
By stepping away, Netflix avoids a costly acquisition and can invest elsewhere. The move was initially welcomed by investors.
“Netflix won with investors when it lost Warner Bros Discovery,” said Emarketer senior analyst Ross Benes.
He noted the saved capital could fund content and its advertising business.
Netflix’s advertising platform continues to grow and is expected to generate $3 billion in revenue this year. Co-CEO Greg Peters highlighted using AI to help partners customise ads.
“As the company enters a new era without Reed Hastings, advertising will play a bigger role,” Benes added.
“There’s no better time to amplify an ads business than right now.”
The streamer is also expanding into live sports, podcasts and games. The recently streamed World Baseball Classic was “a hit” on the platform.
“It was the most watched program we’ve ever had in Japan,” said co-CEO Ted Sarandos.
Netflix faces increasing competition from rival streaming services and short-form video platforms like TikTok. Its next challenge is diversifying away from reliance on subscription revenue.
