- Netflix stock has fallen by double digits post-earnings, but 37 of 50 analysts still rate it as a "Buy"
- Netflix's earnings in the first quarter of 2026 beat forecasts both on revenue and EPS
- Co-founder Reed Hastings's departure after 29 years has spooked many investors and created worries about transition
Despite exceeding Q1 2026 expectations and securing a substantial $2.8 billion termination fee after concluding discussions regarding the Warner Bros. Discovery deal, Netflix’s stock has seen a decline of over 12% in recent weeks. As of early May 2026, shares are trading around $88, a notable retreat from their earlier high points. Why?
The Guidance Problem
The hard truth is that the market’s primary interest often lies not in past performance, but in future prospects, and in this regard, Netflix’s projections proved less compelling. Q2 revenue guidance was set at $12.57 billion, falling slightly below the $12.64 billion anticipated by analysts.
Similarly, the EPS guidance of $0.78 per share lagged behind the analyst consensus of $0.84. Furthermore, the operating income outlook of $4.11 billion registered well below the $4.34 billion that had been expected.
Netflix explained that their profit margins got tighter because they had to spend a lot for new content in the first half of 2026. They’re hoping things will get easier on that front in the second half of the year. That’s manageable, but in a market priced for momentum, “manageable” isn’t good enough.
The bigger concern is that their growth seems to be slowing down. For example, in the first quarter, their revenue grew by 16.2%, which was already less than the 17.6% they saw in the last quarter of 2025. Their forecast for the second quarter suggests an even bigger drop, to roughly 13%.
And for the full year, they’re now aiming for 11% to 13% revenue growth, which is quite a bit lower than the 14% to 17% they were originally expecting at the beginning of 2025. When a company’s stock is still valued pretty highly, trading around 30 to 35 times its earnings, a clear trend of growth slowing down like this is a pretty big deal.
The Positive News, Negative Outcome Dynamic
The biggest culprit behind the slide isn’t a lack of profit; it’s a change in how Netflix talks to its investors. Starting this year, Netflix stopped reporting quarterly subscriber numbers, a metric that has defined its valuation for a decade.
Even though they added 9.3 million users in their last reported quarter, the decision to “go dark” on sub counts has signaled to Wall Street that the era of hyper-growth is over. Investors hate uncertainty. When a company stops sharing its favorite metric, the market assumes the numbers are about to get ugly.
Adding to these developments was the announcement that co-founder Reed Hastings will not seek re-election to the board when his term concludes in June, marking the end of his 29-year role in shaping the company. Hastings further amplified concerns by executing a sale of 407,550 shares, valued at approximately $37.96 million, through a pre-arranged Rule 10b5-1 plan on May 1. That news has also spooked investors.
Is There a Path Back Up?
Indeed, the argument for a bullish outlook presents itself as rather compelling, though its realization may largely be a matter of market timing. Among 50 analysts covering Netflix, 37 maintain a buy or higher rating, with only one recommending a sell. The consensus 12-month price target sits around $114.82, implying roughly 30% upside from current levels. BMO maintains an outperform with a $135 target, Goldman Sachs upgraded to Buy with a $120 target, and Wedbush lifted its target to $118.
The structural drivers remain intact. Advertising revenue is projected to double in 2026 to roughly $3 billion, with ad-supported plans accounting for over 60% of new Q1 sign-ups in relevant markets. Recent price adjustments are demonstrating stability.
The new ad-free Standard tier at $19.99 and Premium at $26.99 are being introduced without significant customer attrition. Furthermore, the company initiated a substantial $25 billion share buyback program, the largest in its history, signaling confidence in the business at its current valuation.
Although results exceeded expectations, conservative Q2 guidance and a stable full-year outlook did not satisfy investors hoping for more pronounced growth indicators.
Netflix walked away in February 2026, citing unattractive pricing, and received a $2.8B termination fee that boosted Q1 results.
Hastings co-founded Netflix 29 years ago, and his June exit, combined with a $38 million insider share sale, has rattled confidence in the company’s leadership transition.
