Shares of Netflix Inc. (Nasdaq: NFLX) are getting battered this morning, one day after the company reported its Q1 2026 financial results—the first since the streaming giant abandoned its plans to acquire Warner Bros. Discovery (WBD) in February.
In addition to its quarterly earnings, Netflix also announced a bombshell: its cofounder and current chairman, Reed Hastings, will be exiting the company this June.
The departure of Hastings, who has been the de facto face of the company since its inception, has left many investors wondering about Netflix’s future.
Here’s what you need to know.
What’s happened?
On Thursday, Netflix announced its Q1 2026 financial results. And for all intents and purposes, the results were pretty good.
For the quarter, Netflix reported $12.25 billion in revenue, representing a 16.2% growth from the same quarter a year earlier. It also announced a diluted earnings per share (EPS) of $1.23, which was significantly higher than its EPS of 66 cents in the quarter a year earlier.
As noted by CNBC, Netflix’s Q1 revenue of $12.25 billion surpassed LSEG analysts’ expectations of $12.18 billion. That’s something investors always cheer. The company’s EPS of $1.23 also massively surpassed the 76 cents that analysts expected.
However, the massive surge in Netflix’s Q1 EPS was primarily due to a one-time payment the company received after it declined to make a counteroffer in February to Paramount Skydance’s bid for Warner Bros. Discovery—which many had assumed Netflix would acquire.
As part of the deal’s collapse, Netflix received a $2.8 billion termination fee from WBD, which helped drive its surging EPS in Q1.
Still, there’s no denying that Netflix captured impressive revenue growth in Q1. So then, why is the stock crashing today?
2 factors are spooking Netflix investors today
There are two leading factors that are contributing to Netflix’s declining stock price this morning.
The first involves Netflix’s guidance for its current Q2. While Netflix reported impressive revenue growth in Q1, it issued Q2 revenue guidance of $12.57 billion. As noted by Proactive Investors, this is below the $12.63 billion in revenue that analysts had expected for Q2.
However, it’s worth pointing out that Netflix maintains its previous full fiscal 2026 guidance of $50.7 billion to $51.7 billion, which the company says represents 12%-14% year-over-year growth.
Still, investors sometimes think in the short term, and when a quarterly guidance misses expectations, it can trigger a sell-off in the stock.
But lackluster Q2 guidance isn’t the only thing spooking investors. The other, more significant issue is the news about Netflix cofounder and current chairman, Reed Hastings.
Reed Hastings announces departure from Netflix
In addition to reporting its Q1 results yesterday, Netflix also announced a bombshell: its cofounder and current chairman, Reed Hastings, will shortly depart the company.
Hastings, who has served as the chairman of Netflix since stepping down as CEO in 2023, has largely been seen as the person most responsible for birthing the video streaming industry.
It is an industry that has radically transformed Hollywood and the way most people consume its content now.
Under Hastings’s leadership, Netflix went from being a fringe DVD rental company to being the king of the entertainment world.
So it’s understandable that investors are now fretting over Netflix’s future, given that Hastings has confirmed he will be leaving the company.
The news of Hastings’s departure was announced in Netflix’s Q1 shareholder letter. In the missive, Netflix said that Hastings has informed the company “that he will not stand for re-election to our Board when his current term expires” in June.
“Netflix changed my life in so many ways,” the company’s shareholder letter quoted Hastings as saying, “and my all‑time favorite memory was January 2016, when we enabled nearly the entire planet to enjoy our service.”
Netflix addresses concerns about the departure
Netflix says Hastings has decided not to stand for re-election as chairman “in order to focus on his philanthropy and other pursuits.”
Of course, many may be wondering if this explanation is just a cover story and if the departure is in fact related to Netflix’s attempt to buy Warner Bros. Discovery. Some have speculated that Hastings wasn’t completely sold on that move.
In an analyst call, Ted Sarandos and Greg Peters, Netflix’s co-CEOs, were asked whether Hastings’s preference to build, not buy, was a factor in his departure after Netflix decided to go ahead and pursue a WBD acquisition anyway.
But according to Peters, Hastings’s decision to leave the company had nothing to do with the move.
“Sorry if anyone who is looking for some palace [intrigue] here,” Peters said, according to a PitchBook transcript, “[but] not so.”
He added: “Reed was a big champion for that deal. He championed it with the Board. The Board unanimously supported the deal. So we had perfect alignment with management and the Board on the Warner Bros. deal. So it absolutely had nothing to do with it.”
Sarandos also chimed in, acknowledging that “It’s very unusual for a founder to step away from the board of the company after succession,” but adding that “Reed is no ordinary founder.”
Netflix stock falls 10% after Hastings news
Regardless of the driving factor behind Hastings’s decision to depart, investors don’t seem to love the news.
As of this writing, in premarket trading, NFLX shares are currently down more than 10% to $96.60. Yesterday, the company’s share price closed at $107.79, before the news was announced.
If today’s current premarket drop holds, it will wipe out a majority of NFLX’s gains for the year.
As of yesterday’s close, NFLX shares were up nearly 15% year to date from their early January closing price of around $91 per share. That means Netflix has outperformed the Nasdaq Composite, which is up only about 3.7% in 2026 so far.
Since Hastings originally took Netflix public in 2002, NFLX shares have surged more than 93,000%.
