Who needs Warner Bros.? Netflix reported better-than-anticipated first quarter (2026) revenue thanks to surprisingly strong member growth, particularly in Japan. Better ad sales and higher subscription prices also kicked in. We did not get an updated subscriber total on Thursday.
What we did get was a set of financials that topped expectations, both internal and external. For the March quarter, Netflix posted diluted earnings of $1.23 per share on $12.250 billion in revenue, up 16 percent from the prior year. Net income was $5.283 billion; operating income was nearly $4 billion (+18 percent). The company previously forecast its Q1 2016 revenue at $12.157 billion, and predicted $3.264 billion in profit, which would have diluted to 76 cents per share.
The big beat at the bottom line was thanks in large part to a $2.8 billion termination fee Netflix received for not getting Warner Bros. (and paid out by Paramount). The result has cash flow fans salivating.
Sometimes when you lose, you really win. “Warner Bros. would have been a nice accelerant for our strategy,” the shareholder letter says, “but only at the right price.”
After the bell and the subsequent letter, shares in Netflix (NFLX) fell about 10 percent. The decline was not because of what happened, but more about what will happen. Netflix forecasts its second quarter operating margin will decline year over year from 34.1 percent to 32.6 percent.
At the end of 2025, Netflix surpassed 325 million global paid subscribers. Though the company announced some time ago it would no longer be giving quarter-by-quarter updates on subs, executives did say they would update investors (and thus, the public) at meaningful benchmarks. Netflix instead now focuses on its new KPIs (key performance indicators), revenue and income.
Netflix released its Peaky Blinders movie in the first quarter, as well as Alan Ritchson’s War Machine. Top series from the first three months of 2026 included Bridgerton season four, the Stranger Things finale, His & Hers and One Piece season two, to cherrypick a few.
Last quarter, the company recorded EPS of 56 cents on $12.157 billion in revenue. At the time, Netflix was in the process of buying Warner Bros. for $83 billion. What a difference a quarter makes: Netflix is out of the sweepstakes and Paramount Skydance is firmly in, with David Ellison paying about $111 billion for the entirety of Warner Bros. Discovery.
