Netflix NFLX reported the first quarter of 2026 earnings of $1.23 per share, which increased 86.4% from 66 cents a year ago. The figure beat the Zacks Consensus Estimate of 76 cents.
Quarterly revenues rose 16.2% year over year to $12.25 billion, modestly beating the consensus mark by 0.65%. Management attributed the upside versus guidance to slightly higher-than-planned subscription revenues.
Revenue growth in the quarter was driven primarily by membership growth, higher pricing, and increased advertising revenues. The company cited that results landed slightly above its internal forecast due to higher-than-forecasted membership growth and favorable foreign exchange movements net of hedging. Notably, Netflix no longer provides quarterly updates on its membership numbers.
Management also emphasized that recent price changes have “gone well,” reflecting the value proposition, while the advertising business remains on track to reach about $3 billion in 2026, doubling from 2025.
The company noted strong adoption of its ad-supported tier, with the ads plan representing more than 60% of sign-ups within ads countries during the quarter.
Netflix, Inc. Price, Consensus and EPS Surprise
Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. Quote
NFLX Engagement and Content Initiatives Continue to Broaden
On engagement, the company said its primary internal quality metric reached another all-time high in the first quarter of fiscal 2026.
The first quarter featured exceptional content performance led by the fourth season of Bridgerton , which generated 94 million views.
Other successful first-quarter releases included One Piece S2 (40M views). Given the franchise’s multi-generational fanbase, Netflix recently announced a third season of the series, along with a LEGO One Piece animated special and a One Piece anime series.
Netflix's live programming strategy continued to deliver disproportionate impact. In the first quarter, Netflix aired more than 70 live events, including their first regional live event with the World Baseball Classic , exclusively for members in Japan. This massive event delivered 31.4 million viewers, becoming the company’s most-watched program ever on Netflix in Japan, and sparked the largest day of sign-ups in the country. As a result, among the 190+ countries in which Netflix operates, Japan was the largest contributor to member growth in the first quarter.
The March 21st live airing of BTS The Comeback Live delivered 18.4 million global viewers, reached the weekly Top 10 in 80 countries and secured the #1 spot in 24 countries.
Netflix continued to broaden its entertainment offering beyond core series and films. It pointed to early traction in video podcasts, which management said are over-indexing on daytime viewing and mobile usage, and to progress in games, including the early-April launch of a standalone kids gaming app, Netflix Playground. The company also said it is redesigning its mobile experience, including a vertical video discovery feed slated to launch at the end of the month.
NFLX Profitability Reflected Operating Leverage and Other Income
Operating income increased 18.2% year over year to $4 billion, with operating margin expanding to 32.3% from 31.7% in the year-ago quarter, slightly above its forecast due to higher-than-forecasted revenues.
Below the operating line, the quarter included a $2.8 billion termination fee related to the Warner Bros. transaction that was recognized in “interest and other income,” which the company cited as a driver of earnings versus its forecast. Management reiterated that its primary financial metrics are revenues for growth and operating margin for profitability.
NFLX Cash Flow and Capital Allocation Strengthened
Cash generation stepped up meaningfully. Net cash provided by operating activities totaled $5.3 billion in the first quarter of fiscal 2026 versus $2.8 billion a year earlier, aided in part by the cash receipt tied to the termination fee. Free cash flow rose to $5.1 billion from $2.7 billion in the prior-year quarter.
On the balance sheet, Netflix ended the quarter with $12.3 billion in cash and cash equivalents and $14.4 billion of gross debt. The company said its cash position was elevated due to a pause in share repurchases during the Warner Bros. process and the subsequent receipt of the termination fee, but it has resumed buybacks. During the quarter, Netflix repurchased 13.5 million shares for $1.3 billion, leaving $6.8 billion remaining on its authorization.
NFLX Outlook Maintained as Netflix Targets 2026 Margin Expansion
Netflix maintained its full-year 2026 outlook, projecting revenues of $50.7-$51.7 billion and an operating margin of 31.5%. For the second quarter of 2026, the company forecasts revenue of $12.57 billion and an operating margin of 32.6%. Management also reiterated that content amortization growth will be first-half weighted due to the timing of title launches, with the highest year-over-year content amortization growth expected in the second quarter before decelerating in the back half of the year.
Executives framed the longer-run opportunity around expanding entertainment value, leveraging technology (including generative AI) to improve the member experience and content creation, and improving monetization through distribution, plans and pricing, and advertising. Netflix continues to expect advertising revenues of about $3 billion in 2026, and highlighted the growing advertiser base and increased programmatic buying on its platform.
The company has an exciting slate for the balance of the year, including films Here Comes the Flood with Denzel Washington, Greta Gerwig’s Narnia , and David Fincher’s follow-up to Once Upon a Time In Hollywood ; and series like Will Ferrell’s The Hawk, One Hundred Years of Solitude S2 and Lupin Part 4.
Zacks Rank & Other Stocks to Consider
Currently, Netflix carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Consumer Discretionary sector include Sirius XM SIRI, Electronic Arts EA and Warner Music Group WMG, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SiriusXM, Electronic Arts and Warner Music Group are set to report their quarterly results on April 30, May 5 and May 7, respectively.
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This article originally published on Zacks Investment Research (zacks.com).