NFLX · Q1 2026 Earnings

Bullish

Netflix

Reported April 16, 2026

30-second summary

Revenue grew 16.2% YoY to $12.25B in Q1, beating the prior $12.16B guide by $93M, while GAAP EPS of $1.23 came in well above the company's own $0.76 forecast — driven in part by the $2.8B Warner Bros. termination fee recognized in interest and other income. FY26 FCF guidance was raised to ~$12.5B from ~$11B — a $1.5B (+13.6%) lift just one quarter into the year — while FY26 revenue and the 31.5% OpM framework were reaffirmed. The hidden tension: Q2 OpM is guided to 32.6% vs 34.1% in Q2 FY2025, a 150bps YoY decline that puts the entire FY26 31.5% target on the back of H2 margin expansion management explicitly flagged.

Headline numbers

EPS

Q1 FY2026

$1.23

Revenue

Q1 FY2026

$12.25B

+16.2% YoY

+0.7% vs est.

Gross margin

Q1 FY2026

51.9%

Free cash flow

Q1 FY2026

$5.09B

Operating margin

Q1 FY2026

32.3%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$12.25B	+16.2%	$12.05B	+1.7%
EPS	$1.23	—	$0.56	+119.6%
Gross margin	51.9%	—	45.9%	+600bps
Operating margin	32.3%	—	24.5%	+780bps
Free cash flow	$5.09B	—	$1.87B	+172.2%

Guidance

Strong Q1 beat on revenue, EPS, and margin; FY2026 FCF guidance raised $1.5B to $12.5B while maintaining full-year revenue and operating margin targets.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	$12,157 million	$12,250 million	+$93M above guide	Beat
Revenue YoY Growth	Q1 FY2026	15.3% YoY	16.2% YoY	+0.9pts above guide	Beat
Operating Margin	Q1 FY2026	32.1%	32.3%	+0.2pts above guide	Beat
EPS	Q1 FY2026	$0.76	$1.23	+$0.47 above guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$12,574 million	+13.4%-13.5% YoY
Operating Margin	Q2 FY2026	32.6%	—
Revenue YoY Growth	Q2 FY2026	13% (or 12% F/X neutral)	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Free Cash Flow	FY2026	approximately $11B	approximately $12.5B	+$1.5B increase	Raised

Reaffirmed unchanged this quarter: Operating Margin (31.5%), Revenue ($50.7B-$51.7B), Revenue YoY Growth (12%-14% (11%-13% F/X neutral)), Advertising Revenue (~$3B, up 2x year-over-year)

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Ads Revenue (FY2026 Target)	$3B	+100.0%

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Advertising Clients	4000+
Ads Plan Sign-ups (% of total)	60%+
Primary Engagement Metric (Quality)	All-time high in Q1
Bridgerton S4 Views	94M
One Piece S2 Views	40M
World Baseball Classic (Japan) Viewers	31.4M
BTS The Comeback Live Viewers	18.4M

Profitability

Q1 FY2026

Segment	Q1 FY2026
Operating Margin	32.3%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
UCAN	$5.25B	+14.0%
EMEA	$3.99B	+17.0%
LATAM	$1.5B	+19.0%
APAC	$1.51B	+20.0%

Management tone

The biggest tone shift this quarter is around M&A discipline. The WB deal had been announced and management spent the prior call justifying it. This quarter, an analyst asked what management learned from the WB experience and Sarandos characterized it as "nice to have, not need to have," describing the willingness to put emotion and ego aside and walk away when the cost of the deal grew beyond the net value to the business and shareholders. The shift from defending an acquisition to celebrating the discipline of abandoning it is meaningful — it tells investors capital allocation reverts to the organic+small-tuck-in framework (Interpositive being the example), and the $275M of FY26 acquisition expenses flagged previously as a margin risk is now absorbed and pulled forward into the reaffirmed 31.5% framework.

On ads, the conversation has moved entirely to advertiser-base and platform metrics: 4,000+ clients (+70% YoY), 60%+ of new sign-ups on ads, and management's framing on Rich Greenfield's Nielsen question — that the Nielsen gauge is not the currency for the video marketplace — signals a posture of indifference to legacy measurement that only an at-scale ads business can credibly adopt. The dollar target is no longer the headline; the platform is.

Management disclosed that the primary member quality metric hit an all-time high in Q1, with view hours growing at similar rates to H2 2025 despite Winter Olympics competition for 17 days, and live events drive outsized retention value even at lower absolute view-hour counts. The deliberate withholding of quality-metric composition (to avoid handing competitors the playbook) is itself a confidence signal.

Sports has graduated from selective opportunism to a programmatic pipeline. The WBC result (31.4M viewers, largest baseball streaming event ever, drove Japan's biggest sign-up day) is being followed by a multi-year CONCACAF deal for Mexico rights, Women's World Cup US/Canada rights, and the Ronda Rousey/Carano MMA event. Netflix is buying events that drive members, not chasing regular-season category packages — management was explicit on the NFL question that the discipline of valuing live properties on total benefit (viewing plus ads) is unchanged.

Q&A highlights

Robert Fishman · Moffitt Nathanson

Can you speak to full year margin guidance and how it compares to prior guidance with Warner Brothers deal costs? Beyond content spending, where else are you accelerating investment in 2026?

Management confirmed 31.5% operating margin guidance for 2026. WB deal costs were offset by pulling forward costs from 2027 and including previously unannounced Interpositive acquisition costs, resulting in no material impact on operating margin guidance. Three priority areas: delivering more entertainment value (series, films, podcasts, live sports, games), leveraging technology for delivery and content creation, and improving monetization through distribution, pricing, and advertising.

Operating margin guidance: 31.5% for 2026Revenue growth guidance: 12-14%Advertising business doubling to approximately $3 billion USD325+ million paid members at end of prior year

Sean Diffley · Morgan Stanley

What have been your biggest learnings from the Warner Brothers experience? Does it change your appetite for M&A or capital structure going forward?

WB deal was 'nice to have, not need to have.' Core business remained focused during transaction, evidenced by strong Q1 results. Teams demonstrated ability to execute large deals and manage early integration. Key learning was testing investment discipline—management walked away when deal costs grew beyond net value. This reinforces M&A will remain a disciplined tool. No change to capital allocation philosophy: invest organically and opportunistically in M&A while maintaining strong liquidity and returning excess cash via share buybacks.

WB deal was characterized as 'nice to have, not a need to have'Management built M&A muscle through deal execution and integration experienceDemonstrated willingness to walk away when economics no longer workedNo change in capital allocation philosophy

Rich Greenfield · LightShed Partners

How does Nielsen methodology change impact Netflix's viewership measurement and advertising revenue aspirations?

Nielsen's methodology change reduces weight of streaming-only households and increases weight of linear households, making streaming appear smaller relative to broadcast/cable. This is purely a measurement change, not a change in actual viewing behavior. No impact on Netflix's effectiveness or ad business because Nielsen gauge is not the currency for video marketplace. Netflix continues expecting $3 billion advertising revenue in 2026. Netflix tracks actual member viewing data independently.

Nielsen methodology reduces streaming weight, increases linear weightNo change to actual consumer viewing behaviorNetflix gauge not the currency for video marketplaceAdvertising revenue target remains $3 billion for 2026

John Hulick · UBS

Details on World Baseball Classic viewership; other similar sports and live event opportunities that appeal globally?

WBC was massive success: 31.4 million viewers, most-watched program ever in Japan, biggest global baseball streaming event of all time. Drove largest single sign-up day ever in Japan, leading Q1 member growth globally. Japan achieved highest quarter of paid net ads historically. Event demonstrated ability to stream multiple games concurrently. APAC was strongest FX-neutral revenue growth market overall, with strong performance in India, Korea, Southeast Asia. One Piece viewing increased post-WBC. Additional sports deals announced: multi-year CONCACAF deal for Mexico rights, Women's World Cup in US/Canada, Ronda Rousey/Carano MMA event.

World Baseball Classic: 31.4 million viewersMost-watched program ever in Japan for NetflixLargest global baseball streaming event of all timeLargest single sign-up day ever in Japan

Answers to last quarter's watch list

Q1 FY2026 operating margin vs. the 32.1% guide — Beat at 32.3%, a 20bps print above guide. The FY26 31.5% framework gets reaffirmed and management explicitly flagged that Q3 and Q4 OpM will grow YoY to land the full year, signaling discretion in H2 spend. The structural-margin debate is closed for now.

Resolved positively

Whether ad revenue tracking supports the ~$3B FY26 figure — Management reaffirmed the ~$3B (2x YoY) target with no qualification, layered on platform proof points (4,000+ advertisers, +70% YoY; 60%+ of new sign-ups on ads), and explicitly dismissed Nielsen methodology concerns as immaterial to the trajectory.

Resolved positively

APAC growth re-acceleration — Resolved cleanly: APAC reaccelerated from Q4's +17% to +20% YoY in Q1, and management called out APAC as the strongest FX-neutral revenue growth region. The "maturing region" framing is off the table.

Resolved positively

WB deal close mechanics and the $275M of FY26 acquisition expenses — Netflix walked away from the WB deal. The framing shifted from integration risk to capital discipline. The $275M expense line that was flagged as a margin risk is no longer in play; what's absorbed in the FY26 OpM now is the Interpositive acquisition plus pulled-forward 2027 costs, and the reaffirmed 31.5% target accommodates both.

Resolved positively

FY26 FCF tracking against the ~$11B guide — Better than expected: guidance raised to ~$12.5B, a $1.5B (+13.6%) lift just one quarter in. Q1 FCF of $5.09B is more than 40% of the new full-year guide, suggesting cash conversion is running ahead of pace.

Resolved positively

Engagement quality metrics, particularly total view hours growth — Partially resolved: management said the primary quality metric hit an all-time high in Q1 and view hours grew at rates similar to H2 2025, but declined to disclose composition or absolute hour figures. The qualitative signal is positive; the absence of disclosable hours data leaves the engagement-stagnation thesis only partially refuted on the numbers.

Continue monitoring

What to watch into next quarter

Q2 FY2026 operating margin vs. the 32.6% guide and the -150bps YoY gap — Q2 FY25 printed 34.1%; the 150bps YoY decline is the only "hidden cut" in this print. A Q2 miss would force the FY26 31.5% target onto the back of Q3/Q4 alone and reopen the FY-OpM debate.

Whether the FY26 revenue guide gets raised at Q2 — Netflix typically refreshes the FY range mid-year. The Q1 16.2% YoY growth is running ahead of the 12-14% FY range; if Q2 prints at or above 13% as guided, the math forces the FY low end higher.

UCAN growth durability — UCAN decelerated from Q4's +18% to Q1's +14%, the only region that softened. A second quarter below +15% would suggest US pricing and ad-tier monetization are nearing saturation faster than the international mix.

FY26 FCF cadence against the new $12.5B guide — Q1 came in at $5.09B (~40% of the FY target). If Q2 prints another $3B+, the FCF guide gets raised a second time and the cash conversion ratio implied (FCF / operating income) materially exceeds historical norms — investors will want explicit working-capital and content-cash-spend reconciliation.

Ad revenue quarterly disclosure cadence — with 4,000+ advertisers and the $3B target reaffirmed, watch whether management publishes an explicit Q1 or H1 ads revenue dollar at Q2 — the absence of a number through mid-year would suggest the doubling isn't fully derisked.

Engagement view hours disclosure for H1 2026 — view hours growth has been the softest data point of the cycle; H1 2026 total hours growth needs to recover toward the originals-viewing pace to fully close out the stagnation thesis.

Sources

Netflix Q1 2026 Shareholder Letter (Form 8-K Exhibit 99.1), filed 2026-04-16 — https://www.sec.gov/Archives/edgar/data/1065280/000106528026000137/ex991_q126.htm
Netflix Q1 2026 Earnings Interview (Q&A transcript)

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