Reed Hastings’ exit from $455 billion Netflix ‘had nothing to do with’ failed Warner Bros. deal

The 65-year-old co-founder and former CEO of the world’s largest streaming service announced on Thursday that he won’t stand for reelection to the board at the company’s annual shareholder meeting in June, ending a 29-year run at the company he created in 1997. In a statement included in the first quarter investor letter, the billionaire said he’s leaving to focus on philanthropy “and other pursuits.” He gave shoutouts to co-CEOs Greg Peters and Ted Sarandos, who took full control of Hastings’s executive role in January 2023.  

“A special thanks to Greg and Ted, whose commitment to Netflix’s greatness is so strong that I can now focus on new things,” said Hastings.

While Netflix’s has shown its business can thrive without Hastings in an operating role, the founder’s complete separation from the company is something of an anomaly in the tech world where founders typically remain on the board of directors for years. Nor did the timing of Hastings’ exit—coming shortly after Netflix’s failed attempt to acquire Warner Bros—go unnoticed.

So is Hastings departure related to Netflix’s attempted purchase of the Hollywood movie studio, an analyst asked during Netlflix’s earnings call on Thursday?

Absolutely not, said co-CEO Sarandos.

“Sorry for anyone who was looking for some palace intrigue here, not so,” Sarandos said, in what was Netflix’s first earnings call since it walked away from the deal in February.

Netflix proposed the $27.75 per-share deal for Warner Bros. in January, Warner Bros. accepted, and then in February 2026 Warner Bros. told Netflix that David Ellison’s Paramount Skydance had submitted a better proposal. Paramount Skydance paid Netflix a $2.8 billion termination fee in the deal. 

The analyst who asked the question Thursday noted that Hastings was historically opposed to large acquisitions, but Sarandos said the Netflix founder was fully on-board with the plan to purchase Warner Bros. Discovery’s studios businesses and streamer HBO Max for an enterprise value of $82.7 billion.

“Reed was a big champion for that deal. He championed it with the board, the board unanimously supported the deal, so… that absolutely had nothing to do with it,” Sarandos said.

Shares of Netflix plunged as much as 9% in after hours trading on Thursday, as the company beat first-quarter financial targets but forecast second quarter revenue and profit below Wall Street expectations, according to Bloomberg.

‘We did not lose focus’

Sarandos said the company is looking ahead and not backward.

“At the risk of being a broken record, I just want to remind you that we said this from the beginning, that the WB deal was a nice to have, not a need to have,” Sarandos said during Netflix’s call with analysts. “Our biggest risk was losing focus on our core business while we were working on the transaction, and as you can see from our Q1 results, we did not lose focus.”

Netflix reported net income of $5.3 billion for the first quarter of 2026, up about 82.8% from $2.9 billion a year ago. Revenue rose 16.2% to $12.25 billion. The $2.8 billion from Paramount Skydance boosted the streamer’s free cash flow to $5.1 billion, prompting Netflix to raise its full-year 2026 free cash flow forecast to $12.5 billion, up from $11 billion. 

Sarandos said the company strengthened its “M&A muscle” in designing the bid and working with regulators on approvals. One of the benefits of the exercise was that executives tested their “investment discipline, and when the cost of this deal grew beyond the net value to our business and to our shareholders, we were willing to put emotion and ego aside and walk away.” 

Netflix also detailed three strategic priorities in its investor letter, mapping out its playbook now that the Warner Bros. deal is off the table. The company is focusing on more entertainment, leveraging technology, and improving monetization.

Netflix said it would expand into video podcasts and live events, including the World Baseball Classic in Japan, which drove its single largest day of Netflix signups in the country. It also plans to leverage technology to improve its service, flagging its March acquisition of Hollywood actor and director Ben Affleck’s AI-powered moviemaking tool, InterPositive. 

Netflix is also revamping mobile viewing with a vertical video discovery feed launch planned for the end of April. Its ad-supported price tier represented 60% of all signups in countries where it’s an option and Netflix said it expects $3 billion in ad revenue this year, double its 2025 figures.  

Peters reaffirmed the company’s financial goals of revenue growth of 12% to 14% and operating margin of 31.5%. He said Netflix’s audience is approaching one billion people, which Peters said will be “an exciting milestone to strive for” that leaves it with “plenty of room to grow.” He said Netflix’s market penetration is under 45%.