The streaming giant’s management just fired its biggest weapon yet in the battle to reassure investors: a record-breaking $25 billion share buyback program. The move, approved on April 22, comes on the heels of a brutal week that saw the stock shed nearly a tenth of its value in a single session, leaving the shares trading roughly 31% below their 52-week high.
The new authorization adds to an existing tranche, giving Netflix a combined firepower of more than $31 billion to repurchase its own equity. The company’s balance sheet is more than equipped for the task. At the end of the first quarter, Netflix held $12.3 billion in cash, a figure bolstered by a $2.8 billion termination fee it pocketed after walking away from its planned acquisition of Warner Bros. During the period when that deal was under negotiation, Netflix had paused its buyback activity. Once the talks collapsed, it swiftly resumed, snapping up 13.5 million of its own shares.
A Quarter of Contradictions
The buyback was a direct response to a market rout that began on April 17. On that day, Netflix’s stock plunged nearly 10% despite delivering a first-quarter report that, on the surface, beat Wall Street’s expectations. Revenue came in at $12.25 billion, slightly ahead of the $12.18 billion consensus estimate. Earnings per share of $1.23 matched analyst forecasts.
The problem was the fine print. The headline net income of $5.28 billion was massively inflated by that $2.8 billion breakup fee from the abandoned Warner Bros. deal — a non-recurring item that masked the underlying operational picture. Far more concerning to the market was the guidance for the current quarter. Management projected second-quarter revenue of $12.5 billion, falling short of the $12.6 billion analysts had penciled in. The earnings forecast of $0.78 per share also missed expectations of $0.84.
Founder’s Exit Adds to the Gloom
Compounding the disappointment over the outlook was a seismic leadership change. Co-founder Reed Hastings is stepping down from his role as chairman of the board. His mandate will expire at the annual general meeting on June 4, 2026. The company said Hastings intends to focus on philanthropy going forward.
Rich Greenfield of LightShed Partners told CNBC that Hastings’ departure “scares investors.” Netflix has not yet named a successor for the board chair role. The operational leadership remains unchanged: Greg Peters and Ted Sarandos have been serving as co-CEOs since 2023.
Should investors sell immediately? Or is it worth buying Netflix?
The Ad Business Is the Bright Spot
Away from the noise around the stock and the boardroom, the underlying business is showing real momentum in one key area. The ad-supported subscription tier is now accounting for more than 60% of new sign-ups in markets where it is available. The number of advertising clients has surged 70% year-over-year to over 4,000 companies.
Netflix is targeting roughly $3 billion in advertising revenue for the full year, which would represent a doubling from 2025 levels. The company is sticking with its full-year revenue guidance of $50.7 billion to $51.7 billion. The operating margin is expected to hit 31.5%. Free cash flow has been boosted to around $12.5 billion, largely thanks to the Warner Bros. termination payment.
There is a near-term headwind, however. The concentration of content spending in the first half of the year will compress the second-quarter operating margin to 32.6%, a decline of 150 basis points from the same period last year. Management expects the drag from content amortization to ease in the second half, allowing margins to recover.
Wall Street Divided on the Dip
The analyst community is split on what to make of the current situation. Morgan Stanley and JPMorgan are both advising clients to buy the stock, viewing the selloff as an overreaction and an entry point. Needham’s team points to Netflix’s pricing power and new mobile content formats as reasons for optimism.
Others are more cautious. Rosenblatt Securities has trimmed its price target and rates the shares neutral. The Pivotal Research Group warns that short-form video platforms such as TikTok and YouTube Shorts represent a growing competitive threat to traditional streaming.
The stock closed at $92.44 on April 24. The average price target among the 32 analysts covering Netflix stands at $119.23, suggesting the market has overshot to the downside. For now, the company is betting that the best use of its capital is not a risky acquisition but a massive vote of confidence in its own equity.
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