Netflix’s $2.8 Billion Windfall Fuels a Record Buyback, Even as a Founder’s Exit and Soft Forecast Weigh on Shares

Netflix's $5.1B quarterly cash flow, fueled by a Warner Bros. breakup fee, funds record buybacks as ad revenue doubles and live sports expansion accelerates.

The streaming giant is sitting on a pile of cash it never expected to have. A $2.8 billion breakup fee from Warner Bros. Discovery—paid after the media conglomerate chose to merge with Paramount Skydance instead of pursuing a deal with Netflix—has reshaped the company’s financial trajectory for 2026. The windfall, combined with a strong first quarter, has pushed Netflix’s free cash flow to a staggering $5.1 billion, nearly double the $2.7 billion recorded in the same period last year.

That cash isn’t going toward acquisitions. Instead, Netflix is funneling it directly back to shareholders. The company bought back 13.5 million of its own shares in the first quarter, spending $1.3 billion as part of a broader $31.8 billion repurchase program. The management has also lifted its full-year free cash flow forecast to roughly $12.5 billion, up from an earlier estimate of $11 billion—a revision almost entirely attributable to the after-tax impact of the Warner Bros. payment.

Ad Revenue Doubles as Live Sports Take Center Stage

Behind the financial engineering, Netflix is accelerating its push into advertising. The company expects its ad-supported tier to generate around $3 billion in revenue this year, double the 2025 figure. The strategy is already gaining traction: in markets where the cheaper, ad-supported plan is available, it now accounts for more than 60% of new sign-ups. The number of advertising partners has jumped 70% year-over-year, and Netflix plans to roll out new measurement tools for advertisers later this year.

Live sports are the engine driving this growth. Netflix is in advanced talks with the NFL to expand its rights beyond the Christmas Day games it currently airs. The company is reportedly targeting a package of five games, including the season opener and the night before Thanksgiving. Co-CEO Ted Sarandos has made clear that any deal must be economically sensible and directly boost the ad business. The company has also secured rights to the Women’s World Cup in North America and regional tournaments in Mexico.

The logic is straightforward: live events draw massive real-time audiences, creating premium advertising inventory that commands higher prices. Netflix is also moving to automate its ad sales, with platforms from Google and Amazon expected to handle more than half of the business going forward.

A Tepid Q2 Outlook and a Founder’s Departure

Despite the operational momentum, the stock has struggled. Since mid-April, shares have fallen roughly 10%, and they now trade about 30% below their 2025 peak. The culprit is a cautious forecast for the second quarter. Netflix expects revenue of $12.5 billion and earnings per share of just $0.78—both figures missing analyst estimates. For the full year, the company projects revenue between $50.7 billion and $51.7 billion.

Adding to investor unease is the impending exit of co-founder Reed Hastings. He will not stand for re-election to the board at the annual meeting on June 4, 2026. Netflix told shareholders in a letter that Hastings wants to focus on philanthropic work, and the company has denied rumors of internal conflict. A successor for the board chair has not yet been named, leaving a leadership vacuum that investors will be watching closely.

The annual meeting is shaping up to be a pivotal moment. By then, the NFL is expected to have awarded its package of five games, and the market will have a clearer picture of whether Netflix’s ad-driven growth can offset the near-term earnings disappointment. For now, the company is betting that a record cash pile and a live-sports strategy can win over Wall Street—even as its founder prepares to walk out the door.