Netflix Stock Plummets After Q1 Earnings: Is It Time to Buy the Dip in NFLX?

Netflix (NFLX) released its Q1 2026 earnings yesterday, April 17, after the close of markets. The stock is trading sharply lower today as markets gave a thumbs down to the report. Let's explore why it makes sense to buy the dip in NFLX stock.

NFLX Q1 2026 Earnings Beat Estimates

Netflix reported revenues of $12.25 billion in the March quarter, up 16.2% from the corresponding quarter last year. The number came in ahead of Street estimates as well as the company’s guidance. It reported an operating income of nearly $4 billion in the quarter, up 18.2% year-over-year (YoY). The diluted earnings per share (EPS) nearly doubled to $1.23, but that number is not comparable to the previous quarter due to the $2.8 billion termination fee Netflix received from Warner Bros. Discovery (WBD). 

While Netflix’s Q1 numbers were strong, its Q2 guidance fell short of estimates even as the company maintained its full-year guidance that called for revenues between $50.7 billion and $51.7 billion. The management also reaffirmed that ad revenues are on track to double this year to about $3 billion.

Markets were also spooked by the announcement that co-founder and chairman Reed Hastings will step down from his position in June when his term expires. Hastings stepped down as the co-CEO in 2023, handing over the baton to Greg Peters, who was then the company’s chief operating officer.

While there were apprehensions that Hastings’ stepping down was linked to the WBD deal that Netflix eventually walked away from, the company categorically denied it, with co-CEO Theodore Sarandos stressing that there was a “perfect alignment between management and the board” on that deal.

Netflix Is a Structural Growth Story

Meanwhile, during the earnings call, Sarandos pointed to three priorities for the company. These are delivering even more value to its members, improving its service using technology, and improving monetization. According to Sarandos, “These features help position us to deliver multiyear growth beyond the 12% to 14% that we expect to deliver this year.”

I believe that’s a reasonable expectation from the company, something I had noted in the pre-earnings analysis. A combination of higher subscription prices, rising member count, and growing ad revenues would help keep Netflix’s topline growth buoyed. The company estimates that it currently makes up less than 5% of global TV viewing time. Cord-cutting is a structural story, and Netflix is among the key beneficiaries of that trend.

The key here for Netflix would be ensuring that its subscription continues to offer value to members—something the company has been actively working on by expanding its offerings to include live streaming, games, and podcasts. 

Notably, Netflix has high engagement levels, and during the Q1 earnings call, the company highlighted that in the U.S., Netflix members are paying the least per hour of viewing time on streaming compared to other streaming video on demand (SVOD) offerings.

Should You Buy NFLX Stock?

I see the dip in NFLX as an opportunity to buy more shares. The stock is among the best and reasonably priced growth stories out there and comes with a strong moat in the form of the value it offers to the members in an otherwise competitive streaming market. Notably, Netflix added 23 million members last year, even as some of its peers are struggling to grow their subscriber base.

Along with double-digit topline growth, Netflix expects its margins to keep expanding every year as it aims to keep content spending growth below revenue growth. The streaming industry has high operating leverage, as content and technology costs are largely fixed, and revenues from new members help expand margins.

To sum it up, Netflix brings prospects of double-digit topline growth and even higher EPS growth over the long term. Consensus estimates call for NFLX’s EPS to rise 26% this year and almost 21% in 2027. The EPS is expected to hit $3.88 in 2027, which gives us a 2027 price-to-earnings multiple of just about 25x, which I believe is justified considering the kind of growth Netflix brings to the table. 

While the stock's post-earnings price action is contrary to what I anticipated, dips like these are usually a good buying opportunity for patient investors.