Shares in Netflix dropped by more than nine per cent on Thursday after the company’s latest quarterly results failed to excite investors, while co-founder Reed Hastings confirmed he will step down as chairman in June.

Hastings, who transformed Netflix from a DVD-by-post service into a global streaming powerhouse, said he plans to focus on philanthropy and other interests. He had already handed day-to-day leadership to co-chief executives Greg Peters and Ted Sarandos in early 2023.

In an earnings statement, Hastings reflected on his time at the company, highlighting its global expansion in 2016 as a defining moment. “Netflix changed my life in so many ways,” he wrote.

The California-based firm reported quarterly revenue of $12.25 billion, slightly ahead of expectations, and profits of $5.28 billion. However, earnings were boosted by a $2.8 billion termination fee linked to a collapsed deal involving Warner Bros. Discovery.

Netflix had previously pursued a takeover of Warner Bros. but chose not to increase its offer, ultimately losing out to a rival bid backed by Paramount Skydance. The decision signals a major shift in the US media landscape, with Warner assets — including CNN — likely to move under new ownership, pending regulatory and shareholder approval.

The bidding battle drew political attention, with Donald Trump claiming involvement in the outcome. Meanwhile, Larry Ellison is reported to have supported the Paramount bid led by his son, David Ellison.

Despite investor disappointment, some analysts argue Netflix may benefit from walking away. Savings from the abandoned deal could be redirected into original programming and its growing advertising business.

“Netflix won with investors when it lost Warner Bros Discovery,” said Emarketer analyst Ross Benes, noting that diversifying revenue beyond subscriptions remains a key challenge.

The company is increasingly focused on advertising, which it expects to generate around $3 billion this year. Executives also pointed to opportunities to use artificial intelligence to tailor adverts more effectively.

Beyond advertising, Netflix is expanding into live sports, gaming and podcasts. According to Sarandos, coverage of the World Baseball Classic proved particularly successful, becoming the platform’s most-watched programme in Japan.

As Netflix enters a post-Hastings era, its ability to adapt to intensifying competition — from rival streaming services to short-form platforms like TikTok — will be closely watched by investors.