NEW YORK: Shares of Netflix fell more than 9% after the streaming giant’s third-quarter earnings came in below expectations, weighed down by an unexpected $619 million charge linked to a tax dispute in Brazil.
The company’s stock traded around $1,121.37 as of 1610 GMT on Wednesday, following the release of its quarterly results late Tuesday. While Netflix reported a net income of $2.55 billion, or $5.87 per share, up from $2.36 billion, or $5.40, a year earlier, the results missed analyst forecasts.
The shortfall was largely due to a Brazilian Supreme Court ruling that led to the sizable one-time charge covering past payments between 2022 and 2025.
Revenue surges but profit margin narrows
Netflix’s revenue rose 17% year-on-year to $11.51 billion, matching market projections. The company reaffirmed its full-year revenue outlook of $45.1 billion, a 16% increase over 2024.
However, the tax expense reduced its third-quarter operating margin to 28.2%, prompting Netflix to revise its full-year operating margin forecast from 30% to 29%.
The firm noted that the tax issue is “non-recurring” and will not have a lasting impact on future results.
Ad-tier momentum and investor reaction
Despite the earnings setback, Netflix reported strong growth in its ad-supported subscription tier, saying ad revenue is on pace to more than double in 2025.
Since early 2025, the company has stopped reporting subscriber numbers, instead focusing on metrics such as revenue, engagement, and profitability. Analysts say this shift has added volatility to market expectations.
Market analysts described Wednesday’s stock drop as a knee-jerk reaction, emphasizing that the company’s underlying fundamentals remain solid. “Investors were hoping for an all-around beat, but the unexpected tax hit overshadowed an otherwise strong quarter,” one analyst said.
Netflix’s executives maintained a positive outlook, offering Q4 revenue and earnings guidance above Wall Street estimates, suggesting confidence in continued growth despite temporary setbacks.
