Netflix shares fell about 7% in after-hours trading on Tuesday after the company missed third-quarter earnings expectations, citing an unexpected charge related to a Brazilian tax dispute. The expense stems from a 10% tax on payments made by Brazilian entities to operations abroad—an item not previously forecasted but now recognized after Netflix determined it would likely lose its legal challenge. CFO Spence Neumann noted that the tax isn’t specific to streaming and said results would have exceeded forecasts without the added cost.
Revenue climbed 17% year over year to $11.51 billion, meeting analyst estimates, while earnings per share reached $5.87 versus the expected $6.97. The company slightly lowered its full-year operating margin forecast from 30% to 29% but reaffirmed projected annual revenue of $45.1 billion, up 16% from the prior year.
Despite the earnings miss, Netflix reported its strongest ad sales quarter ever, with co-CEO Greg Peters saying ad revenue is on track to more than double this year. The streamer continues to expand its global brand with merchandise and media tie-ins around its hit film “KPop Demon Hunters” and a packed content slate featuring Stranger Things’ final season and Wake Up Dead Man: A Knives Out Mystery.
