Netflix Earnings Miss Estimates Amid Brazil Tax Charge; Shares Drop 5.8%

Netflix Inc. reported third-quarter earnings that fell short of Wall Street expectations, largely due to a one-time charge related to a tax dispute in Brazil. Despite this setback, the company emphasized that the issue will not have a lasting impact on future results. Following the announcement, Netflix shares dropped 5.8% in after-hours trading.

The streaming giant posted earnings per share (EPS) of $5.87, missing analysts’ forecasts of $6.96. Revenue, however, grew 17% year-over-year to $11.51 billion, aligning with market expectations. Operating margin slipped to 28% from 30% a year ago after Netflix recorded a $619 million expense connected to Brazilian non-income tax assessments covering 2022 through 2025. The company clarified that without the charge, it would have exceeded its margin targets and reaffirmed that the dispute would not materially affect future performance.

Looking ahead, Netflix projected fourth-quarter revenue of $11.96 billion and earnings of $5.45 per share, both roughly in line with analyst forecasts. The company highlighted strong growth driven by higher membership numbers, increased pricing, and record advertising sales, with ad revenue marking its best quarter yet. Notably, Netflix has stopped disclosing subscriber counts in its earnings reports, signaling a shift toward focusing on engagement and profitability metrics.

According to data from Nielsen and Barb, user engagement surged in key markets, with the U.S. and U.K. seeing increases of 15% and 22%, respectively, compared to late 2022. Netflix forecasted a 23.9% operating margin for the fourth quarter—up two percentage points year-over-year—and maintained its full-year outlook of about 16% revenue growth and a 29% operating margin.

The company’s solid engagement metrics and growing ad business suggest continued strength in its global streaming dominance, despite short-term financial headwinds.