Netflix Misses Earnings Target, Cites Brazilian Tax Dispute as Cause
Netflix missed the earnings target set by stock market analysts during its latest quarter, marking a break in the company’s six-quarter streak of posting profits that exceeded expectations. The Los Gatos, Calif.-based streaming giant attributed the earnings shortfall to an unexpected $619 million expense related to a tax dispute in Brazil.
Despite this setback, Netflix highlighted its strong lineup of distinctive TV series and films, which have kept its audience engaged. The company also noted a successful combination of subscriber fees and increased ad sales that helped deliver revenue in line with analyst forecasts.
Investors, however, were not entirely reassured by the explanation. Following the earnings announcement on Tuesday, Netflix’s shares fell approximately 6% in extended trading.
Diverging Analyst Opinions
Analyst reactions to Netflix’s third-quarter report were mixed. Thomas Monteiro, an analyst at Investing.com, expressed concern that Netflix might be using the Brazilian tax hit to mask underlying signs of slowing subscriber growth and advertising revenue amid economic uncertainty. “The truth is that the company failed to deliver the kind of growth we’ve grown used to over the past couple of years,” he said.
Conversely, Jeremy Mullin of Zacks took a more optimistic view, stating that Netflix’s “underlying story remains solid” and sees little cause for concern.
Financial Highlights
In the July-September quarter, Netflix earned $2.5 billion, or $5.87 per share, representing an 8% increase from the same period last year. Revenue rose 17% year-over-year to $11.5 billion.
Analysts surveyed by FactSet Research had expected Netflix to earn $6.96 per share on revenue of $11.5 billion. While the company matched revenue estimates, it fell short on earnings per share, primarily due to the Brazilian tax expense.
A Shift in Focus
Netflix has increasingly emphasized delivering solid financial growth over quarterly subscriber gains. As part of this strategic shift, the company stopped disclosing its subscriber numbers at the end of last year. This change has so far been effective, with Netflix’s stock price rising approximately 40% this year—though the dip in extended trading following the earnings release suggests some of those gains may be at risk.
Subscriber Growth and Market Position
Although Netflix no longer reports specific subscriber data, this year’s revenue growth suggests its worldwide subscriber base has increased from roughly 302 million at the end of last year, maintaining the company’s lead among video streamers. This is notable even as well-funded rivals such as Amazon and Apple continue expanding their programming selections.
In the company’s quarterly conference call, co-CEO Ted Sarandos revealed that Netflix’s total worldwide audience—including multiple viewers within the same subscriber household—is approaching 1 billion.
“We have a better understanding of the streaming business than any of our competitors,” asserted Greg Peters, Netflix’s other co-CEO, during the call.
Diversification Efforts
Netflix has sustained its market leadership by diversifying its offerings, adding live sports and video games alongside its extensive scripted programming. The company plans to expand this diversification further by introducing video podcasts in partnership with Spotify next year.
As the streaming landscape evolves, Netflix’s strategy focuses on broadening its content portfolio to maintain user engagement and drive continued growth.
https://nypost.com/2025/10/21/media/netflix-shares-slide-on-rare-earnings-miss-snapping-six-quarter-profit-streak/