Netflix blames $600m tax dispute with Brazil for disappointing earnings

"The results announced on Tuesday broke Netflix's six-quarter streak of posting a profit that eclipsed analysts' projections, despite growth in its ads business. The Los Gatos, California, company cited an unexpected $619m expense tied to the Brazilian tax dispute for the third-quarter earnings shortfall while hailing its lineup of distinctive TV series and films for keeping its audience engaged and delivering a mix of subscriber fees and increased ad sales that helped it deliver revenue that matched analyst forecasts."

"Investors, though, were not placated by the explanation as Netflix's shares still fell by about 5% in extended trading after the numbers came out. Netflix earned $2.5bn, or $5.87 per share, in its July-September quarter, an 8% increase from the same time last year. Revenue climbed 17% from last year to $11.5bn. Analysts surveyed by FactSet Research had predicted the company to earn $6.96 per share on revenue of $11.5bn."

"Delivering solid financial growth has become more important than ever for Netflix as management has steered investors from fixating on how many subscribers its service gains from one quarter to the next. As part of that process, Netflix stopped disclosing its subscribers at the end of last year. The shift has paid off so far, with Netflix's stock price rising about 40% so far this year, although the downturn in extended trading signaled some of those gains may evaporate."

Netflix posted a profit but missed analysts' earnings-per-share expectations after an unexpected $619 million expense tied to a Brazilian tax dispute. Revenue climbed 17% year-over-year to $11.5 billion, supported by subscriber fees and growth in ad sales, which allowed revenue to match forecasts. The company earned $2.5 billion, or $5.87 per share, versus analysts' $6.96 expected per share. Management has shifted investor focus from quarterly subscriber counts and stopped disclosing subscriber totals, contributing to a roughly 40% year-to-date stock increase despite the post-results downturn in extended trading.

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