Netflix stock drops 6% after earnings miss due to $619 million expense from Brazilian tax fight

"Netflix's quarter - and stock price - was dragged down by a hefty $619 million expense tied to a Brazilian tax dispute. Netflix otherwise had another standout quarter, notching record revenue fueled by robust viewership for Korean-themed megahits like "Kpop Demon Hunters," "Squid Game," and its Canelo vs. Crawford live boxing event. Netflix's revenue rose 17.2% to a record $11.5 billion in the third quarter, largely in line with expectations from analysts and the company's guidance."

"The streaming titan's operating income was up 7.7% year-over-year to $2.55 billion, or $5.87 per share, which was well under analyst estimates of $6.94 and Netflix's guidance of $6.87. Netflix said that the miss on operating income and margins came after an "ongoing dispute" with Brazilian tax authorities that cost it $619 million. "Absent this expense, we would have exceeded our Q3'25 operating margin forecast," Netflix said in its shareholder letter."

"A key growth area for Netflix is its ad tier. The company said it had its "best ad sales quarter ever" and doubled its commitments received from advertisers in the US. Netflix's robust revenue growth suggests that its never-ending mission to improve engagement is working. Despite stiff competition from YouTube, content creators, and AI-powered video apps like Sora, Netflix just had its best-ever quarter of viewership on US-based smart TVs, according to Nielsen data dating back to May 2021."

Revenue rose 17.2% to a record $11.5 billion in the third quarter. Operating income increased 7.7% year-over-year to $2.55 billion, or $5.87 per share, but fell short of analyst estimates and company guidance. A $619 million expense from an ongoing dispute with Brazilian tax authorities reduced operating income and margins. Engagement from Korean-themed megahits and a high-profile live boxing event contributed to robust viewership. The ad-supported tier delivered its best ad sales quarter ever, with doubled US advertiser commitments. Netflix shares fell about 6% in after-hours trading following the earnings report.

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