Netflix shares fell more than 5% in after-hours trading on Tuesday after the streaming giant reported a quarterly profit of $2.5 billion, falling short of analysts’ expectations despite strong performance in viewership and ad-supported subscriptions.
The company posted revenue of $11.5 billion for the quarter, but disclosed a $619 million charge related to an ongoing tax dispute in Brazil, which affected its bottom line. In a letter to shareholders, Netflix stated that without the Brazilian tax expense, it would have surpassed its operating margin forecast.
“We don’t expect this matter to have a material impact on future results,” the company noted.
Despite the earnings miss, viewership in the U.S. and U.K. reached a three-year high, driven in part by the success of “KPop Demon Hunters,” now the most-watched film in Netflix history.
Netflix also reported that its ad-supported membership tier had its best quarter to date in terms of sales. However, the company again declined to disclose the exact size of its advertising business.
“Netflix had its best ad sales quarter to date but still did not provide a figure for how large the ad business is,” said Ross Benes, senior analyst at Emarketer.
“This gives the impression that revenue growth is still being driven mainly by subscription fees.”
The company now boasts over 300 million paid members across more than 190 countries, solidifying its position as a global leader in streaming entertainment.
📈 Looking Ahead
Netflix expressed optimism for the current quarter, pointing to a strong content lineup that includes:
- The final season of Stranger Things
- Season 2 of “The Diplomat”
- A new installment in the “Knives Out” mystery series
- Expanded live event programming, including American football and boxing
🔍 Acquisition Rumors
Analyst Ross Benes also noted speculation that Netflix may be preparing a bid for Warner Bros. Discovery (WBD). He suggested that the planned split of WBD could make its studio assets more attractive to Netflix by separating them from less nimble traditional TV networks.
