Key points:

• Netflix shares tumble 7%
• Brazil messes up the numbers
• Stock is up 40% year to date

Earnings per share missed analysts’ consensus calls while revenue landed inline. A Brazil tax dispute was behind the miss, Netflix said.

💰 Earnings Miss, Revenue Flatlines

• Netflix NFLX stock dropped 7% in premarket trading Wednesday after the company’s third-quarter earnings came in way below expectations.
• The streamer reported $5.87 in adjusted earnings per share on $11.51 billion in revenue, missing the $6.96 EPS consensus from analysts. Revenue perfectly matched estimates.
• Netflix earned $5.40 a share on $9.83 billion in revenue during the same period last year — meaning growth is still there, but margins are getting squeezed.

🎬 Blame It on Brazil

• In its earnings release, Netflix said an ongoing tax dispute with Brazilian authorities was responsible for the weaker-than-expected profit. The company didn’t detail the size of the hit, but it was enough to drag earnings lower even as revenue climbed.
• Brazil’s government has recently tightened rules around how international tech firms report and pay taxes on local ad revenue and streaming income — and Netflix has been caught in the bureaucratic crossfire.
• Outside of that headache, the company said membership growth, price hikes, and a booming ad tier helped revenue expand 17% year over year.

📺 Streaming Still Strong

• Netflix stopped reporting subscriber counts earlier this year, but said it notched its highest-ever quarterly viewing share in both the US and UK, up 15% and 22% respectively since late 2022.
• The company’s ad-supported tier continues to grow, contributing more to overall revenue than expected — a silver lining investors may overlook amid the earnings miss.
• Looking ahead, Netflix guided for fourth-quarter revenue growth of 17%, just above Wall Street’s 16% estimate, suggesting the company still sees healthy demand heading into the holidays.

Source: Tradingview