Netflix's shares tumbled almost seven per cent following last night's financial results, after the streaming giant's impressive run of quarterly earnings was halted by a $619m (£464.8m) tax charge in Brazil that weighed on third-quarter profits.
The streaming powerhouse delivered a 17 per cent increase in revenue to $11.2bn, largely meeting forecasts, whilst operating income climbed 12 per cent to $3.2bn, as reported by .
However, the unforeseen tax expense pushed its operating margin down to 28 per cent, falling short of the 31.5 per cent guidance provided earlier this year, and sent earnings per share to $5.87, roughly a dollar below Wall Street predictions.
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The entertainment giant's shares finished at $1,241.35 before tumbling to $1,154.78 in pre-market trading, representing a 6.97 per cent decline.
Nevertheless, Netflix maintained its full-year outlook, projecting total revenue of $44.8–$45.2bn and expressing continued optimism about its content and advertising expansion heading into the final quarter of 2025.
Netflix's ad business strengthens
Numerous analysts have suggested the results highlighted the robustness of Netflix's fundamental operations despite the disappointment.
"Tax matters aside, the core business is in a happy place", contended Dan Coatsworth, head of markets at AJ Bell, noting that programmes like Wednesday or K-Pop Demon Hunters continue to captivate global audiences.
Its advertising division continues to shine, with the streaming titan recording its strongest ad-sales quarter yet and doubling its US upfront commitments. Live events, including the Canelo v Crawford boxing match, also demonstrated strong performance.
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"Without that one-off tax issue, these results would have beaten expectations", stated Ben Barringer, head of technology research at Quilter Cheviot.
"Netflix remains exceptionally robust and continues to innovate through gaming, AI-driven recommendations and live experiences".
Netflix's forthcoming line-up includes the final season of Stranger Things and Rian Johnson's sequel to Knives Out, Wake Up Dead Man.
Strategy and M&A
Executives have indicated that Netflix will maintain its focus on organic growth, but have left the door open for potential "selective M&A", sparking rumours it could make a bid for Warner Bros Discovery, which is reportedly considering a sale.
Analysts have suggested such a move would represent a significant departure from Netflix's typical bolt-on strategy.
"Acquiring Warner Bros Discovery would be a radical change", added Coatsworth. "It would bring valuable IP such as Harry Potter, but there are elements that wouldn't fit neatly, like CNN/".
Rebecca Crook, chief executive of MMT, commented: "By discontinuing quarterly subscriber updates, Netflix is demonstrating real confidence in its product and profitability. Advertising now sits at the heart of its next growth chapter."