Netflix Shares Fall 5% as $2.5 Billion Profit Misses Forecasts Amid Brazil Tax Dispute

Netflix shares fell sharply on Tuesday after the streaming giant reported a $2.5 billion quarterly profit that came in below market expectations.

The company posted $11.5 billion in revenue for the quarter but said its profit was impacted by a $619 million charge tied to an ongoing tax dispute in Brazil.

In a letter to shareholders, Netflix explained that without the Brazilian tax expense, it would have exceeded its operating margin forecast.

“We don’t expect this matter to have a material impact on future results,” the company said.

Following the earnings announcement, Netflix shares fell more than 5 percent, trading just above $1,173 in after-hours markets.

Despite the earnings miss, the company reported that viewership in the U.S. and U.K. reached the highest levels in nearly three years, boosted by hit titles such as its record-breaking film “KPop Demon Hunters.”

Netflix also said its ad-supported plan recorded its best sales quarter to date, underscoring growing competition with traditional television.

“Netflix had its best ad sales quarter so far but still didn’t disclose how big the ad business is,” said Ross Benes, senior analyst at Emarketer. “This suggests that most of the sustained revenue growth this quarter—and next—will still come from subscriptions.”

Netflix continues to describe itself as one of the world’s leading entertainment platforms, with over 300 million paid memberships across 190 countries.

Analyst Benes also noted speculation that Netflix may be eyeing a bid for Warner Bros. Discovery, saying:

“If the planned split of WBD goes ahead, its studio arm could complement Netflix well without the drag of slower-moving TV networks.”

Looking ahead, Netflix said it expects stronger performance in the current quarter, driven by major releases including the final season of “Stranger Things,” “The Diplomat,” and a new “Knives Out Mystery.” The platform also plans to expand live programming, featuring American football and boxing events.

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