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Netflix Inc. shares fell sharply on Tuesday, 21 October, after the streaming giant missed Wall Street’s third-quarter earnings estimates. The miss came after the company recorded an unexpected expense related to a long-standing Brazilian tax dispute.

The stock dropped 6.48 per cent in after-hours trading to close at USD 1,160.94, down USD 80.41 from the previous session.

Netflix reported operating income of Rs 3.24 billion for the quarter — around Rs 400 million below analyst estimates. The company said the shortfall stemmed from a 10 per cent tax imposed on payments made by Brazilian entities to operations outside the country.

In 2022, Netflix had already paid about Rs 619 million to settle parts of the dispute with Brazilian authorities. However, this additional charge was not factored into the current quarter’s forecast.

Chief Financial Officer Spence Neumann clarified that the issue was not unique to Netflix.

“It’s not a tax that’s specific to Netflix or even to streaming,” Neumann said during the company’s earnings call. “Absent this expense, we would have exceeded our Q3 operating income and margin forecast.”

The company further stated that it does not expect the matter to have any material impact on future results.

Despite the tax expense, Netflix’s third-quarter revenue rose 17 per cent year-on-year, in line with analyst expectations. The growth was driven by higher membership numbers, pricing adjustments, and strong ad revenue.

Net income for the quarter came in at Rs 2.55 billion, or Rs 5.87 per share, compared to Rs 2.36 billion, or Rs 5.40 per share, a year earlier.

For the full year, Netflix projects revenue of Rs 45.1 billion, a 16 per cent rise from the previous year, with an operating margin now expected at 29 per cent instead of the earlier 30 per cent forecast.

Netflix ended Tuesday’s regular session up 0.23 per cent at USD 1,240.35 and has gained nearly 40 per cent so far in the year-to-date period. The stock has traded in a 52-week range of USD 1,231.78 to USD 1,341.15.

Netflix credited its Q3 performance to a strong content lineup, including KPop Demon Hunters, the second season of Wednesday, and a sequel to Happy Gilmore. The company also gained traction from streaming a live boxing match between Canelo Álvarez and Terence Crawford.

The animated film KPop Demon Hunters became Netflix’s most-watched title with over 325 million views. The company announced a merchandising partnership with Hasbro and Mattel to launch dolls, plush toys, and themed games based on the film by spring 2026.

Netflix also hinted at expanding into live experiences, publishing, beauty, and food products tied to its popular titles.

Looking ahead, the company expects continued revenue growth in the fourth quarter, supported by its upcoming slate — including the final season of Stranger Things, new episodes of The Diplomat and Nobody Wants This, and Rian Johnson’s Wake Up Dead Man: A Knives Out Mystery.

Abhay Shukla is a Senior Sub-Editor at Zee Business, where he covers the stock markets, corporate news, personal finance, technology, and auto sectors.

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