Netflix’s shares tumbled almost seven percent following last night’s financial results, as the streaming giant faced a $619 million (£464.8 million) tax charge in Brazil that adversely impacted its third-quarter profits, reports BritPanorama.
The company recorded a 17 percent increase in revenue to $11.2 billion, largely in line with forecasts, while operating income rose 12 percent to $3.2 billion. However, the unexpected tax burden decreased its operating margin to 28 percent, falling short of the 31.5 percent guidance provided earlier this year, with earnings per share dropping to $5.87, roughly a dollar below Wall Street expectations.
Netflix’s shares closed at $1,241.35 before plunging to $1,154.78 in pre-market trading, reflecting a decline of 6.97 percent. Despite this setback, the company retained its full-year outlook, projecting total revenue of $44.8–$45.2 billion and maintaining optimism regarding its content and advertising growth as it enters the final quarter of 2025.
Netflix’s ad business strengthens
Analysts suggested that the results underscored the resilience of Netflix’s underlying operations despite the missed targets. “Tax matters aside, the core business is in a happy place,” remarked Dan Coatsworth, head of markets at AJ Bell, pointing out the continued appeal of popular programs such as Wednesday and K-Pop Demon Hunters.
The advertising division proved to be a bright spot, achieving its strongest ad-sales quarter to date and doubling its commitments in the US market. Live events, including the highly anticipated Canelo v Crawford boxing match, also showed strong performance, contributing positively to the overall results.
“Without that one-off tax issue, these results would have beaten expectations,” stated Ben Barringer, head of technology research at Quilter Cheviot. He emphasized that Netflix remains robust, continuing to innovate with gaming, AI-driven recommendations, and live experiences. Upcoming releases include the final season of Stranger Things and Rian Johnson’s sequel to Knives Out, titled Wake Up Dead Man.
Strategy and M&A
Executives have indicated that Netflix will continue to prioritize organic growth but are open to potential “selective M&A,” sparking speculation around a possible bid for Warner Bros Discovery, which is reportedly considering a sale. Analysts remarked that such a move would mark a significant shift in Netflix’s traditional growth strategy.
“Acquiring Warner Bros Discovery would be a radical change,” Coatsworth added, noting the valuable intellectual property involved, such as Harry Potter, while also pointing to elements, like CNN, that may not align with Netflix’s existing framework.
Rebecca Crook, chief executive of MMT, remarked, “By discontinuing quarterly subscriber updates, Netflix is demonstrating real confidence in its product and profitability. Advertising is now at the heart of its next growth chapter.”
The recent financial results have highlighted both challenges and opportunities for Netflix as it navigates the dynamic landscape of entertainment and streaming, reinforcing its focus on innovation while scrutinizing fiscal responsibilities.
