Brazil tax shock: Netflix Q3 profit far below expectations, lowers full-year guidance, shares drop as much as 7% after hours | Earnings Report

US streaming giant Netflix delivered a “surprising miss” in its third-quarter results: Although service price increases and strong subscriber growth pushed the company’s advertising revenue to a record high, an unexpected expense from a tax dispute with Brazilian tax authorities meant that profits fell far short of expectations, causing Netflix to lower its full-year profit margin guidance.

Netflix’s third-quarter revenue was roughly in line with expectations, maintaining double-digit growth, but earnings per share (EPS) and net profit were far below Wall Street estimates. While Netflix did not significantly revise its full-year revenue guidance, it made a slight downward adjustment to its operating profit margin outlook.

After the financial report was released, Netflix’s stock price, which had closed up slightly by more than 0.2%, plunged after hours, at one point falling as much as 7.5%. Netflix’s stock price had reached a record high close near $1,340 on June 30, but subsequently declined; the Q2 earnings report released in late July failed to boost the stock price, and by the close this Tuesday, the price had already dropped more than 7% from its record high.

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