Shares of Netflix Inc. dropped nearly 7% in pre-market trading on Tuesday, October 22, following a third-quarter earnings miss linked to a Brazilian tax dispute that dented profits. The stock was trading at $1,163.10, down $78.25 or 6.30%, according to Marketwatch data as of 1:30 PM IST.
The streaming giant reported an operating income of $3.24 billion, around $400 million below its forecast, as an unexpected $619 million payment to resolve a multi-year tax dispute with Brazilian authorities weighed on quarterly results.
In a statement, Netflix clarified that while the one-time expense impacted this quarter’s performance, it doesn’t expect the issue to have a “material impact on future results.”
Despite the setback, Netflix posted record subscriber engagement in Q3, driven by popular titles such as “KPop Demon Hunters,” “Wednesday” Season 2, and “Happy Gilmore 2,” along with a high-profile boxing match between Canelo Álvarez and Terence Crawford.
The company’s free cash flow reached $2.66 billion, surpassing analyst estimates, prompting Netflix to raise its full-year FCF guidance to around $9 billion.
However, analysts expressed concerns over stagnant user screen time and the potential competition from AI-generated video content on platforms like YouTube, Roku, and Tubi.
Netflix co-CEOs Ted Sarandos and Greg Peters emphasized their confidence in the company’s global reach, noting that its total audience is approaching one billion worldwide.
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