Netflix Inc fell short of Wall Street’s profit expectations for the third quarter, after the streaming giant absorbed a substantial expense related to a Brazilian tax dispute. The company, however, maintains that the one-time charge will not materially impact future earnings. Netflix shares declined 5.8% in extended trading following the announcement.
For the quarter ending in September, Netflix posted earnings of $5.87 per share, lagging behind analysts’ average estimate of $6.96 per share. Revenue, meanwhile, increased 17% year-on-year to $11.51 billion, aligning with market forecasts.
Operating margin narrowed to 28%, compared to 30% a year earlier, as Netflix recognized a $619 million charge tied to non-income tax assessments in Brazil for the period spanning 2022 through the third quarter of 2025. Excluding this expense, Netflix said it would have surpassed its targeted margin and reiterated that the tax case is not anticipated to affect future financial performance.
According to Netflix, the dispute revolves around the Brazilian federal tax known as the Contribution for Intervention in the Economic Domain (CIDE), which imposes a 10% gross levy on outbound payments. Chief Financial Officer Spencer Neumann explained on the earnings call that this expense is regarded as a “cost of doing business in Brazil,” and consequently, it was recorded as cost of revenue rather than as an income tax item. Neumann emphasized that the issue should not have a significant ongoing impact, based on the company’s assessment.
Looking ahead, Netflix projected fourth-quarter revenue of approximately $11.96 billion, in line with consensus expectations, and earnings per share of $5.45. The company attributed its recent revenue growth to increases in membership, price adjustments, and especially strong advertising sales, with ad revenue reaching a quarterly record.
Netflix opted not to disclose subscriber numbers in its financial report. The company forecasts an operating margin of 23.9% for the upcoming quarter—two percentage points higher than the previous year—and continues to target around 16% revenue growth alongside a 29% operating margin for the full year.
