Tuesday's extended trading saw Netflix shares decline roughly 7% following third-quarter earnings that missed Wall Street targets, with the streaming platform citing an ongoing Brazilian tax authority dispute as the cause for underperformance, according to CNBC.
An unforeseen 10% tax on payments Brazilian entities make to foreign operations created the expense not factored into earlier forecasts, CNBC reported. Chief Financial Officer Spence Neumann explained during the earnings call that "It's not a tax that's specific to Netflix. It's not even specific to streaming," adding "Absent this expense, we would have exceeded our Q325 operating income and operating margin forecast, and we don't expect this matter to have a have a material impact on our results going," as quoted by CNBC.
Third-quarter revenue climbed 17% to $11.51 billion, matching analyst projections, while earnings reached $5.87 per share against the $6.97 estimate, according to CNBC. Netflix forecasts full-year revenue of $45.1 billion, a 16% increase, though operating margin expectations dropped to 29% from 30% due to the Brazilian matter.
Despite the earnings shortfall, Netflix achieved record advertising sales during the quarter, with co-CEO Greg Peters noting the company will more than double ad revenue this year, CNBC reported. EMarketer senior analyst Ross Benes observed that "Netflix had its best ad sales quarter to date, but still did not provide a figure for how large the ad business is," suggesting "This gives the impression that the sustained revenue growth achieved this quarter, and forecasted for next quarter, will predominantly continue to come from subscription fees," as quoted by CNBC.
The platform's fourth-quarter content roster features the final "Strangers Things" season, new installments of "The Diplomat" and "Nobody Wants This," plus Guillermo del Toro's "Frankenstein" and Rian Johnson's "Wake Up Dead Man: A Knives out Mystery," CNBC noted. Meanwhile, "KPop Demon Hunters" has generated over 325 million views since its June release, becoming Netflix's most-watched film.
Netflix announced Tuesday it's expanding "KPop Demon Hunters" into consumer products through partnerships with Hasbro and Mattel, with dolls, plush toys and games arriving at retailers spring 2026, according to CNBC. The company also explores opportunities in live experiences, publishing, beauty, lifestyle, food and beverages connected to the film, with theatrical screenings returning during Halloween weekend.
