Netflix blames tax dispute in Brazil for rare quarterly earnings letdown
[October 22, 2025] By
MICHAEL LIEDTKE
Netflix missed the earnings target set by stock market analysts during
the video streamer’s latest quarter, a letdown that the company blamed
on a tax dispute in Brazil.
The results announced Tuesday broke Netflix's six-quarter streak of
posting a profit that eclipsed analysts' projections.
The Los Gatos, California, cited an unexpected $619 million expense tied
to the Brazilian tax dispute for the earnings shortfall while hailing
its lineup of distinctive TV series and films for keeping its audience
engaged and delivering a mix of subscriber fees and increased ad sales
that helped it deliver revenue that matched analyst forecasts.
Investors, though, weren't placated by the explanation as Netflix's
shares still fell by about 6% in extended trading after the numbers came
out.
Analysts varied in their interpretation of the third-quarter report.
Investing.com analyst Thomas Monteiro worries Netflix is using the
Brazilian tax hit as a way to mask signs of a slowdown in subscriber
growth and advertising amid economy uncertainty. “The truth is that the
company failed to deliver the kind of growth we’ve grown used to over
the past couple of years,” he said.
But Zacks analyst Jeremy Mullin said he sees little reason for concern,
asserting Netflix's “underlying story remains solid.”
Netflix earned $2.5 billion, or $5.87 per share, in its July-September
quarter, an 8% increase from the same time last year. Revenue climbed
17% from last year to $11.5 billion. Analysts surveyed by FactSet
Research had predicted the Los Gatos, California, company to earn $6.96
per share on revenue of $11.5 billion.
Delivering solid financial growth has become more important than ever
for Netflix as management has steered investors from fixating on how
many subscribers its service gains from one quarter to the next. As part
of that process, Netflix stopped disclosing its subscribers at the end
of last year.
The shift has paid off so far, with Netflix’s stock price rising about
40% so far this year, although the downturn in extended trading signaled
some of those gains are about to evaporate.
Although Netflix no longer reveals the specific, this year’s revenue
growth signals that its worldwide subscriber count has increased from
the roughly 302 million it had at the end of last year – by far the most
among video streamers, even as rivals with deeper pockets such as Amazon
and Apple expand their programming selections.
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This Aug. 13, 2020 photo shows a logo for Netflix on a remote
control in Portland, Ore. (AP Photo/Jenny Kane, File)
 In the company's quarterly
conference call, Netflix co-CEO Ted Sarandos said the streaming
service's total worldwide audience — including multiple people
living in the same subscriber household — is approaching 1 billion.
“We have a better understanding of the streaming business than any
of our competitors,” Greg Peters, Netflix's other co-CEO, boasted
during the call.
Netflix has maintained its lead by adding more live sports and video
games to supplement its wide array of scripted programming – a
diversification effort that will expand into video podcasts from
Spotify next year.
And now Netflix may have another opportunity to add even more
compelling programming with Warner Bros. Discovery announcing it may
sell all or part of its holdings, which include HBO, DC Studios and
CNN. Analysts are already speculating that Netflix may join the
bidders looking to grab a piece of Warner Bros. Discovery.
In response to a question about Netflix's acquisition strategy,
Sarandos noted that the company traditionally has been “more
builders than buyers” without ruling out a potential bid for some of
Warner Bros. Discovery's properties other than cable TV networks
like CNN and TBS. “We can be and will be choosey,” Sarandos said.
The company has also mining a new vein of revenue by selling
commercials as part of a low-priced option of its service it
introduced three years ago.
Although the advertising business still isn’t large enough to
require the company to disclose its sales, management expects its
revenue to more than double from last year. A recent analyst by S &
P forecast $1.1 billion in ad sales for Netflix this year — a figure
that would represent about 2% of its projected total revenue.
It’s getting to the point that Netflix may be in danger of trying to
juggle too many ball at once, said Forrester Research analyst Mike
Proulx. “If the company goes too broad to become all things
entertainment, it risks diluting its core.”
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