Netflix shares drop 7% after weak quarterly earnings and Brazil tax charge

Netflix shares fell more than 7% in U.S. premarket trading on Wednesday after the streaming giant reported third-quarter earnings below Wall Street expectations, mainly due to a $619 million tax charge in Brazil related to a non-income tax dispute covering the period from 2022 through Q3 2025.

The company posted earnings per share of $5.87, missing the consensus estimate of $6.96, while revenue rose 17% year-on-year to $11.51 billion, roughly in line with forecasts. Netflix said it would have exceeded its margin target if not for the Brazilian tax impact.

The operating margin slipped to 28% from 30% a year earlier, prompting the company to cut its full-year margin guidance from 30% to 29%. For the current quarter, Netflix expects revenue of $11.96 billion and earnings of $5.45 per share.

Despite the one-off hit, Netflix highlighted record engagement levels, with viewing up 15% in the U.S. and 22% in the U.K., according to Nielsen and Barb data. Advertising revenue also delivered the best quarter in the company’s history.

Netflix no longer discloses subscriber numbers, shifting its focus to revenue growth and audience engagement.

Analysts at Bank of America said the absence of forward guidance for the next fiscal year reflects the company’s transition away from subscriber reporting, not any deterioration in fundamentals. They expect advertising revenue to more than double in 2025 as engagement and pricing power continue to rise.