Why Netflix stock is down over 6% in pre market trading after Q3 results

Core Viewpoint - Netflix's stock declined over 6% in pre-market trading following the release of its Q3 results, which missed profit expectations due to an unexpected tax bill in Brazil, although the company provided a better outlook for Q4 [2][3][4]. Financial Performance - Netflix reported a Q3 net income of $2.5 billion, falling short of analysts' estimates of $3.0 billion, with diluted earnings per share at $5.87 compared to the expected $6.97 [4]. - Revenue for the quarter was $11.5 billion, aligning with forecasts, but was impacted by a $619 million tax charge from a dispute in Brazil [4][6]. - The operating margin, excluding the tax charge, would have exceeded the forecast of 31.5%, but the reported margin was 28% [5]. Future Outlook - For Q4, Netflix estimated revenue of $11.96 billion, slightly above Wall Street's projection of $11.90 billion, and forecasted diluted profits per share of $5.45, a cent above analysts' expectations [8]. - The company highlighted a strong year-end content lineup, including the final season of "Stranger Things" and live NFL games on Christmas Day, contributing to a positive outlook [9]. Advertising and Subscription Trends - Q3 was noted as Netflix's best-ever period for advertising sales, although subscription fees remain the primary growth driver [6][10]. - The company has shifted focus beyond subscriptions, recently ceasing to report subscriber numbers and emphasizing revenue and profit instead [11]. Competitive Landscape - Netflix faces increasing competition from platforms like YouTube, Amazon Prime Video, and Disney+, but executives view both video games and advertising as long-term growth opportunities [12]. - Co-CEO Ted Sarandos stated that Netflix remains selective in acquisitions, prioritizing intellectual property over traditional media networks, and does not see competitor consolidation as a significant threat [13][14].