Netflix shares drop as Brazilian tax dispute hits earnings

Core Insights - Netflix missed Wall Street's third-quarter earnings targets due to an unexpected expense from a Brazilian tax dispute, leading to a 5.6% drop in shares after the earnings release [1][5][6] - Despite the earnings miss, Netflix provided a forecast slightly ahead of Wall Street projections for the remainder of the year [1] Financial Performance - Netflix reported a net income of $2.5 billion and diluted earnings-per-share of $5.87 for the third quarter, falling short of analyst expectations of $3.0 billion and $6.97 respectively [5] - Revenue matched forecasts at $11.5 billion, while the operating margin was reported at 28%, which would have exceeded guidance of 31.5% without the Brazilian tax expense of approximately $619 million [5][6] Strategic Initiatives - Netflix is looking to expand into new areas such as advertising and video games, having attracted over 300 million customers globally [2] - The company is facing competition from platforms like YouTube, Amazon Prime Video, and Disney+, amidst significant industry changes including potential media consolidation [2] Management Commentary - Co-CEO Ted Sarandos stated that Netflix will be selective about acquisition targets and has no interest in owning legacy media networks, focusing instead on intellectual property [3] - Co-CEO Greg Peters expressed that media industry consolidation would not necessarily alter the competitive landscape for Netflix [4]