Netflix's Revenue Fell Short of Expectations

Netflix's Third Quarter Results

Netflix Inc. reported its third quarter earnings on Tuesday, falling short of <%strong>Wall Street% expectations. The company recorded an expense related to a tax dispute in Brazil, but stated that this would not have a significant impact on future results. Following the announcement, shares dropped by 5.8% in after-hours trading.

For the third quarter, earnings per share came in at $5.87, below the $6.96 expected by analysts. However, the company's revenue rose by 17% compared to the same period last year, reaching $11.51 billion, in line with expectations.

The company's operating margin fell from 30% last year to 28% in this quarter. This decline was attributed to a $619 million expense recorded related to tax assessments in Brazil.

Future Expectations

Netflix stated that it would have exceeded its target margin without this obligation and reinforced its outlook that this dispute would not affect future performance. The company forecasts fourth-quarter revenue of $11.96 billion, which is consistent with analyst estimates. It also anticipates earnings per share of $5.45.

The anticipated increase in revenue for the upcoming period is attributed to declining subscription numbers, price increases, and advertising revenues. Advertising sales demonstrated the best quarterly performance to date. Netflix no longer discloses subscriber numbers in its earnings reports. Engagement rates in the United States and United Kingdom grew by 15% and 22%, respectively, compared to the end of 2022.

The company predicts an operating margin of 23.9% for the fourth quarter, expecting a two-point increase compared to the previous year. Additionally, it maintains an expectation of approximately 16% annual revenue growth and a forecast for a 29% operating margin.