Netflix's Profits Fell Short of Expectations

Netflix's Quarterly Results and Market Reaction

Netflix shares experienced a sharp decline on Tuesday after the company's quarterly profit fell below market expectations. The company reported $11.5 billion in revenue with a $2.5 billion profit for the recently closed quarter. However, a $619 million cost arising from an ongoing dispute with Brazilian tax authorities impacted these results.

Netflix executives stated during an earnings call that they exceeded their operating margin estimates for the quarter without the high costs in Brazil. CFO Spencer Neumann said, "This is not an income tax; it's a cost of doing business in Brazil." He also added, "This situation is not just unique to streaming services, and we expect other companies to be affected as well."

Share Value and Viewer Numbers

After the earnings figures were released, Netflix shares fell by more than %6, dropping to around $1,163. However, the company noted that its viewer numbers in the UK and the US reached the highest level in three years. Netflix attracted attention with its most popular film, "K-Pop Demon Hunters."

The company is confident that it will maintain its momentum in the current quarter, highlighting notable productions such as the final season of "Stranger Things" and "The Diplomat." Additionally, plans are in place to increase live events like professional American football and boxing, along with a new film titled "Knives Out Mystery."

Competition and Advertising Revenues

Netflix had its best sales quarter yet for its ad-supported membership tier. Greg Peters noted that the company's annual advertising revenue has doubled, but this figure is assessed based on a small member base. Emarketer senior analyst Ross Benes stated, "Netflix’s advertising sales had the best quarter ever. However, no figure was provided for how big the advertising business is." This suggests that sustainable revenue growth in the quarters will mostly come from subscription fees.

Future Acquisitions and Growth Strategy

Netflix has been the subject of rumors regarding its desire to acquire entertainment company Warner Brothers Discovery. Analyst Benes mentioned, "If this potential acquisition aligns best with Netflix, WBD's planned split might make the studio more attractive."

Ted Sarandos said, "As Netflix, we focus on organic growth and are selective in acquisitions." Peters added, "It is our responsibility to evaluate every significant opportunity." Warner Brothers Discovery announced that it is reviewing its options due to unwanted interest from various parties.