Netflix's profits fell below 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 $2.5 billion in profit for the last quarter. However, a $619 million cost related to an ongoing dispute with Brazilian tax authorities affected these results.

Netflix executives stated during an earnings call that they exceeded their quarterly operating margin estimates without the high costs in Brazil. Chief Financial Officer 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 unique to streaming services; we expect other companies to be affected as well."

Stock Value and Viewer Numbers

Netflix shares fell over %6 to around $1,163 following the earnings announcement. Conversely, the company noted that its viewer numbers in Britain and the US reached their highest level in three years. Netflix drew attention with its most popular film, "K-Pop Demon Hunters."

The company is confident in maintaining its momentum this quarter. It highlighted notable productions such as the final season of "Stranger Things" and "The Diplomat." Additionally, it plans to boost live events like professional American football and boxing, along with a new movie titled "Knives Out Mystery."

Competition and Advertising Revenues

Netflix experienced its best sales quarter yet for its ad-supported membership tier. Greg Peters noted that the company's annual advertising revenue has doubled, although this figure is evaluated against a small member base. Emarketer's Senior Analyst Ross Benes stated, "Netflix had its best ad sales quarter. However, there was no figure provided regarding how large the advertising business is," indicating that the majority of sustainable revenue growth in quarters is likely to come from subscription fees.

Future Acquisitions and Growth Strategy

Netflix has been subject to rumors regarding its desire to acquire the global entertainment company Warner Brothers Discovery. Analyst Benes expressed, "If this potential acquisition would align well with Netflix, WBD's planned spin-off of its studio could make it more attractive."

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