Netflix's profits fell below expectations.

Netflix's Quarterly Results and Market Reaction

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

Netflix executives noted during an earnings call that they exceeded their operating margin forecasts for the quarter without the high costs in Brazil. Chief Financial Officer Spencer Neumann stated, "This is not an income tax; it's the 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."

Share Value and Viewer Count

Following the earnings announcement, Netflix shares fell by over 6%, dropping to around 1,163 dollars. In contrast, the company noted that its viewer count in the UK and the US reached a three-year high. Netflix drew attention with its most popular film "K-Pop Demon Hunters."

The company is confident it will maintain this momentum in the current quarter. They highlighted notable productions such as the final season of "Stranger Things" and "The Diplomat." Additionally, they plan to increase live events such as professional American football and boxing, along with a new film titled "Knives Out Mystery."

Competition and Advertising Revenues

Netflix experienced its best sales quarter ever at the ad-supported membership tier. Greg Peters pointed out that the company's annual advertising revenue has doubled, although this figure is based on a small member base. Emarketer senior analyst Ross Benes commented, "Netflix had a stellar quarter in ad sales. However, no figure was provided on how large the advertising business is," indicating that sustainable revenue growth in upcoming quarters is likely to come mainly from subscription fees.

Future Acquisitions and Growth Strategy

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

Ted Sarandos remarked, "We are focused on growing organically and being selective about acquisitions." Peters added, "It is our responsibility to evaluate each significant opportunity." Warner Brothers Discovery announced that it is reviewing its options due to unwanted interest from various parties.