Netflix's Profits Fell Below Expectations

Netflix's Quarterly Results and Market Reaction

Netflix shares experienced a sharp decline on Tuesday after its quarterly profit fell short of market expectations. The company reported $11.5 billion in revenue and $2.5 billion in profit for the recently concluded quarter. However, a $619 million cost stemming from an ongoing dispute with Brazilian tax authorities affected these results.

Netflix executives noted during an earnings call that they exceeded their operating margin forecasts for the quarter, excluding the high costs in Brazil. Finance Chief Spencer Neumann stated, "This is not an income tax; it is a cost of doing business in Brazil." He added, "This issue is not unique to streaming services; we expect other companies to be affected as well."

Share Value and Viewer Count

Following the release of the earnings figures, Netflix shares fell by over 6%, dropping to around $1,163. On the other hand, the company reported that its viewer count in the UK and the US reached a three-year high. Netflix drew attention with its popular film "K-Pop Demon Hunters."

The company is confident in maintaining its momentum in the current quarter, highlighting noteworthy productions such as the final season of "Stranger Things" and "The Diplomat." They are also planning to enhance live events like professional American football and boxing, alongside the new film "Knives Out Mystery."

Competition and Advertising Revenues

Netflix had its best sales quarter to date for its ad-supported membership tier. Greg Peters noted that the company's annual advertising revenue had doubled, but this figure was assessed against a small member base. Emarketer senior analyst Ross Benes stated, "Netflix's advertising sales had a strong quarter. However, no figures were provided regarding the scale of the advertising business." This gives the impression that sustainable revenue growth in upcoming quarters will largely come 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 expressed, "If this potential acquisition aligns well with Netflix, the planned split of WBD's studio could make it more attractive."

Ted Sarandos stated, "We are focused on organic growth as Netflix, and we are selective in acquisitions." Peters added, "It is our responsibility to assess each significant opportunity." Warner Brothers Discovery announced that it is reviewing its options due to unwanted interest from various parties.