Netflix's Profits Fell Short of 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 a 2.5 billion dollar profit on 11.5 billion dollars in revenue for the recently concluded quarter. However, a 619 million dollar cost stemming from an ongoing dispute with Brazilian tax authorities impacted these results.

Netflix executives noted during an earnings call that they exceeded quarterly operating margin forecasts without the high costs in Brazil. Chief Financial Officer Spencer Neumann stated, "This is not an income tax; this is a cost of doing business in Brazil." He also added, "We expect this situation to affect not only streaming services but other companies as well."

Share Value and Viewer Count

After the earnings figures were released, Netflix shares fell by over %6, dropping to 1,163 dollars. However, it was noted that the number of viewers in the UK and the US reached a three-year high. Netflix attracted attention with its most popular film, "K-Pop Demon Hunters."

The company is confident in maintaining its momentum in the current quarter. They highlighted impressive releases like the final season of "Stranger Things" and "The Diplomat." Additionally, they plan to enhance live events like professional American football and boxing, along with a new film titled "Knives Out Mystery."

Competition and Advertising Revenues

Netflix experienced its best sales quarter yet for its ad-supported subscription tier. Greg Peters stated that the company's annual advertising revenue has doubled, although this figure is evaluated based on a small subscriber base. eMarketer senior analyst Ross Benes remarked, "Netflix's advertising sales had a strong quarter. However, no figures were provided regarding the size of the advertising business." This gives the impression that sustainable revenue growth in quarters will mostly come from subscription fees.

Future Acquisitions and Growth Strategy

Netflix has been subject to speculation regarding its interest in acquiring global entertainment company Warner Brothers Discovery. Analyst Benes expressed, "If this potential acquisition aligns well with Netflix, WBD's planned spin-off could make its studio more attractive."

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