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 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 stemming from an ongoing dispute with Brazilian tax authorities impacted these results.

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

Stock Value and Viewership Numbers

Netflix shares dropped by over 6% to around $1,163 following the release of the earnings figures. Conversely, the company's viewer count in Britain and the U.S. reached its highest level in three years. Netflix attracted attention with its most popular film, "K-Pop Demon Hunters."

The company is confident 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 to increase live events like professional American football and boxing were mentioned, along with a new film titled "Knives Out Mystery."

Competition and Advertising Revenues

Netflix experienced its best sales quarter so far with its ad-supported membership tier. Greg Peters noted that the company's annual advertising revenue has doubled, though this figure is assessed based on a small subscriber base. eMarketer senior analyst Ross Benes stated, "Netflix's ad sales had an excellent quarter. However, no figure was provided regarding how large the advertising business is." This leaves the impression that sustainable revenue growth in future quarters will mainly come from subscription fees.

Future Acquisitions and Growth Strategy

Netflix has been subject to rumors about a potential acquisition of entertainment company Warner Brothers Discovery. Analyst Benes stated, "If this potential acquisition aligns well with Netflix, WBD's planned studio spin-off might make it more attractive."

Ted Sarandos emphasized, "At Netflix, we are focused on organic growth and are selective in 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.