Netflix Shares Get Eviscerated (-8%) After Brazil Rips a YUGE Tax Strip Clean Off Its Bottom Line

Netflix’s quarterly report just came out, and let’s just say investors were not chill about it.

Shares dropped more than 8% after the streamer missed earnings… all thanks to what CFO Spence Neumann politely called a “tax matter.” Translation: Brazil just hit them with a surprise 10% levy on payments sent to their overseas ops, and that’s all it took for $40 billion in market cap to say “peace out.”

And no, it’s not some new “Netflix-only” law. Brazil basically looked at every foreign company doing business there and said, “You guys seem to be doing too well… time to pay up.”

Without the tax charge, Netflix says it would’ve beaten forecasts… but they decided to eat it this quarter, so their profit line got kicked in the teeth. Operating margin dropped from a projected 31.5% to 28%. Think of it as their “Brazilian trim.”

Still, it wasn’t all bad news. Revenue jumped 17% year-over-year to $11.51 billion (exactly what Dan Ives and all his analyst buddies expected) powered by subscriber growth, higher prices, and the company’s best ad-sales quarter ever. I guess nobody wants to spend $15.49 to rewatch Gilmore Girls for the 14th time (it’s pumpkin spice season, after all)... but throw in a few ads and everyone suddenly becomes a budget hero.

Co-CEO Greg Peters said ad revenue is on track to more than double this year. But, in true Netflix fashion, they refused to give an actual number… probably because it’s still small enough to fit on a Post-it note.

(Source: The Guardian)

And while the accountants were fighting in Brazil, the content team was busy printing hits. “KPop Demon Hunters” (the song you hear on every other Instagram reel) just became Netflix’s most-watched film ever with 325 million views. The streamer’s now milking it for all it’s worth with Mattel and Hasbro toys, plushies, and (wait for it) a Halloween theatrical rerelease.

Next up: the final season of Stranger Things, The Diplomat S2, and Guillermo del Toro’s Frankenstein. Clearly, they’re hoping nostalgia and dead monsters can distract everyone from the tax bill.

For Q4, Netflix expects another 17% revenue bump and EPS of $5.45, slightly above estimates. For the year, they’re targeting $45.1 billion in revenue (a 16% climb) and a 29% margin.

So yeah… they got waxed in Brazil, but if ad sales keep climbing and Stranger Things hits like expected, this quarter might just grow back smoother.

At the time of publishing this article, Stocks.News holds positions in Netflix as mentioned in the article.