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The streaming service fell short of analyst expectations during its third quarter, blaming the underperformance largely to a major tax controversy in Brazil.

The earnings report broke Netflix's six-quarter streak of beating earnings forecasts, notwithstanding expansion in its ads business. Netflix did posted a net income, however it was lower than anticipated.

The Major Expense Behind the Miss

Highlighting an surprising charge of around $619 million linked to the tax issue in Brazil, the company credited its third-quarter earnings shortfall. At the same time, it praised its strong lineup of original shows for keeping the audience interested and contributing to sales that matched market expectations.

Possible Growth with a Major Studio

Netflix could have another opportunity to boost its offerings. This follows the media conglomerate announcing it is considering selling a portion or all of its assets, which include the HBO brand, DC Comics, and the news network. Analysts are already speculating that the company could be among the interested parties.

Shareholder Reaction and Share Movement

The market did not seem reassured by the reasoning, as the company's shares dropped by around 5% in after-hours trading following the report.

Specific Earnings Metrics

• Net Profit: Came in at $2.5 bn, or $5.87 per share, representing an 8% rise from the comparable quarter last year.
• Revenue: Increased 17% year-over-year to $11.5 bn.
• Projections: Had predicted earnings of $6.96 a share on revenue of $11.5 billion, per surveys.

Management Shift From Subscriber Numbers

Producing robust financial growth has become increasingly crucial for the company as executives have directed investors from fixating on quarterly user additions. In line with this, the streamer ceased disclosing its user base at the end of last year.

This move has paid off to date, with Netflix's stock increasing approximately 40% year-to-date. Yet, the latest downturn in after-hours activity indicated that a portion of those gains could be lost.

User Base Expansion Indicators

While Netflix does not reports exact subscriber numbers, the revenue growth in the latest period suggests that its global user base has increased from the roughly 302 million it reported at the end of last year.

This positions Netflix as the undisputed front-runner among streaming service sector, despite competitors like Amazon and Apple with more funding continue to broaden their content offerings.

Broadening Efforts

Netflix has held onto its dominance by incorporating more sports programming and video games to complement its broad selection of scripted programming. The diversification effort is planned to expand into podcast content from Spotify next year.