Netflix said it’s finishing the year with ‘good momentum’ as it gears up to release the final season of Stranger Things, one of its biggest hits.Jenny Kane/The Associated Press
Netflix NFLX-Q missed Wall Street third-quarter earnings targets because of an unexpected expense from a dispute with Brazilian tax authorities and it offered a forecast a touch ahead of Wall Street projections for the rest of the year.
Shares of Netflix fell four cent to US$1,186.82 in after-hours trading on Tuesday.
The streaming service posted net income of US$2.5-billion and diluted earnings per share of US$5.87 for July through September, a period during which the animated K-Pop Demon Hunters became the most-watched movie in Netflix history. Analysts had expected US$3.0-billion and US$6.97, according to LSEG.
Revenue was even with forecasts, at US$11.5-billion.
Netflix is searching for growth from new areas such as advertising and video games after attracting more than 300 million customers around the world. It faces competition from YouTube, Amazon’s Prime Video, Disney+ and others.
Netflix said its operating margin for the third quarter came in at 28 per cent. Without the Brazilian tax expense of roughly US$619-million, operating margin would have exceeded the company’s guidance of 31.5 per cent, the company said.
“We don’t expect this matter to have a material impact on future results,” Netflix said in its quarterly letter to shareholders.
For the fourth quarter, Netflix forecast revenue of US$11.96-billion, compared with Wall Street’s projection of US$11.90-billion. It projected diluted earnings per share a penny ahead of analysts’ targets, at US$5.45.
The company will release the final season of one of its biggest hits, Stranger Things, in November and December and will stream two live National Football League games on Christmas.
“We’re finishing the year with good momentum and have an exciting Q4 slate,” Netflix said in its letter.
Earlier this year, Netflix stopped reporting subscriber numbers and urged investors to focus on revenue and profit. It has expanded into video games and advertising, two areas that have contributed little to revenue so far, according to analysts and investors.