Netflix stock (NASDAQ:NFLX) slipped about 5% in the wake of its third-quarter earnings report, where the company posted revenue growth as expected but lower operating income and margins, an outcome that Netflix pinned on an unexpectedly ongoing dispute over Brazil taxes.
Revenues rose 17.2% to $11.51B, in line with expectations, and operating income rose to $3.25B from a year-ago $2.91B.
Operating margin, though, dipped to 28.2%, down from a year-ago 29.6% as well as Q2’s 34.1%. Net income rose to $2.55B from a year-ago $2.36B.
“We incurred an expense in Q3 ’25 of approximately $619 million related to an ongoing dispute with Brazilian tax authorities regarding certain non-income tax assessments. This expense was not included in our prior guidance forecast but was identified as a potential exposure in our prior 10-Q and 10-K filings,” the company said in its release.
That expense was booked as a cost of revenue and its cumulative impact cut operating margin by more than 5 percentage points, Netflix said, and it otherwise would have beaten its forecast.
Correspondingly, while net income grew (to $5.87 per share), it ended up below consensus of $6.97.
Net cash from operations landed at $2.83B, up from a year-ago $2.32B and above consensus gathered by Bloomberg for $2.56B. Free cash flow was $2.66B, up from a year-ago $2.19B and above consensus for $2.39B.
Engagement
The company noted its highest quarterly view share ever in the U.S. and UK, up 15% and 22% respectively since the end of the last fiscal year.
The company pointed to Q3 hits including Wednesday, Untamed, and The Hunting Wives among series, and Happy Gilmore 2 and The Thursday Murder Club among films.
Upcoming projects
The company noted an “exciting” slate for the fourth quarter, including the final season of its hit Stranger Things, an anticipated remake of Frankenstein directed by Guillermo del Toro and the latest Knives Out film.
Netflix also has more live events lined up for the quarter, including another Jake Paul boxing match and Christmas Day NFL games.
Guidance
The company also expects revenue growth of about 17% for the fourth quarter (16% on a currency-neutral basis) to $11.96B, and it sees operating income growing to $2.86B from a year-ago $2.27B, as well as seasonally adjusted ongoing growth in operating margin and EPS.
Netflix’s (NASDAQ:NFLX) usual live executive earnings interview will begin at 4:45 p.m. ET.