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The streaming service missed market forecasts in its third quarter, blaming the disappointment mainly to a sizable tax dispute in Brazil.

The earnings report broke Netflix's six-quarter string of beating profit expectations, notwithstanding increases in its advertising business. The company did posted a net income, though one that was lower than expected.

The $619 Million Expense Explaining the Shortfall

Highlighting an surprising cost of approximately $619 million linked to the Brazilian tax dispute, Netflix credited its Q3 below-target results. At the same time, it praised its strong catalog of original shows for holding subscribers interested and enabling revenue that matched market expectations.

Future Opportunities with a Major Studio

Netflix may have a future opportunity to boost its offerings. This is due to the media conglomerate announcing it may sell a portion or all of its properties, such as HBO, DC Comics, and CNN. Market experts are already suggesting that Netflix may join the bidders.

Market Reaction and Stock Performance

Shareholders did not seem placated by the reasoning, as Netflix's stock fell by approximately 5% in after-hours trading after the announcement.

Specific Earnings Results

• Income: Reported $2.5 billion, equating to $5.87 per share earnings, representing an 8% growth from the same period last year.
• Revenue: Rose 17% year-over-year to $11.5 billion.
• Projections: Expected earnings of $6.96 per share on revenue of $11.5 bn, according to FactSet Research.

Management Focus Away From Subscriber Numbers

Delivering robust profit growth has become more crucial for Netflix as management have guided investors away from fixating on quarterly user additions. As part of this, Netflix stopped disclosing its subscriber numbers at the close of the previous year.

This shift has paid off to date, with its share price rising approximately 40% year-to-date. Yet, the recent decline in extended trading signaled that some of the increase might fade.

User Base Expansion Indicators

Even though Netflix does not reveals specific membership figures, the revenue growth this year suggests that its global audience has expanded from the roughly 302 million subscribers it had at the close of the prior year.

This positions Netflix as the undisputed front-runner among streaming service market, despite rivals like Amazon and Apple having greater resources continue to broaden their programming selections.

Diversification Efforts

Netflix has maintained its dominance by adding more sports programming and gaming content to supplement its wide array of TV shows and movies. The expansion strategy is scheduled to venture into video podcasts from the audio platform in the coming year.