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The streaming service missed market forecasts in its third quarter, blaming the disappointment primarily to a major tax controversy in Brazil.

The earnings report halted Netflix's six-period streak of exceeding earnings forecasts, despite expansion in its ad-supported business. Netflix did reported a profit, though it was less than anticipated.

The $619 Million Charge Behind the Shortfall

Pointing to an unforeseen charge of around $619 million linked to the Brazilian tax dispute, Netflix attributed its Q3 earnings shortfall. Meanwhile, it celebrated its strong lineup of original shows for maintaining the audience loyal and contributing to sales that were in line with analyst forecasts.

Future Expansion with a Major Studio

Netflix could have an additional chance to enhance its programming. This is due to Warner Bros. Discovery revealing it is considering selling some or all of its assets, including HBO, DC Studios, and CNN. Analysts are already suggesting that Netflix may join the interested parties.

Market Response and Stock Movement

Investors did not seem placated by the explanation, as Netflix's stock declined by around 5% in after-hours trading sessions after the announcement.

Specific Financial Figures

• Earnings: Reported $2.5 bn, or $5.87 per share, marking an 8% growth from the comparable quarter last year.
• Total Sales: Climbed 17% from the previous year to $11.5 billion.
• Market Forecasts: Expected earnings of $6.96 a share on sales of $11.5 bn, per FactSet Research.

Management Focus Away From Subscriber Numbers

Achieving robust profit growth has become increasingly vital for the company as management have guided investors from focusing solely on quarterly user additions. In line with this, Netflix ceased revealing its subscriber numbers at the end of last year.

This change has paid off so far, with its share price rising around 40% this year. However, the recent downturn in extended trading indicated that some of this progress might fade.

Subscriber Growth Indicators

Although Netflix no longer reveals exact user counts, the 17% rise in the latest period indicates that its worldwide subscriber base has grown from the approximately 302 million it reported at the end of last year.

This keeps the platform as the undisputed leader in the streaming service market, even as competitors like Amazon Prime and Apple TV+ having more funding keep broaden their programming selections.

Broadening Efforts

Netflix has held onto its lead by adding more sports programming and video games to supplement its broad selection of original series and films. This diversification effort is set to include podcast content from the audio platform next year.