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The streaming service fell short of analyst expectations in its third quarter, attributing the shortfall primarily to a sizable tax dispute in Brazil.

The earnings report halted Netflix's six-period run of surpassing analyst projections, despite growth in its ads segment. Netflix still recorded a net income, though it was lower than projected.

The Major Expense Behind the Disappointment

Highlighting an unexpected charge of around $619 million associated with the controversy with Brazil, Netflix linked its third-quarter earnings shortfall. Meanwhile, it hailed its diverse catalog of films for holding viewers interested and contributing to revenue that met projections.

Possible Opportunities with a Major Studio

Netflix could have an additional prospect to boost its content library. This is due to the media conglomerate stating it may sell some or all of its properties, including the HBO brand, DC Studios, and the news network. Market experts are already speculating that the company might enter the bidders.

Shareholder Reaction and Share Movement

Shareholders were not reassured by the explanation, as Netflix's stock fell by approximately 5% in extended trading after the report.

Detailed Earnings Figures

• Net Profit: Reported $2.5 bn, or $5.87 per share earnings, marking an 8% rise from the same period a year ago.
• Revenue: Increased 17% from the previous year to $11.5 billion.
• Projections: Expected earnings of $6.96 per share on sales of $11.5 bn, per FactSet Research.

Management Shift Away From User Counts

Delivering strong profit growth has become increasingly crucial for Netflix as leaders have steered the market from focusing solely on subscriber gains. Accordingly, the streamer stopped reporting its subscriber numbers at the end of last year.

This move has paid off thus far, with Netflix's stock gaining about 40% this year. However, the latest downturn in extended trading signaled that a portion of this progress may evaporate.

Subscriber Growth Indicators

While the service does not discloses exact user counts, the revenue growth this year suggests that its worldwide subscriber base has expanded from the approximately 302 million it had at the end of last year.

This positions Netflix as the undisputed leader in the video streaming sector, despite rivals like Amazon Prime and Apple having greater resources continue to expand their programming selections.

Diversification Initiatives

The company has held onto its lead by incorporating more sports programming and video games to enhance its extensive range of TV shows and movies. The diversification effort is planned to include video podcasts from the audio platform in the coming year.