Netflix (NFLX) Stock Price Falls After Q3 Earnings Miss Amid Tax Dispute

Netflix (NASDAQ: NFLX) stock price took a slight hit this week after the streaming giant missed its third-quarter earnings expectations, largely due to an unexpected tax expense in Brazil. 

While the results rattled some investors, Netflix’s strong growth outlook and continued expansion into new markets suggest the company remains firmly in control of its long-term trajectory. Read this article to find out more!

Netflix Misses Q3 Earnings 

Netflix reported net income of $2.5 billion and earnings per share (EPS) of $5.87 for the July–September period, below Wall Street’s estimates of $3.0 billion and $6.97 EPS, respectively. 

The shortfall was mainly caused by a $619 million tax expense in Brazil, which reduced the company’s operating margin to 28%, compared to its prior guidance of 31.5%.

Despite this one-time hit, the company emphasized that the tax dispute is not expected to materially impact future results. Shares of Netflix dropped around 4% to $1,186.82 in after-hours trading following the announcement.

Interestingly, the quarter also saw Netflix’s animated film K-Pop Demon Hunters become the most-watched movie in the platform’s history, helping drive engagement even as competition in streaming intensifies.

Read Also: How to Buy Netflix Tokenized Stock Defichain (DNFLX)

Netflix (NFLX) Stock Price Today

As of the latest market close on October 21, Netflix (NFLX) stock price is trading at $1,241.35, marking a 0.23% increase for the day. 

However, in after-hours trading, the price dipped 6.48% to $1,160.94, reflecting cautious investor sentiment following the company’s Q3 earnings miss. 

The stock’s 52-week range sits between $744.34 and $1,341.15, while its market capitalization stands at approximately $527.48 billion with a P/E ratio of 52.90.

This performance underscores the market’s mixed reaction, optimism about Netflix’s long-term growth potential balanced by concerns over short-term earnings volatility and external tax-related costs.

Read Also: Minerva (NERV) Stock Price Soars After $200 Million Funding Deal

Netflix (NFLX) Stock Valuation and Cash flow Strength

Financially, Netflix remains solid. The company generated $2.66 billion in free cash flow, up from $2.19 billion in the previous quarter, showcasing strong operational efficiency.

On valuation, Netflix (NFLX) stock trades around 16–17 times EBITDA, slightly above industry peers like Disney+ and Amazon Prime Video. This premium reflects Netflix’s consistent revenue growth and superior margins.

However, analysts caution that the current share price leaves little room for error, meaning that sustained earnings performance will be essential to maintain investor confidence in the coming quarters.

Positive Signs for Netflix (NFLX) Stock Price in Q4

For the fourth quarter, Netflix projected revenue of $11.96 billion, slightly above Wall Street’s forecast of $11.90 billion, and an EPS of $5.45, just a penny higher than analysts expected.

Upcoming releases, including the final season of “Stranger Things” and two live NFL games on Christmas, are expected to fuel engagement and boost advertising revenue.

The company also reaffirmed its 16% year-over-year revenue growth target, underscoring confidence in its ability to balance profitability with expansion.

Netflix's Global Growth and Expansion Strategy

Netflix’s international performance continues to be a major growth driver. The company reported 21% revenue growth in Asia Pacific, reaching $1.37 billion, while Europe, the Middle East, and Africa (EMEA) grew 18% to $3.7 billion.

This strong international momentum reflects Netflix’s global subscriber diversification, with more than 300 million users worldwide. 

The company’s ad-supported subscription tier has been key to improving monetization per user, particularly in markets where traditional premium plans face price sensitivity.

Netflix has also been investing heavily in video games and advertising, though these segments still represent a small portion of overall revenue. By diversifying into these areas, the company aims to secure future growth beyond streaming alone.

Read Also: Glottis Share Price: Performance and Market Sentiment

Netflix Investments in AI, Ad Tech, and Production

Netflix increased its technology and development spending by 16%, reaching $854 million this quarter. These investments primarily focus on artificial intelligence tools, ad technology, and content recommendation systems, essential elements for maintaining its competitive advantage.

Capital expenditures rose 30% to $165 million, mainly allocated toward expanding production facilities and upgrading ad delivery infrastructure. 

The company also spent $4.65 billion on content, signing new licensing deals with Mattel and Hasbro, and expanding its partnership with Amazon’s Demand Side Platform (DSP) for enhanced programmatic ad reach.

These strategic investments position Netflix at the forefront of streaming innovation, ensuring stronger audience engagement while optimizing ad monetization.

Read Also: EchoStar (SATS) Stock Price Predictions 2025–2030 

Conclusion

While Netflix (NFLX) stock price faced short-term pressure after missing Q3 earnings estimates, the company’s fundamentals remain strong. 

The Brazilian tax dispute was a one-time setback, not a reflection of underlying weakness. With growing revenues, robust free cash flow, and strategic investments in AI and advertising, Netflix continues to solidify its dominance in the global streaming landscape.

As the company enters Q4 with blockbuster content and live sports on the horizon, investors can expect renewed momentum heading into 2025.

Explore expert insights, in-depth articles, and the latest crypto market trends on Bitrue blog. Whether you're a beginner or a seasoned trader, there's something valuable for everyone. Stay informed and ahead in your crypto journey. Register now on Bitrue and take the next step!

FAQ

Why did Netflix (NFLX) stock price drop after Q3 earnings?

Netflix shares fell around 4% after it missed profit estimates due to a one-time $619 million tax expense in Brazil.

How much revenue did Netflix generate in Q3?

Netflix reported $11.5 billion in revenue, up 17% year over year, matching Wall Street expectations.

What is Netflix’s forecast for Q4?

The company expects $11.96 billion in revenue and $5.45 in EPS, slightly above analyst estimates.

Where is Netflix seeing the most growth?

Asia Pacific and EMEA regions showed the strongest growth, with 21% and 18% year-over-year increases, respectively.

Is Netflix investing in AI?

Yes. Netflix increased its AI and ad tech investment by 16% this quarter to enhance content recommendations and improve advertising performance.