Netflix Inc. (NFLX) saw its stock fall 7% in premarket trading Wednesday following a third-quarter earnings miss, highlighting pressure on margins despite steady revenue growth.

The streaming giant reported adjusted earnings of $5.87 per share on $11.51 billion in revenue, falling short of analysts’ $6.96 EPS estimate. Revenue, however, came in exactly as expected. By comparison, Netflix posted $5.40 per share on $9.83 billion in revenue in the same quarter last year, showing that while growth continues, profit margins are being squeezed.

Brazilian Tax Dispute Impacts Profits

Netflix attributed the weaker-than-expected earnings to an ongoing tax dispute with Brazilian authorities. The company did not disclose the exact financial impact, but it was significant enough to drag down profits despite rising revenue.

Brazil has recently tightened regulations on how international tech firms report and pay taxes on local advertising revenue and streaming income. Netflix, like other global tech companies, has faced challenges navigating the new rules.

Revenue Drivers Remain Strong

Outside of Brazil, Netflix reported positive growth metrics:

• Revenue rose 17% year-over-year, aided by membership growth, price increases, and expansion of its ad-supported subscription tier.
• Although the company has stopped reporting subscriber counts, it recorded its highest-ever quarterly viewing share in the U.S. and U.K., up 15% and 22% respectively since late 2022.
• The ad-supported tier continues to outperform expectations, adding meaningful incremental revenue.

Outlook and Guidance

Looking ahead, Netflix forecasted fourth-quarter revenue growth of 17%, slightly above Wall Street’s 16% estimate, signaling that the company expects continued demand for streaming services during the holiday season.

Key Takeaways:

• EPS: $5.87 vs. $6.96 estimate — miss
• Revenue: $11.51B — in line with estimates
• Growth: 17% YoY revenue increase; margin pressure due to Brazilian tax dispute
• Subscriber trends: Highest-ever viewing share in U.S. & U.K.
• Stock impact: Pre-market drop of 7%

Despite the earnings miss, Netflix’s strong viewing metrics, ad-tier growth, and guidance indicate that streaming demand remains robust, though investors remain cautious about margin pressures and international regulatory challenges.