So Netflix just pulled a classic “hold my beer” moment and missed earnings by a country mile. The stock took a 10% nosedive faster than you can say “Are you still watching?” But before you panic-sell your NFLX shares, let’s break down what actually happened here.
Netflix reported earnings per share of $5.87 when Wall Street was expecting somewhere between $6.94 and $6.97. That’s not just a miss – that’s like showing up to a potluck with gas station sushi when everyone expected homemade lasagna.
But here’s the plot twist: this wasn’t because Netflix suddenly forgot how to make money. The culprit? A surprise $619 million tax bill from Brazil that came out of nowhere like a plot twist in a bad thriller. Netflix basically got hit with the equivalent of a financial jump scare.
The company was quick to point out that without this Brazilian tax bombshell, they would have actually beaten their operating margin forecasts. It’s like saying “I would have won the race if I hadn’t tripped over that random banana peel.” Except in this case, the banana peel was very real and very expensive.
Now, Wall Street usually shrugs off one-time expenses like this, but $619 million is hard to ignore – that’s not couch cushion money. Still, Netflix insists this won’t materially impact future results, which is corporate speak for “this was a fluke, we promise.”
Here’s why the smart money might be backing up the truck right now: Netflix’s fundamentals are still rock solid. Revenue grew 17% year-over-year and met expectations. The password-sharing crackdown is working like a charm, and their ad revenue is growing faster than a teenager’s appetite.
The numbers tell a compelling story: analysts are projecting 29.3% earnings growth in 2025 and 25.9% in 2026. Sales are expected to grow 15.56% this year and 12.9% next year. Sure, the stock trades at over 48 times forward earnings, which sounds expensive until you remember this is Netflix we’re talking about – they’ve been defying gravity longer than most superhero movies.
The company’s margins are expanding faster than their content library, and that’s saying something. Between cracking down on password sharing (sorry, college roommates) and growing ad revenue, Netflix is getting leaner and meaner.
If the company keeps beating estimates – minus random tax surprises from South America – some analysts think NFLX could hit $1,700 or higher by 2028. That’s assuming Wall Street maintains its love affair with the streaming giant, which seems likely given their track record of turning binge-watching into a profitable art form.
The bottom line? This earnings miss was more about Brazilian bureaucracy than business fundamentals. Netflix is still the king of streaming, still growing like crazy, and still turning couch potatoes into profit margins. Sometimes the best buying opportunities come disguised as bad news.
So while everyone else is freaking out about one quarter’s tax surprise, maybe it’s time to think like Warren Buffett: be greedy when others are fearful. Just maybe don’t tell your financial advisor you’re taking investment advice from a streaming service’s tax troubles.