Netflix experienced a significant downturn in its stock value, with shares falling by approximately 7% on Tuesday. This decline followed the company’s announcement that it missed its third-quarter earnings and revenue targets, a disappointment for investors.
The streaming giant attributed the miss primarily to an unexpected expense stemming from a tax dispute in Brazil. Netflix explained that a 10% tax on certain payments made by its Brazilian operations to overseas entities led to a one-time charge, impacting its operating margin. While the company assured that this issue would not affect future results and that, absent this expense, they would have surpassed their forecasts, the market reacted negatively.
Adding a layer to the narrative, some social media commentators have suggested that Tesla CEO Elon Musk’s vocal criticism of Netflix’s content might have also played a role. Musk had previously led a “cancel Netflix” movement, accusing the platform of promoting “woke” content. One X user pointed out the correlation, tweeting, “Musk says ‘Cancel $NFLX’, company misses earnings with all sorts of reasons. Hmmmmm….”
Despite these speculations, Netflix’s Chief Financial Officer, Spence Neumann, emphasized during the earnings call that the Brazilian tax issue was not unique to Netflix or the streaming industry. Nevertheless, the missed earnings and the ongoing public discourse surrounding Musk’s commentary have cast a shadow over Netflix’s stock performance.