Company says that, if it were not for tax expenses of US$619 million, it would have exceeded its operating margin in the 3rd quarter of 2025
a North American streaming company, stated in a publication on Tuesday (21.Oct.2025) that the operating profit margin in the 3rd quarter was below projections due to a tax dispute in Brazil.
“Q3 revenue grew 17%, in line with our forecast. Operating margin of 28% was below our guidance of 31.5% due to an expense related to an ongoing dispute with Brazilian tax authorities, which was not in our forecast”the company wrote in the statement. Here is the document (PDF – 434 kB).
According to Netflix, if it were not for the tax expense of US$619 million, the company would have exceeded the operating margin forecast for the 3rd quarter of 2025. The company reported that the dispute refers to “certain non-income tax assessments”. The company said not to wait “that this issue has a relevant impact on future results”.
Netflix’s net profit in the 3rd quarter of this year was US$2.5 billion, an increase of 7.7% compared to the same period last year.
In the statement, Netflix stated, without giving details, that the payment to Brazilian authorities covers periods from 2022 to the 3rd quarter of 2025, and was recorded as a cost of revenue.
“The cumulative impact of this expense (approximately 20% related to the year 2025 and the remainder related to 2022-2024) reduced our Q3 operating margin by more than 5 percentage points. In the absence of this expense, we would have exceeded our operating margin forecast for Q3 2025”he stated.
The company reported that diluted earnings per share were US$5.87, US$1 below the forecast for the period.
In the statement, Netflix said that, by the year 2025, it expects “revenue of $45.1 billion (16% or 17% growth on a currency neutral basis), in line with our previous expectations of revenue growth of 15% to 16% (16% to 17% on a currency neutral basis)”.
As for the operating margin, the projection is now “29% for 2025 (both in reported terms and based on January 1, 2025 exchange rates), compared to our previous expectations of a reported operating margin of 30% (29.5% based on January 1, 2025 exchange rates), due to the impact of the tax issue in Brazil”.
