Netflix disappointed Wall Street with its quarterly report. What is expected from the company now?

Streaming giant Netflix's third quarter results fell short of Wall Street's expectations. The figures were spoiled by an ongoing dispute with tax authorities in Brazil, the company explained, but promised that future performance will not be affected. After the publication of the report, its shares fell in extended trading by almost 6.5%.

Revenue at Netlix, the world's most expensive entertainment company, rose 17% in the third quarter to $11.51 billion - in line with its own forecast, it said in a report, attributing the result to growth in the number of subscribers, price adjustments and expansion of advertising revenue. Analysts surveyed by FactSet were counting on just such a figure, Barron's reports . The streaming giant failed to meet Wall Street's earnings expectations, with adjusted earnings of $5.87 per share against a consensus forecast of $6.96.

In addition, Netflix said its operating margin came in below guidance - 28% versus an estimated 31.5% - due to costs related to an ongoing dispute with Brazilian tax authorities that were not factored into the company's outlook. It was forced to pay about $619 million and would have beaten its estimate without it, it said in a letter to shareholders. "We do not expect this matter to have a material impact on future results," Netflix said.

For the current quarter, the company hopes to increase revenue by another 17% year-on-year, slightly above Wall Street forecasts. It should be helped to attract and retain subscribers by upcoming premieres, including the movie "Frankenstein," Christmas broadcasts of NFL games and the final season of "Stranger Things," management said.

Investors have expressed concern that users aren't increasing the amount of time spent on the platform, Bloomberg notes . Netflix tried to allay those concerns by claiming high engagement: it achieved record quarterly viewing shares in the U.S. and U.K., where the figure is up 15% and 22%, respectively, since the fourth quarter of 2022. The company also reported peak ad sales and promised to double its year-end ad revenue.

The company's shares fell 6.4% in the postmarket after the release of its quarterly report.

"Netflix's results are definitely not what we wanted to see at the start of the corporate reporting season," Investing.com senior analyst Thomas Montero wrote . - While the tax dispute certainly had an impact, especially on margins, the truth is that the company failed to show the growth rate that investors have become accustomed to in recent years."

Concerns about competition in the streaming market and Netflix's growth potential have taken a toll on its quotes recently. They have lost about 10% relative to the record closing at the end of June, Barron's calculated . At the same time, since the beginning of the year, the company's capitalization remains in plus by about 40%.

The tax dispute overshadowed a quarter that many expected to see very successful thanks to a strong content program, including the company's most popular film, "Demon Huntress Cape," Barron's noted. The service also streamed a boxing match between Canelo Alvarez and Terence Crawford.

Some investors have expressed concern about Netflix's slowing growth after several years of strong growth in subscribers and revenue, the publication said. In recent years, the company has limited password sharing and introduced cheaper plans with ads, and earlier this year raised prices across all subscription options. It will now have to find new ways to retain current customers and attract new ones to demonstrate that growth can still accelerate, Barron's warns. He recalls the successful decision to shift its focus to new content - broadcasts of sports and other events, family games, video podcasts and other projects.

However, the streaming giant still has risks, according to the publication. First of all, there is stiff competition from such services as Paramount+, HBO Max, Disney+ and Peacock. According to Nielsen research, YouTube, owned by Alphabet, still ranks first in terms of total streaming time, ahead of Netflix.

"Netflix had its best quarter ever in terms of ad sales, yet the company never disclosed how much scale its ad business has achieved. It seems that the strong revenue growth achieved this quarter and expected next quarter will continue to be driven largely by subscription fees," EMarketer senior analyst Ross Benes told CNBC.

This article was AI-translated and verified by a human editor