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The streaming service fell short of Wall Street projections in its third quarter, blaming the disappointment primarily to a major tax issue in Brazil.

The earnings report halted Netflix's six-period run of exceeding profit expectations, despite expansion in its advertising business. Netflix still posted a profit, though one that was below projected.

The Significant Expense Explaining the Shortfall

Citing an unforeseen cost of about $619 million linked to the controversy with Brazil, Netflix credited its third-quarter profit miss. Meanwhile, it praised its distinctive lineup of TV series for maintaining subscribers loyal and helping revenue that met projections.

Potential Growth with Warner Bros.

Netflix might have a future prospect to enhance its content library. This comes after the media conglomerate revealing it is considering selling a portion or all of its properties, such as HBO, DC Studios, and the news network. Financial observers are now suggesting that Netflix might enter the interested parties.

Shareholder Response and Share Movement

Shareholders did not seem reassured by the justification, as the company's shares declined by approximately 5% in after-hours trading sessions following the announcement.

Key Earnings Metrics

• Earnings: Reported $2.5 bn, equating to $5.87 per share, marking an 8% rise from the same period last year.
• Revenue: Increased 17% year-over-year to $11.5 bn.
• Market Forecasts: Had predicted earnings of $6.96 a share on revenue of $11.5 bn, according to FactSet Research.

Strategic Shift Away From Subscriber Numbers

Delivering solid financial growth has become increasingly crucial for the company as executives have directed the market from fixating on subscriber gains. As part of this, Netflix stopped revealing its user base at the end of last year.

This change has yielded results to date, with its share price rising about 40% year-to-date. However, the latest decline in extended trading suggested that some of the increase may evaporate.

Subscriber Growth Signs

Even though Netflix does not discloses specific user counts, the 17% rise this year suggests that its global audience has grown from the about 302 million it had at the end of last year.

This keeps Netflix as the undisputed leader in the video streaming industry, even as rivals like Amazon Prime and Apple having deeper pockets continue to expand their libraries.

Diversification Efforts

The company has held onto its top position by adding more live sports and video games to enhance its broad selection of TV shows and movies. The diversification effort is set to include video podcasts from Spotify in the coming year.