Netflix shares sank on Tuesday after the streaming television powerhouse reported quarterly profit that fell short of market expectations.
Netflix recorded a profit of $2.5 billion on revenue of $11.5 billion in the recently ended quarter, saying it was hit with a $619 million expense due to an ongoing dispute with Brazilian tax authorities.
Netflix executives told financial analysts on an earnings call that absent the hefty cost in Brazil, it would have exceeded its operating margin forecast in the quarter.
“It’s not an income tax; it’s a cost of doing business in Brazil,” said Netflix chief financial officer Spencer Neumann.
“It’s not even specific to streaming, so we assume other companies will be impacted by this.”
A recent court ruling involving a different company doing business in Brazil boosted the likelihood of Netflix being hit with the expense, so it recorded it in the recently-ended quarter, according to Neumann.
Netflix shares were down more than six percent to slightly less than $1,163 in after-market trades that followed release of the earnings figures.
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