Netflix’s third-quarter report stunned investors this week. The company announced earnings of $5.87 per share for July through September—well below analysts’ expectations of $6.96 per share. The shock wasn’t from slowing growth, but from a massive $619 million tax expense tied to Brazil’s Contribution for Intervention in the Economic Domain (CIDE) tax.
The CIDE tax slaps a 10% levy on payments Brazilian companies make to foreign entities. Netflix’s Brazilian branch pays Netflix U.S. for its operational services, and the company thought it had escaped this burden back in 2022 when a lower court ruled in its favor.
That win didn’t last long. In August, Brazil’s Supreme Court reversed the earlier decision and expanded the tax’s scope, leaving Netflix on the hook for years of unpaid fees. CFO Spencer Neumann admitted that about 20% of the $619 million charge applies to 2025, while the rest covers prior years.
The financial hit was brutal. Netflix’s operating margin tumbled to 28%, falling short of its own guidance of 31.5%. Investors wasted no time responding—the stock plunged nearly 6% in after-hours trading once the earnings were revealed.
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