The "Brazil Cost" factor entered Netflix's financial statements—and sent the stock down 6% in New York! 🚨

The company disappointed Wall Street with lower-than-expected earnings.

The main reason was a tax dispute in Brazil.

Netflix reported third-quarter profit of $2.5 billion, or $5.87 per share.

Wall Street expected $3 billion, or $6.97 per share.

The difference came from a $619 million expense for a Brazilian tax.

And it's called CIDE — Contribution for Intervention in the Economic Domain.

It's a 10% gross tax on payments made to companies abroad.

In this case, Netflix Brazil makes payments to its US headquarters for services that enable local operations.

In 2022, Netflix had secured a favorable ruling and was exempt from this tax.

But in August 2025, the Supreme Court changed its mind: it ruled that the tax also applies to services that do not involve technology transfer.

Given the new jurisprudence, the company reclassified the dispute as a "probable loss" and recorded the expense in the third quarter.

The impact dropped the operating margin to 28%. Without Cide, it would have exceeded 31.5%.

The problem isn't exclusive to Netflix.

Other companies with international contracts are likely to suffer the same blow. In other words, Brazil has created yet another accounting hurdle for those trying to operate globally.

And this affects investment and pricing decisions for streaming products here.

Despite the hit to profit, revenue came in as expected: $11.5 billion.

And the guidance was encouraging:

• Q4 revenue: $11.96 billion (above consensus) • Earnings per share: $5.45

• Final season of Stranger Things • 2 NFL games live on Christmas

According to Netflix, the 4th quarter started with "good momentum."

This episode sums up the business environment in Brazil well:

• Tax Complexity • Retroactive Changes • Unpredictable Impact Even on Multinationals

This time, the "Brazil Cost" has moved beyond rhetoric and into the balance sheet of one of the world's largest companies.