Netflix (Nasdaq: NFLX), the leading online streaming service, said this week that it intends to launch a workforce reduction program that will cut around 1,000 employees from the company’s payroll. This cut represents approximately 6% of its entire workforce, a meaningful number, and comes as the company’s stock has stumbled this year.
Learn more about Netflix cutting its workforce…
For years now, Netflix, which has more subscribers than any other streaming service, seems to have had the golden touch, leading the highly competitive streaming service segment and appearing impervious to the many challenges, such as subscriber churn, that plague many of its competitors. Just recently, the company attempted to acquire Warner Bros. Discovery, but was ultimately outbid by David Ellison’s Paramount/Skydance.
Now the company announces its most significant round of layoffs since 2022, in news broken by the Wall Street Journal on Wednesday.
Company Departments Most Affected by Layoffs
According to the WSJ, the bulk of the layoffs is expected to hit Netflix’s product, human resources, tech, and legal teams, as described in an internal email to employees from co-CEOs Ted Sarandos and Greg Peters. However, there are rumors that several executives are also out, according to the Morning Brew newsletter. See my update at the end of this story.
This news emerges as the company struggles with a tough year. The fact is that Netflix has begun to struggle with slowing growth in revenues and earnings over the past several quarters, according to a report by business reporter Jake Conley for Yahoo Finance. The company that for years seemed to have an indomitable growth engine is, in fact, finding that its growth is slowing.
Competition from Other Streamers and Video-Centric Sites
Perhaps even more importantly, indicators suggest subscriber engagement is waning. Many analysts believe that the company is enduring unprecedented competition not just from other streaming services, but also from other online sites, such as YouTube and even social sites such as TikTok, Instagram, and others.
As it struggles with the double demons of increased competition and declining engagement, we have seen Netflix stock drifting downward for most of 2026, now down about 25% year-to-date.
A Bumpy Ride in 2026
“Netflix will ‘continue to invest aggressively in high impact areas’ while ‘making focused choices across the business so we can keep delivering for our members, partners, employees and investors,’ Sarandos and Peters said in their email to employees.”
Brave talk aside, it’s been a bumpy ride this year for Netflix. In Q1, the company issued an earnings miss of $1.23/share versus analysts’ consensus forecast of $1.25/share. And in Q2, earnings of $0.80/share beat the consensus estimate of $ 0.79/share, but revenues came in at $12.56 billion, less than the consensus estimate of $12.58 billion.
We continue to see healthy acquisition and retention trends on the membership side, and our recent price adjustments are going well on the pricing side.
Spencer Neumann, Netflix Chief Financial Officer
Is A Dark Cloud Hanging Over Netflix?
The announcement of the headcount reduction plan to reduce overhead is normally a positive kind of story for the investment community. But this time, it barely moved the needle for NFLX stock. Most likely, this is due to the fact that the company has another earnings report coming out next week. And Wall Street is waiting…and watching closely…for what is coming. The buzz is that a dark cloud is hovering over the company.
Remember that run Netflix took at Warner Bros. Discovery? Had they succeeded, that deal might have been a lifeline for the company. However, Skydance prevailed, and that potentially spells trouble for Netflix. In a note to investors, Needham analyst Laura Martin summed up the new position the company finds itself in.
Netflix is Newly Threatened
The newly formed Skydance boasts two historic movie studios [Paramount, Warner Bros.], several major streaming networks, highly valuable IP such as ‘Harry Potter,’ and an annual content budget of $30 billion. That scale and content funding ‘threatens Netflix the most.’
Whereas Skydance is expected to have 30 wide-release films that will move to its streaming platforms in 2027, Netflix is only expected to have 12 limited-release films.
NFLX is a pure-play streaming asset, without a robust film slate or sports content, and the streaming industry is rapidly maturing. We believe that all entertainment companies must have all genres of content (films, TV, reality, comedy, sports, etc) to compete effectively, and today NFLX is the only major entertainment company that doesn’t.
Laura Martin, Needham analyst as reported by Jake Conley at Yahoo Finance
Netflix Addresses Cost Reductions, But What About Growth?
This week, Netflix addressed cost-side expense reductions with its headcount reduction plan. But as Martin’s quote above suggests, they may have even bigger issues to deal with.
Learn more about Netflix by visiting netflix.com.
NOTE: As this story was being written, CNBC reported “Breaking News” that Netflix Chief Content Officer Bela Bajaria is leaving the company after a decade-long career there. She will be replaced by Peter Rice, a former Disney executive who most recently oversaw Disney’s cable channels, news programming, and coverage of major sporting events. This announcement came just one day after the workforce downsizing announcement.
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