Netflix cut 1,000 jobs and its content chief in a week. Tonight it has to explain why
Netflix reports after the close on Tuesday, after a week of layoffs and a content shake-up. Here is the bar it set itself and what its 10-Q says about the cuts.
Netflix spent last week doing the things companies usually do after a bad quarter, not before one. On Wednesday it told staff it was letting about 1,000 people go. On Friday it replaced the executive in charge of what its members watch. Tonight, after the market closes, it reports its third-quarter results, and for once the numbers may matter less than the explanation.
The shares arrive bruised. They closed Friday at about $70, down from $93.76 at the end of 2025, Yahoo Finance reported, roughly 35% below their mid-April high. Co-CEO Ted Sarandos has not hidden his frustration. At a Bloomberg conference on Sept. 30 he said the company was "not growing as fast as I want us to," The Hollywood Reporter reported.
This is a preview of what to watch tonight. Netflix's own forecast sets the bar, its latest quarterly filing shows where the pressure was building, and the past week shows how management chose to respond.
A week of cuts
The layoffs come to roughly 6% of Netflix's employees, CNBC reported, citing a memo from the co-CEOs. Most of the cuts fall on the product, tech, legal and HR teams. CBS News, citing The Wall Street Journal, which broke the story, said the cuts would be the company's largest since 2022. Netflix had roughly 16,000 full-time employees at the end of last year, according to its annual filing.
The memo from Sarandos and co-CEO Greg Peters insisted that nothing was broken. "Our business is strong and growing, and we remain on track to deliver our full-year forecast," they wrote, according to a copy published by The Hollywood Reporter. They added that Netflix would "continue to invest aggressively in high-impact areas to improve our service and further drive growth and innovation."
Two days later, Netflix named Peter Rice, a former Disney executive, as chief content officer, replacing Bela Bajaria. The stock fell nearly 3% that day, according to Yahoo Finance. Variety reported that several industry sources think Bajaria "is being made the scapegoat" for wider problems. In a memo on the change, Sarandos said he saw "an opportunity to take our slate to the next level, especially in UCAN," Netflix's term for the US and Canada, "where we have an outsize impact in creating big, buzzy hits that our members love and drive conversation around the world."
The backdrop matters too. The cuts follow a long bidding war for Warner Bros. Discovery's studio and streaming businesses that Netflix lost to Paramount Skydance earlier this year, as TechCrunch noted. Netflix walked away with a $2.8 billion termination fee, which its 10-Q shows booked in the first quarter, but not with the studio.
What the filing shows
Netflix is not shrinking. Revenue reached $45.2 billion last year, up 15.9%, and net income was $11.0 billion, according to its annual filings. In the second quarter it bought back $4.7 billion of its own stock, its largest quarter of buybacks yet, Quartz reported.
The strain shows in the detail. In its 10-Q for the quarter to June, Netflix explained a slightly lower operating margin, the share of revenue left after running costs, this way: "The decrease in operating margin was primarily driven by technology and development expenses and sales and marketing expenses growing at a faster rate than revenue." The biggest single cause on the technology side was people. The filing says that increase "was primarily due to a $142 million increase in personnel-related costs."
Over a full year the trend is the same. Netflix spent $3.4 billion on technology and development in 2025, up from $2.9 billion in 2024. Last week's cuts landed mostly on product and tech teams. Read together, the layoffs look less like an emergency and more like Netflix trimming the cost line its own filing flagged.
The bar for tonight
Netflix sets its own targets. In July it said it expected third-quarter revenue growth of 12% and an operating margin of 33.2%, up from 28.2% a year earlier. Analysts polled by Yahoo Finance expect revenue of $12.88 billion, in line with the company's own forecast, and earnings of $0.82 a share.
Recent history makes investors wary. After the July results, the stock fell more than 8% in after-hours trading, Quartz reported, and closed about 7% lower the next day, according to Yahoo Finance, when second-quarter revenue came in slightly below estimates.
The worry is attention. CNBC summed up the paradox: Netflix "continues to post solid profits and remains the biggest player in the streaming realm, but its viewing time has stagnated." HSBC, which cut its rating on the stock in September, said YouTube took a record 14.2% of US TV viewing time in July while Netflix's share slipped to 7.8%, according to Stocktwits. Variety reported that BMO Capital Markets analyst Brian Pitz believes total viewing hours in the US and Canada declined in the second quarter, and that the content shake-up suggests "engagement trends may have softened further."
Netflix's own numbers are more upbeat but rarer. Members watched more than 97 billion hours in the first half of 2026, up 2% from a year earlier, the company said in July. In the same letter, it said it would stop publishing that viewing report with its results and release it once a year instead, starting in 2027.
What to watch
The US and Canada. Revenue growth in the region slowed to 10% in the second quarter, which Netflix said reflected "only a partial quarter impact" from its latest price rise. A full quarter of higher prices should lift that number tonight. If it doesn't, the price rise didn't do what Netflix said it would.
Advertising. Netflix has promised about $3 billion in ad revenue this year, roughly double last year's. Ads are the part of the business that depends most directly on time spent watching, so any comment on how the US advertising deals closed is a read on engagement too.
The full-year forecast. The memo says Netflix is on track. Repeating that tonight would be the minimum. Any change, up or down, will say more about the business than the job cuts did.
What the savings are for. KeyBanc analyst Justin Patterson listed four things he wants from management, Yahoo Finance reported: "increased content investment, product changes, operating expense cuts, and exploring a dividend." The cuts tick one box. Whether the money goes into more shows, more live sport or more buybacks is the strategic question.
Our read
Netflix's problem is not money. It is time. A company that earned $11.0 billion last year doesn't need to cut 6% of its staff to survive. It cuts them to pay for the fight it is losing for evenings on the living-room TV, against YouTube and against free video on phones. Replacing the content chief says management thinks the answer is better shows, especially American hits that travel.
That is a bet that takes years, not a quarter. So tonight's numbers will probably look fine, because Netflix guides carefully. The tell will be in the words: whether management names a viewing trend it is willing to be measured against, now that it no longer reports viewing every quarter. Our view would be wrong if Netflix shows viewing growth picking up in the US and Canada this year. Without that, last week's moves were only a start.
Sources
- Netflix second-quarter 2026 letter to shareholders · Netflix (SEC filing)
- Netflix quarterly report (Form 10-Q) for the quarter ended June 30, 2026 · Netflix (SEC filing)
- Netflix to lay off roughly 1,000 employees, or 6% of workforce · CNBC
- Netflix Lays Off Around 1,000 Employees in Largest Cuts Since 2022 · The Hollywood Reporter
- Netflix is cutting 6% of its workforce as its revenue growth slows · CBS News
- Netflix to lay off 1,000 staff amid intensifying competition for user attention · TechCrunch
- Netflix Is Profitable and Still Growing. Why Did It Just Make a Huge Round of Layoffs and Oust Its Top Content Exec? · Variety
- Netflix stock is down roughly 25% in 2026 as Q3 earnings loom · Yahoo Finance
- Netflix meets earnings expectations, is scaling back viewership reports · Quartz
- Netflix Faces Growing YouTube Threat As Viewer Share Hits Multi-Year Low, HSBC Says · Stocktwits
This story describes figures the company has published. It is for information only and is not investment advice or a recommendation to buy, sell or hold any security. Check the original filings before relying on any figure. Stoqly is not affiliated with the SEC.
