In 2025, Netflix made a net profit of $11 billion, with a 16% increase in revenue to $46.6 billion. He expects revenue growth to slow this year, with an increase of 13-14%, while the streamer aims to increase its operating margin by 200 basis points, to 31.5%. Its balance sheet is healthy, with $9.1 billion in cash and equivalents and a very manageable total debt of $14.4 billion as of June 30.
So why did Netflix, which is still in the process of rolling out many changes, this week lay off around 1,000 employees – its biggest reduction yet?
Companies often carry out layoffs in crisis mode, for example when they face short-term revenue shortfalls and simply cannot pay salaries. This is not the case here. But Netflix faces a persistent problem.
Specifically, investors are concerned about the slowdown in the US/Canada region, raising questions about its long-term growth trajectory. For the second quarter of 2026, Netflix’s UCAN revenue decelerated from 14% in the previous quarter to 10% (partly due to its recent price increases). The company also issued third-quarter revenue guidance that was lower than analysts’ expectations. Netflix shares have fallen 20% since the start of the year on fears that the streamer’s days of double-digit gains may be coming to an end.
Netflix’s 6% workforce reduction and decision to replace chief content officer Bela Bajaria with highly regarded industry veteran Peter Rice, a Disney and 21st Century Fox native, is a testament to its attempts to get ahead of the problem.
Several industry sources said Variety they believe Bajaria has become the scapegoat for Netflix’s larger problems. But content is the main engine fueling Netflix’s finances. As VarietyAccording to analysis of Bajaria’s release, Netflix hasn’t produced a “cultural hit in the vein of ‘Stranger Things’ in some time.”
Back to the all-important UCAN region: Total viewing hours in the U.S. and Canada declined in the second quarter, according to BMO Capital Markets analyst Brian Pitz. Netflix’s split with Bajaria and Rice’s hiring “suggest to us that engagement trends may have softened further in 3Q26E,” Pitz said in a research note Friday. The change in content direction prompted the Wall Street firm to cut its revenue estimates for Netflix’s third and fourth quarters by about 1% each and also cut its 2027 revenue forecast by 1.5%. BMO’s model, Pitz added, “conservatively does not assume an acceleration in UCAN revenues” until 2029.
Netflix co-CEO Ted Sarandos, in a memo to staff Thursday about the management shakeup, seemed to acknowledge that the company needs a stronger content offering in the U.S./Canada region. Sarandos wrote that he sees “an opportunity to take our roster to the next level, especially at UCAN where we have an outsized impact by creating big, buzzy hits that our members love and spark conversations around the world.”
And what about the 1,000 employees laid off? Sarandos and co-director Greg Peters told staff in a company-wide memo that the job cuts were intended to give it the means to “invest aggressively in high-impact areas to improve our service and drive further growth and innovation.”
Note that Netflix is not the only one handing out pink slips. Disney – also profitable – has made three rounds of layoffs in 2026 in different parts of the company. Unlike Netflix, Disney is grappling with the continued deterioration of linear television. But echoing Netflix’s explanation for its RIF, CEO Josh D’Amaro and CFO Hugh Johnston told the Street they were looking to cut costs, including through layoffs, to “create additional capacity to invest for growth.”
Netflix’s top executives will surely be asked to provide more details about the restructuring (and their decision to swap Bajaria for Rice) when they report their third-quarter results on Tuesday (October 20). This will kick off an intriguing quarterly earnings season for the entertainment sector, which will include Skydance Corp.’s first impression.
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