Netflix Inc is cutting about 1,000 jobs, roughly 6% of its workforce, marking its largest reduction in headcount since 2022. The announcement arrives less than a week before the company reports third-quarter earnings on October 20.

Layoffs target product and tech teams

Co-CEOs Ted Sarandos and Greg Peters announced the cuts in a memo to employees on Wednesday. The majority of the affected roles are within Netflix’s product, technology, legal, and human resources divisions. This final figure exceeds the approximately 850 jobs (5% of staff) reported by Puck last week.

"Our mission to entertain the world is ambitious, and delivering on it requires us to be disciplined about where we prioritize our people and resources," the co-CEOs stated. They added that the business is strong and growing, with plans to continue investing aggressively in high impact areas. The last significant workforce reduction occurred in 2022, when Netflix cut about 450 jobs in two rounds after losing subscribers for the first time in more than a decade.

Growth slows and engagement declines

The stock tells a different story than management's optimism. Netflix shares have declined approximately 25% this year and more than 40% over the past 12 months. Much of the selling dates back to July, when Netflix forecast another quarter of slower revenue growth and came in below Wall Street expectations.

The company guided for 12% revenue growth in the third quarter and narrowed its 2026 revenue outlook to $51 billion to $51.4 billion. Full-year growth of 13% to 14% would be down from 16.5% in 2025. Sarandos acknowledged the slowdown at the Bloomberg Screentime conference, stating Netflix was "not growing as fast as I want."

Engagement has become investors' biggest concern. YouTube reached a 14.2% share of U.S. TV viewing in July, while Netflix slipped below 8%. Wells Fargo estimates that Netflix viewership in the first half of 2026 was down about 8% on an adjusted basis from the same period in 2023. HSBC analyst Mohammed Khallouf argued that YouTube’s gains are "increasingly coming at the direct expense of Netflix."

Competitive landscape shifts

Netflix’s competition also got bigger this month. On October 6, Paramount closed its $110 billion acquisition of Warner Bros. Discovery, creating Skydance Corp. Other media companies are cutting too; Disney said last month it would lay off around 300 employees, mostly in HR and technology.

Analysts remain cautious ahead of the results. Morgan Stanley and Barclays lowered their price targets to $80 and $70, respectively. However, Deutsche Bank upgraded Netflix to Buy, arguing engagement concerns are overstated because programming performance naturally moves in cycles.

What the numbers show

The timing of the layoffs suggests a strategic effort to manage operating expenses prior to reporting quarterly results. Analysts expect revenue of $12.88 billion against company guidance of about $12.86 billion. While the projected operating margin of 33.2% appears robust, it benefits from a favorable year-over-year comparison; last year’s third-quarter margin was suppressed to about 28% by a one-time Brazilian tax charge.

A key divergence exists between management's claim of a "strong" business and the market's reaction. While Netflix expects content spending to rise 10% this year, reducing back-office and tech staff helps cover the gap. However, eMarketer senior analyst Ross Benes noted that Netflix hasn't found another line of major revenue, suggesting the core subscription business could be nearing a ceiling despite new ad tiers and gaming initiatives.

At the time of publication, Netflix shares traded 0.09% lower at $70.39.

Netflix Inc has secured exclusive rights to broadcast the 2030 FIFA World Cup in Spain and Andorra, offering live coverage of all 104 matches. This major sports deal coincides with KeyBanc lowering its price target on the stock from $92 to $85, though the Overweight rating remains intact.

The streaming giant’s agreement covers the tournament’s centennial edition, with Spain co-hosting alongside Morocco and Portugal. To broaden accessibility, Netflix plans to offer one free match per matchday to fans in Spain. Additionally, a package of games, including every Spain game, both semifinals, and the final, will be shared with a national free-to-air partner.

Analyst positioning and valuation

KeyBanc analyst Justin Patterson adjusted the firm’s outlook, reducing the price target while retaining conviction in Netflix’s long-term trajectory. The downgrade reflects revised expectations for revenue and earnings per share for each year from 2026 through 2028. Two primary factors drove this recalibration: adverse currency movements working against Netflix and assumptions that content spending will yield smaller operating margin improvements than previously estimated.

Despite the reduced target, KeyBanc views the current valuation as attractive. The firm noted that investors have likely already absorbed fears regarding slowing engagement and limited margin growth, with Netflix trading at under 15 times its 2028 earnings. KeyBanc expects leadership to address these challenges by rebalancing costs and altering content spending strategies to strengthen overall growth.

Market reaction

Netflix shares were trading at depressed levels but showed modest gains following the news. At the time of publication on Tuesday, NFLX stock was up 0.35% at $70.86. The market appears to be weighing the strategic value of the exclusive sports rights against the near-term financial headwinds cited by analysts.

What the numbers show

The divergence between KeyBanc’s lowered financial forecasts and its maintained Overweight rating highlights a shift in investment thesis from immediate growth acceleration to long-term structural stability. While the firm cut revenue and EPS estimates due to FX and margin pressures, the valuation multiple of under 15x 2028 earnings suggests that negative sentiment is already priced in. The new FIFA rights deal adds a tangible asset to the platform’s portfolio, potentially offsetting some concerns about engagement limits by introducing high-value live sports content.