Netflix reports third-quarter earnings Tuesday after the market closes, and executives will face questions about a 1,000-person layoff and a shake-up of the studio’s top creative ranks. Co-CEOs Ted Sarandos and Greg Peters told staff last week that the company would cut about 6% of its workforce, its largest reduction yet. The cuts fall mostly on product, technology, legal and human resources teams.
The last major round came in 2022, when Netflix shed about 450 people after its first subscriber loss in more than a decade. This time the company is still profitable and growing, which makes the timing harder for investors to read. The memo to employees framed the cuts as a way to free money for aggressive investment in high-impact areas.
Leadership changes followed within days. Chief Content Officer Bela Bajaria is leaving after nearly 10 years, and industry veteran Peter Rice will replace her. Dan Lin, who ran the film division for nearly three years, is also out, with no successor named. Former Warner Bros. film executives Mike De Luca and Pam Abdy have surfaced as possible candidates.
Analysts will test those moves against the numbers. Wall Street expects earnings of 82 cents a share on revenue of $12.88 billion. Second-quarter revenue rose 13.4% to $12.6 billion with an operating margin of 33.4%, but Netflix guided third-quarter revenue below analyst expectations, and the stock fell. Shares are down about 25% this year.
The concern centers on the home market. Investors have grown wary of slowing growth in the U.S. and Canada, and BMO trimmed its revenue estimates for the next two quarters by about 1% each after the content shake-up. Sarandos acknowledged the pressure at a Bloomberg conference last month. Netflix is “not growing as fast as I want us to,” he said. Tuesday’s report also opens the entertainment industry’s earnings season. It precedes the first quarterly results from David Ellison’s newly formed Skydance Corp.
