Netflix links content shake-up to US slump as growth hits three-year low

Netflix cut 1000 jobs and ousted its content and film chiefs last week. On the Q3 call, its co-CEOs tied the shake-up to slowing US viewing.

Netflix laid off 1000 of its staff last week, around 6% of its global workforce. Some of those job losses were extremely high-profile ones too: Chief content officer Bela Bajaria is out, to be replaced by experienced ex-Walt Disney Television head Peter Rice, called a “quality and volume operator” by Netflix co-CEO Ted Sarandos. Rice has run networks, studios, and streaming services in the past and is seen as a safe pair of hands by many. Film chief Dan Lin and his top lieutenant Doug Belgrad are also gone, as is director of original series Carolina Garcia.

When news of all that broke, it seemed to signal that its latest earnings call was going to be a troublesome one. And so, at least in the growth-obsessed eyes of Wall Street, it has proved to be.

Revenue at $12.87 billion met expectations, but the year-on-year growth of 11.8% is the slowest in three years. Its Q4 forecast at $13.4 billion (up 11.5%) is below the $13.5 billion Wall Street was looking for. And its expected full-year ad revenue of about $2.7 billion is down from the $3 billion forecast. The ad tier is a key part of the company’s future strategy as it reaches market saturation, so the latter is going to ring some alarm bells.

Shares in after-hours trading were down around 7%, but we wouldn’t be surprised to see them edge upwards again as the markets react first and analyze second.

While seeing close to 12% growth as a disappointment is one of the things that makes critics of the current state of Wall Street roll their eyes, there is a definite key data point that should make markets nervous. Churn might be down and total hours viewed rose 2% in the first half of 2026, but per-member viewing has been falling. Jefferies estimates the global monthly average has dropped from 66 hours in the first half of 2023 to about 49 hours now.

That is not going to help the ad revenue increase. To counteract that, the ad-supported tier launches in 15 new countries in 2027, starting March with nine European markets plus Colombia, Peru, and New Zealand.

Consequences for production

Netflix once reported a whole lot of figures it now keeps close to its chest (and it will keep more so too, moving publication of its “What We Watched” viewing report to a yearly cycle from its current twice-yearly cadence). Netflix has stated its current content budget is around $20 billion a year, roughly 6x that of the BBC.

The company’s shareholder letter addressed the layoffs but did not explain the content leadership change. On an accompanying earnings call, however, Sarandos and his co-CEO Greg Peters pointed to the soft US market. Sarandos: “I know that we could do better.” He said the opportunity is to take the slate “to the next level, especially in the U.S.”

So, more volume and more hits. For viewers, Netflix’s journey to basically becoming cable continues. For anyone working on Netflix shows, we would guess that there might be a swing toward homegrown content. Sarandos said that a big buzzy show has the most outsized impact, which also makes us think unscripted content might be moving up the agenda again. Shows like The Traitors (BBC and Peacock) seem to be having just that outsized impact compared to their budget and are bringing back the concept of water-cooler television.

And the next twist?

One last thing to note. One of the things that made Rice’s name in the industry was his work successfully integrating Fox into Disney. And while Netflix’s bid to buy WBD was eventually knocked back, nobody thinks the company has wholly given up on the idea of buying a film studio. NBCUniversal should take note…