How to Play NFLX Stock as Netflix Wipes Out Another 1,000 Jobs in Its Latest Round of Layoffs
A year ago, Netflix (NFLX) captured 8.8% of total television viewing time in the United States, compared with Alphabet's (GOOG) (GOOGL) YouTube’s 13.4%, according to Nielsen. This year, Netflix’s share has slipped to 7.8%, while YouTube’s has climbed above 14%.
The pressure stems from intensifying competition among streaming platforms and softer consumer engagement, despite Netflix’s efforts to broaden its appeal through live sports, video podcasts, and programming from independent content creators. Adding another layer of uncertainty is the potential impact of the Skydance (SKYD) merger, whose implications for Netflix’s growth remain uncertain.
Against this backdrop, Netflix is preparing to eliminate approximately 1,000 positions, representing 6% of its workforce. The cuts are intended to sharpen investment priorities and address weakening engagement, with product, technology, legal, and human resources teams accounting for most of the affected roles.
While Netflix has already undertaken layoffs this year, the latest reduction is its largest headcount cut in more than four years and is arriving just one week before the company’s quarterly earnings announcement. Despite the restructuring, executives have reassured employees that Netflix remains on course to meet its full-year earnings forecast.
Moreover, Netflix is expanding its programming mix to give subscribers more reasons to stay, watch, and return. Newer offerings include live television channels, sports, video podcasts, and shows from YouTube creators. Distribution partnerships and streaming bundles are also part of the strategy, potentially helping the company attract new customers while keeping existing subscribers engaged.
About Netflix Stock
Headquartered in Los Gatos, California, Netflix is a global entertainment company known for its subscription-based streaming platform. Its catalog spans original and licensed television series, documentaries, films, games, and live events, serving audiences across a wide range of genres and languages.
With a market cap of approximately $293.4 billion, Netflix’s primary revenue streams are membership subscriptions and advertising-supported plans, giving the company multiple ways to monetize its growing content ecosystem.
That said, NFLX stock has fallen 40% over the past 52 weeks as concerns about slowing engagement have weighed on investor sentiment. The decline has continued into 2026, with shares down 23% year-to-date (YTD) and another 7% over the past month, underscoring the market’s growing impatience with the company’s trajectory.
On the valuation front, NFLX stock is currently trading at 16.93 times forward adjusted earnings and 5.73 times sales. The multiples trade at a premium to the industry averages but are at a discount to their own five-year average multiples, suggesting a wise entry point for long-term investors.
A Closer Look at Q2 Earnings
On July 16, Netflix reported its Q2 FY2026 results, delivering solid revenue growth alongside a few cracks beneath the headline numbers. Revenue increased 13.4% year-over-year (YoY) to $12.56 billion, supported by membership gains, pricing adjustments, and advertising. However, the figure narrowly missed analysts’ expectations of $12.57 billion.
Operating income rose 11.1% YoY to $4.19 billion, yet operating margin slipped to 33.4% from 34.1%, as faster content amortization during the first half outpaced revenue growth. Net income climbed 8.8% to $3.40 billion, while EPS rose 11.1% from the year-ago level to $0.80, beating the Street’s estimate of $0.79.
Cash flow, however, proved less encouraging. Free cash flow dropped 32.7% YoY to $1.53 billion, while operating cash flow declined 28% to $1.74 billion. Higher cash taxes, partly associated with the Warner Bros. termination fee, contributed to the deterioration.
Netflix also announced a change to its audience reporting practices, confirming that its detailed “What We Watched” report will be published annually rather than twice a year. The report has long served as an important gauge of viewing habits, making the shift a concern for greater visibility into audience trends.
Moreover, Netflix narrowed its forward guidance and now expects 2026 revenue to reach between $51 billion and $51.4 billion. For Q3, management anticipates 12% YoY revenue growth. That said, Netflix is scheduled to release its Q3 FY2026 financial results after the market closes on Tuesday, Oct. 20.
Analysts forecast Q3 FY2026 EPS to grow 39% YoY to $0.82. For full FY2026, estimates call for EPS growth of 41.9% to $3.59, followed by a 6.4% YoY increase to $3.82 in FY2027.
What Do Analysts Expect for NFLX Stock?
Despite the recent share price weakness, Wall Street has maintained a consensus “Moderate Buy” rating on NFLX stock. Of the 49 analysts covering the stock, 31 recommend a “Strong Buy,” four assign a “Moderate Buy,” 12 rate the shares a “Hold,” and two have issued a “Strong Sell.”
To that end, the average price target of $93.43 represents a potential upside of 29%. Meanwhile, the Street-high target of $135 suggests a gain of 86% from current levels.
On the date of publication, Aanchal Sugandh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.