Netflix co-CEO Ted Sarandos is looking to kickstart growth at the streaming giant.Patrick T. Fallon / AFP via Getty Images; Jakub Porzycki/NurPhoto via Getty ImagesNetflix shares have struggled amid slower engagement growth and intensifying competition.The paid streaming leader laid off about 1,000 on Wednesday, its biggest round of cuts in years.Here are reasons Wall Street is uneasy about Netflix's outlook.Netflix is in a slump — and it's not just because you can't find a hot new show to watch.The streaming titan's shares are down 42% in the last 12 months and have been nearly cut in half from their all-time high last summer. Netflix had its biggest round of layoffs in four years on Wednesday, cutting about 1,000 employees, roughly 6% of the company.So, what's going wrong?Netflix's viewership growth has slowed as free competitors like YouTube gain momentum, and initiatives like games and podcasts have yet to become breakout hits. Add in the company's surprise bid for Warner Bros., which it later abandoned, and some investors are feeling on edge.Co-CEOs Ted Sarandos and Greg Peters said in a memo that entertaining the world "requires us to be disciplined about where we prioritize our people and resources" but added that the company is still on track to reach its financial goals this year.Many of Netflix's struggles aren't unique to the "Stranger Things" maker, which disrupted Hollywood by pioneering paid TV streaming and has a major influence over culture."Even the top streaming companies are not immune to stagnation and financial difficulties," said Ross Benes, a media analyst at EMARKETER, Business Insider's sister company.Other entertainment giants like Disney and NBCUniversal have turned to layoffs recently.Here are five of the biggest challenges facing Netflix right now.1. Engagement growth is slowingAlthough Netflix is still growing revenue at a healthy pace while generating billions in profits, Wall Street is concerned about its viewership trends.Netflix co-CEO Ted Sarandos told Bloomberg at an event last month that "we're not growing as fast as I want us to, and we're working on making that move faster."Netflix grew global viewing hours by 2% year over year to 97 billion in the first half of 2026. The streaming giant also announced last quarter that it would share its engagement report only once a year, down from twice a year.When announcing the move, Netflix told investors that "engagement is not just the quantity of view hours, but also refers to the quality and variety of our offering."Investors are worried that slowing engagement growth could hurt Netflix's ability to retain customers and persuade them to pay more, though the streamer has an industry-low cancellation rate.Engagement is also "the golden compass for advertisers" since higher usage helps them reach broader audiences, said Brandon Katz, an analyst at Greenlight Analytics. If Netflix keeps growing viewership, it could charge advertisers higher rates.The lack of a new breakout hit is also troubling for Netflix analysts. "Stranger Things," the platform's biggest show ever, ended last year, and the streamer needs to find new franchises and buzzy hits that can replace it."Entertainment is an inherently subjective and streaky industry," Katz said.2. Competition is heating up from free streamers and social mediaWhile Netflix is still leading its paid peers in viewership and profits, free streaming services like YouTube, Tubi, and The Roku Channel are gaining popularity, especially among younger audiences.YouTube's viewership share on US TVs was 14.2% in July — nearly double Netflix's 7.8% share, according to Nielsen.Roku's free streamer and Tubi are also formidable competitors with shares of 2.9% and 2%, respectively. These no-cost services have grown as paid streamers like Netflix have raised their prices.Netflix is considering starting a free offering in some markets, co-CEO Greg Peters has said.Then there's the popularity of social media platforms like TikTok and Instagram, which are hoovering up viewership hours.Netflix is looking to counter social-media foes by investing in video podcasts and creators to increase engagement and connect with younger viewers without breaking the bank."With pressure mounting, Netflix will look to turn the tide by getting a boost from low-cost content," Benes said.3. The Wall Street narrative soured after Netflix's failed bid for Warner Bros.Netflix spooked some shareholders by making an $82.7 billion bid for the Warner Bros. studio and streaming assets. Paramount Skydance eventually bought the whole company.Although adding HBO Max and the Warner Bros. studio could have given Netflix a boost, investors worried that its leaders had run out of ideas for growth since Netflix hasn't historically turned to major dealmaking. Besides that narrative, shareholders were concerned about Netflix taking on a massive debt load and going through a complex integration process, Katz said.Even though Netflix pocketed a $2
Don't miss out on breaking stories and in-depth articles.