Netflix Promises Cost Discipline, Goes on Hiring Binge As Subscribers Bolt

Headcount is actually growing which suggests layoffs aren’t really part of the company’s cost cutting effort.

July 21, 2022

With two consecutive quarters of subscriber loss, Netflix (NFLX) says it is cutting costs to better match its slowing revenue growth. The company’s most recent investor letter revealed $70 million in severance costs, or by our calculation about $155,000 for each of the approximately 450 layoffs announced in the quarter.

The layoffs are 3.98% of Netflix’s full-time employees.

However, new language in the company’s latest quarterly filing indicates Netflix is actually growing its headcount. The phrase “growth in average headcount” is used throughout the filing as Netflix added an undisclosed number of marketing, technology, and administrative employees over the last ninety days.

Netflix cited headcount growth as the primary driver for the:

—$152 million increase in personnel related costs recognized in cost of revenue
—$61 million increase in personnel related costs recognized in marketing expense
—$163 million increase in personnel related costs recognized in technology & development expense
—$95 million increase in personnel related costs recognized in general and administrative expense

Two things are true at once here; Netflix is laying off workers but simultaneously growing headcount. What can’t be true— with both headcount and employee compensation rising— is that the $70 million severance expense in the quarter is part of the company’s cost cutting initiative as stated in the investor letter.

Related: DIS, WBD, AMZN, AAPL, DISCA, PGRE

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