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Disney’s third round of 2026 layoffs hit Pixar hardest among its studios, even as Toy Story 5 approaches a billion dollars. The cuts follow a string of expensive original flops like Elio, with no home-video market left to soften the losses.
Pixar is having one of the best box office years in its history and laying off staff at the same time. Both things are happening this week, and the gap between them says a lot about where animation is headed.
Disney confirmed a fresh round of layoffs on Tuesday, and Pixar took the hardest hit of any of the company’s film studios. It landed in the same week that Toy Story 5 is closing in on a billion dollars worldwide.
What Disney cut, and where
This is Disney’s third round of layoffs in 2026, following a marketing reorganization earlier in the year and roughly 1,000 jobs in April. The new round hit several hundred employees across corporate teams, ESPN, Disney Entertainment Television, and the film studios. National Geographic was the hardest hit on the TV side, and ESPN’s cuts were tied to its new NFL deal.
Among the studios, Pixar absorbed the most, with one report putting the number around 150 people. Disney framed the cuts as routine belt-tightening, calling them part of its ongoing effort to manage resources as the industry changes. It’s the “One Disney” efficiency push led by CEO Josh D’Amaro, and the company was careful to describe it as a continuation of that plan rather than a response to any one problem.
Pixar’s sequels win while its originals keep missing
The numbers behind the cuts tell a clearer story than the corporate language.
Pixar’s sequels are money machines. Inside Out 2 made $1.69 billion in 2024. Toy Story 5 is nearing $957 million and will end up the highest-grossing film in that franchise. When Pixar returns to a world audiences already love, people show up in enormous numbers.
Its original films are a different story. Since the pandemic, Pixar has struggled badly to launch anything new. Lightyear underperformed in 2022, Elemental stumbled out of the gate in 2023, and this year’s original Hoppers opened decently but came nowhere near the studio’s old highs.
The pattern is stark: the sequels print money, and the new ideas keep losing it.
Elio and the cost of a single miss
Elio is the clearest example, and it’s the one eating the profits.
The original sci-fi adventure had a troubled production and a final budget around $200 million. It made just $154 million worldwide in 2025, making it Pixar’s lowest-grossing movie since the COVID-era Onward. At that budget, a film needs to make far more than its production cost just to break even once theaters and marketing take their share.
Elio didn’t come close.
That’s the squeeze. One $200 million flop can quietly swallow a big chunk of what a hit like Toy Story 5 brings in. Pixar’s own leadership has said the studio needs to make its movies, especially original ones, at more competitive prices.
Cutting headcount is part of how a studio lowers that number.
The home-video safety net is gone
Here’s the part that makes a miss hurt more than it used to. A movie like Elio has almost no way to make its money back after theaters.
For decades, physical home video was the cushion. Studios sold the same film again and again on VHS, then DVD, then Blu-ray, then 4K, and hit titles could pull in hundreds of millions in additional revenue. A movie that underperformed in theaters often recovered on disc. That market has collapsed. Physical media sales fell from a peak of about $16 billion in 2005 to under $1 billion in 2024.
Disney has walked away from it entirely. In April 2026, the company eliminated its whole home entertainment division and handed physical distribution to Sony Pictures Home Entertainment. Best Buy stopped selling discs, Target scaled back, and the studios stopped pressing most of their own.
Streaming was supposed to replace that revenue, but it doesn’t rescue individual movies the way discs did. A film sitting on Disney+ is folded into a subscription, not sold on its own for $30 a copy. There’s a small, real resurgence in collector and boutique disc sales driven by younger buyers, but that’s a niche, not the mass second life studios used to bank on. For a modern Pixar film, it’s a theatrical hit or a write-off. There’s no third act anymore.
Where AI fits into the question
Is Disney trimming animation staff because it plans to lean on AI?
Disney hasn’t said that, and no reporting connects these specific cuts to AI. The stated reason is cost-cutting, and Pixar’s own recent pivot, away from making series for Disney+ and back toward feature films, accounts for a lot of the reductions on its own.
But the worry isn’t coming from nowhere. Disney has been investing heavily in AI, including a reported $1 billion stake in OpenAI, an internal AI office, and AI-driven tools at its visual effects house. When a company spends that aggressively on automation and cuts creative headcount in the same year, artists reasonably connect the dots, even without proof.
For now, the honest read is that these cuts are about money, not machines, but the question is going to keep following Disney around as long as both trends run side by side.
Put it all together and Pixar’s bind is clear. Its original films cost more and earn less, the home-video cushion that once caught its misses is gone, and Disney is shrinking the studio to fit that math.
The next new Pixar movie that underperforms won’t get a second chance to earn its money back. It’ll just be a loss, on the books, right away.
Article compiled and edited by Derek Gibbs (entertainment editor) and the Clownfish TV newsroom.
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Hat Tips:
Variety (July 21, 2026) — the layoffs, Pixar as the hardest-hit studio, the Toy Story 5 and Hoppers box office, and the “trained audiences to watch at home” point
TheWrap — the ~150 Pixar figure, Elio’s ~$200M budget and $154M gross, and the competitive-pricing pressure
The Hollywood Reporter / Deadline — the “third round of 2026 layoffs,” the “One Disney” restructuring, and the Nat Geo and ESPN cuts
Digital Entertainment Group / Omdia (via HDTVTest, Tom’s Guide) — physical media’s fall from $16B in 2005 to under $1B in 2024
Cord Cutters News / Next TV — Disney eliminating its home entertainment division and offloading physical distribution to Sony
StatSignificant / Slashdot — the historical “second life” home-video revenue and the niche Gen-Z physical-media resurgence
