Disney (NYSE:DIS) stock is up 6% in after-hours trading Wednesday after the company confirmed it would lay off 7,000 workers. The Disney layoffs come as part of a restructuring plan CEO Bob Iger presented alongside the company’s fiscal first-quarter results.

The layoffs represent 3% of the company’s 220,000-person staff.

Investors went into today’s earnings call expecting Iger, who just returned to the chief executive role, to present a turnaround strategy. DIS stock is down nearly 20% over the past 12 months and nearly 40% over the past two years.

Facing challenges first from Covid-19 and now from an increasingly competitive streaming landscape, Iger has to respond to shareholders. He also has to address activist investor Nelson Peltz, who has called attention to the declines in DIS stock.

What Comes Next After Disney Layoffs

So where does Iger take the company next? Like so many other publicly traded firms in recent months, Disney is headed toward cost reduction and a renewed focus on profitability. The layoffs are part of a broader strategy to achieve $5.5 billion in cost reductions. Other savings will come from cutting non-sports related content as well as trimming other general and administrative expenses.

Iger also announced that Disney would be reorganizing into three pillars, calling out a need for profitability in its streaming business. It will separate operations into 1) entertainment, 2) sports-focused (ESPN), and 3) theme parks, experiences, and products. Its entertainment unit will house film, TV, and its main streaming business.

The CEO also said he would ask the board to reinstate Disney’s dividend by the end of 2023.

“This reorganization will result in a more cost-effective, coordinated approach to our operations,” Iger told analysts on a conference call. “We are committed to running efficiently, especially in a challenging environment.”

On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.