Edit: This question attracted way more interest than I hoped for! I will need some time to go through the comments in the next days, thanks for your efforts everyone. One thing I could grasp from the answers already - it seems to be complicated. There is no one fits all answer.
Under capitalism, it seems companies always need to grow bigger. Why can’t they just say, okay, we have 100 employees and produce a nice product for a specific market and that’s fine?
Or is this only a US megacorp thing where they need to grow to satisfy their shareholders?
Let’s ignore that most of the times the small companies get bought by the large ones.
Not all companies need to grow. Some do perfectly fine by just maintaining their current output like a owner operated single person plumbing company.
Another example can be Walmart, they don’t need to grow but investors prefer growth so it becomes a focus.
There are some companies that need absolutely to grow to survive. This is seen a lot in tech where in order for the business model to make sense they would need some big quantity of users.
Let’s say you got seeded 10M and managed to get to a minimal product with 10k users that get you $2 in revenue monthly but your cost are around 50k monthly. It means you’re making a loss but with 100k users you’d make a profit. To get to 100k you need more investment but to justify that investment being sound you need show growth.
So in general if being bigger gets you economies of scale then making a loss early is fine as long as you can get the investor money you need to survive. So to survive as a business you need to grow.
Those are two ends of a spectrum and everything in between exists as well. So quick answer would be “Companies don’t always need to grow but some really do because their business model only works at a different scale”.