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.
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In the strictest definition, they don’t.
Capitalism is minimally fulfilled when a business sells something for a profit and reinvests the profit (now capital) in the business. Hence the term. It doesn’t have to grow the business, make new products, or do anything beyond maintenance of its processes, be that fixing or updating machinery or training employees. A single person selling tomatoes in a market in Madagascar that fixes of their tomato table with profits is perfectly capitalist.
Expecting constant growth is not a requirement of anything.
A farmer selling their produce is not necessarily a capitalist. A farmer toiling on their own field sells the fruit of their own labor, so to speak. One step up are what Marx calls “Little Masters”: They own and work their means of production, but sometimes have employees such as farmhands or apprentices (Think companies where the owner still works in the workshop). Actual capitalists are detached from the production process: They no longer work, but simply own the so-called means of production and exploit others by buying their labor force for less than their produced result is worth.
