> Why do animated action shows need to sell tons of merch to stay afloat? Isn’t the ad revenue enough?

There are a lot of reasons, many of which I haven't seen mentioned.

> the show will cost 2 million per episode, that’s actually less than a lot of other shows like Friends, and Yellowstone, which don’t rely on merch to continue funding.

First and foremost, the audience size is completely different, both in viewership and range. Since you brought up Friends, the viewership for the final season averaged 53 million and basically never dipped below 30 million a season. Since you mentioned Young Justice, I'll use that for a kids show. Unfortunately, numbers are limited, but I can find numbers mostly in the 1 to 2 million range, which is also about where Sym Bionic Titan was as well. So, just in terms of views Friends had at least 15 times more viewers. In addition to that, an episode of Friends in the final season, which is about 25 times more views, was only 5 times more than your 2 million estimate. This basic math shows you how much more value the series alone had.

From there, range is massive. There are laws and other things that determine what you can advertise with a children's program. You simply aren't going to see depression meds, Adam & Eve, and equally inappropriate commercials with an episode of He-Man. Not only do laws prevent certain things, there are a lot of companies that see no value. Would you market a car if almost every viewer is a kid? How about HR Block? R rated movie? Shows also tend to have a lean, so even if girls watch He-Man, and boys check out My Little Pony, odds are you'll see ads that make sense for the average viewer. So, even they have views, the slots are worth a lot money. You have like 20 companies that might air a commercial, fighting for channels with over a hundred hours to air things with, fighting for the same group of people.

Finally, as others have said, some cartoons are actually a commercial, along with others getting supplemental value. Young Justice wasn't cancelled because of poor sales per se, it was cancelled because Mattel, who had the license, withdrew their financial support after failing to make enough money off their toys.