Los Blancos have picked up 21 points from their opening nine La Liga matches of the season, which has left them in second spot in the table, three points behind the leaders Barcelona.
The capital giants suffered their first defeat since January at the start of this month, meanwhile, going down 1-0 to Lille in the Champions League, with the in-demand Jonathan David hitting the winner.
Real Madrid beat Villarreal 2-0 in La Liga last weekend, with Federico Valverde and Vinicius Junior on the scoresheet, but the team are struggling to find their rhythm in the early stages of the campaign.
According to Sport, Ancelotti is 'losing strength' in the dressing room, with some of the players more focused on individual competition rather than the team as a whole.
Ancelotti 'losing strength' at Real Madrid
The report claims that the Italian is 'more restless' this season, and he is finding it difficult to get the best out of the players in a new formation, with Kylian Mbappe's arrival seeing the side switch to a 4-3-3.
Real Madrid played a 4-3-1-2 formation last season, with Jude Bellingham starring in the number 10 role behind a front two of Vinicius and Rodrygo.
However, Los Blancos have been operating in a 4-3-3 this term, with Vinicius and Rodrygo in the wide areas, and Mbappe through the middle, with Bellingham dropping into a deeper area.
Ancelotti is in his second spell in charge of Real Madrid, and he has enjoyed huge success at the helm, winning two La Liga titles, two Copa del Rey crowns and three Champions League titles.
Should Ancelotti and Real Madrid part ways next summer?
The 65-year-old has a contract with Real Madrid until June 2026, but a recent report claimed that the club are lining up Xabi Alonso as a replacement for the experienced head coach.
Alonso famously turned down Liverpool last summer to remain in charge of Bayer Leverkusen, but the Spaniard is allegedly the number one choice to become Real Madrid's next manager.
The 42-year-old led his German club to a Bundesliga and German Cup double last season, while Leverkusen were also in the Europa League final, losing 3-0 to Atalanta BC.
Alonso has a contract with the Bundesliga team until June 2026, but he could leave next summer in search of a fresh challenge, and it would not be a surprise to see him make the move to Real Madrid.