- Paramount reported revenue of $6.9 billion on adjusted earnings of 18 cents per share, compared to revenue of $6.87 billion and earnings of 17 cents per share expected by Wall Street.
- The David Ellison-led media giant remains “highly confident” in the Warner Bros. Discovery merger closing as its litigation with state attorneys general and the WGA sets a March trial
- Paramount raised its full-year adjusted EBITDA outlook to a range of $3.8 billion to $3.9 billion
Paramount swung to a profit of $41 million, or adjusted earnings of 18 cents per share, and grew revenue 1% to $6.9 billion in the second quarter, fueled by gains in its streaming and studios divisions and Skydance merger-related cost-cutting.
Profits in the streaming division soared 44% to $366 million as revenue rose 9% to $2.47 billion. That growth was primarily fueled by Paramount+, which added 2 million subscribers for a total of 81.6 million globally and grew revenue 16% to $2.1 billion.
The second quarter marked Paramount+’s lowest churn in the service’s history, driven by its original and sports programming, including the FIFA World Cup and UFC. Total DTC ad revenue grew 8% year over year, while Paramount ad revenue grew over 30% in the quarter. Paramount+ also completed its integration of BET+, which along with Showtime declines amounted to a “modest headwind” in the segment’s total growth, and remains on track to merge its various streaming tech stacks to a unified backend infrastructure by the end of the summer.
The studios business also was a bright spot, swinging to a profit of $36 million and grew revenue 16% to $1.3 billion, driven by “improved film slate profitability,” a strong quarter of third-party deliveries at Paramount Television Studios and the consolidation of Skydance licensing revenues, which was offset by lower theatrical revenue.
But the linear TV business continued to drag down the company’s results, with total segment revenue falling 9% to $3.1 billion. Ad revenue fell 14% due to the sales of Telefe and Chilevision and the lapping of NCAA Final Four and Championship game advertising in the prior-year quarter. Affiliate revenue fell 6% as pay TV subscribers continued to cut the cord. However, the unit posted a profit of $1.1 billion, benefitting from Skydance merger-related cost-cutting.
“One year in, we are proud of the progress we’ve made and confident in our strategy. These results are a testament to our people, whose hard work and dedication have made them possible,” CEO David Ellison wrote in a letter to shareholders. “Looking ahead, we will build on this momentum and grow our business by investing in great storytelling, better serving audiences, and operating more efficiently to create long-term value for shareholders.”
Moving forward, Paramount expects $2.7 billion in run-rate efficiencies by year-end, up from the previous $2.5 billion projection. It also raised its full-year adjusted EBITDA outlook to $3.8 billion to $3.9 billion, maintained its $30 billion revenue forecast and expects free cash flow conversion of at least 10% before roughly $800 million of transformation costs.
For the third quarter, Paramount anticipates revenue of $6.95 billion to $7.15 billion, or 4% to 7% growth year-over-year, driven by its streaming and studios divisions with “moderating declines” in TV media, and adjusted EBITDA of $875 million to $975 million. It also expects Paramount+ subscriber growth to be flattish quarter over quarter and a streaming margin in the mid- to high-single-digits due to the seasonal timing of content expenses. Additionally, Paramount anticipates roughly $200 million in transformational costs for the quarter.
For the full year, total paid subscribers will be modestly higher compared to 2025, including approximately 4 million strategic international hard bundle exits, while streaming profit will grow year over year and be weighted more meaningfully to the first half of the year due to the timing of programming investments in the third and fourth quarters.
While studio profitability is expected to increase year over year, theatrical revenue will come in lower due to lower average box office revenue per film across more releases in 2026 as it ramps up its theatrical slate in 2027 and beyond. Paramount also expects continued headwinds to affiliate revenue, a moderation in linear advertising declines driven by political spending in the back half of 2026, as well as growth in adjusted EBITDA. Corporate expenses are also expected to hit $1.5 billion for the year.
Paramount shares were down 0.86% in after-hours trading on Tuesday following the quarter’s results.
Paramount remains ‘highly confident’ in WBD merger closing as antitrust trial set for March 2027
The latest results come as the company’s pending $110 billion merger with Warner Bros. Discovery has been put on hold after a group of 12 state attorneys general secured a temporary restraining order against the merger, delaying its closing to as early as mid-August.
The litigation with the AGs and the Writers Guild of America is moving to a 12-day antitrust trial set to begin on March 2, 2027. Paramount said it would push the closing of the merger back until five days after the outcome of a trial, or June 1, 2027, whichever comes earliest.
During its earnings call on Tuesday, Ellison said that management remains “highly confident” in the merger closing.
“We continue to believe very strongly that the combination of these two businesses create a stronger competitor that is good for Hollywood, good for consumers, and good for the creative community,” Ellison told analysts. “We’re absolutely open to finding a solution out of court, but we also really believe that we’ll win at trial. We believe that the facts and the law are are on our side.”
The decision to hold a trial in 2027 will trigger the $110 billion deal’s 25 cent per share “ticking fee,” which takes effect starting Oct. 1 and translates to payout of roughly $650 million per quarter, or $7 million per day, until closing.
By the time the trial starts, David Ellison will be on the hook for at least $1 billion in ticking fees. Paramount could also face up to approximately $190 million in external financing costs if the deal isn’t closed until June. In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.
Chief Financial Officer Dennis Cinnelli said that Paramount’s $1.6 billion in cash and $3.2 billion in undrawn revolver capacity is sufficient to fund the business through the extended timeline.
In addition to the state AGs and WGA, a Paramount shareholder and a group of consumers filed separate lawsuits to block the merger, though the latter was denied a preliminary injunction after a judge ruled that they failed to show irreparable harm or that their case would have a likelihood of success.
Despite the lawsuits, the deal already received approval from the U.S. Department of Justice and Warner Bros. shareholders. The European Commission also cleared the deal with conditions, including Paramount’s exit from United International Pictures.
Other countries where the deal has received clearance or where relevant waiting periods have expired include Australia, Austria, Brazil, Canada, China, Kuwait, Saudi Arabia, Serbia, South Africa, Ukraine, Montenegro, New Zealand, and North Macedonia. Foreign direct investment authorities in Spain, Germany, Slovenia, Belgium, Czechia, Italy, France and Romania have also signed off.
However, the United Kingdom’s Secretary of Culture, Media and Sport Lisa Nandy previously said she is “minded to intervene”. The country’s Competition and Markets Authority will decide whether to clear the merger or refer it for a more in-depth Phase 2 investigation by Friday.
In addition to the UK, the U.S. Federal Communications Commission is reviewing the foreign investment in the deal, though a specific timeline for completion has not been publicly announced.
More to come…
