Paramount shares jumped more than 9% on Tuesday after the media giant posted its first earnings since the closing of Skydance’s $8 billion acquisition.
During the quarter, Paramount swung to a loss of $257 million and revenue growth was flat at $6.7 billion, weighed down by declines in linear advertising and affiliate fees. The results included a $13 million loss and $4.12 billion in revenue under its new owner Skydance and a $244 million loss and $2.58 billion in revenue under the media giant’s previous leadership.
But it also saw strong growth in streaming, adding 1.4 million subscribers for a total of 79.1 million globally, and raised its cost savings target to at least $3 billion, up from its previous target of $2 billion.
Paramount stock is up 42% in the past year, year to date and the past six months, but is down 2% in the past month.
Bank of America analyst Jessica Reif Ehrlich said that Paramount has the potential to be a “dynamic global media company.” But she warned there are “no easy fixes” and that the company’s turnaround will take “a significant amount of time” and “require substantial investment and investor patience.”
“It is clear PSKY has a very strong management team and there will be upward estimate revisions post results,” Ehrlich wrote. “However, there are still many unknowns on the strategic initiatives the company has undertaken and, as evidenced by prior large combinations, restructurings often take years to implement.”
MoffettNathanson analyst Robert Fishman agreed that Paramount is off to a “promising start,” but acknowledged questions remain about the path ahead, including how Skydance will identify additional cost savings without constraining growth and how much money is needed for its streaming business to “truly compete with the likes of Netflix, Disney and Amazon — all of which hold a considerable lead in global scale, content output and engagement.”
“Our broader questions now center on the trajectory required to achieve these longer-term goals — and how they may evolve alongside changes in the company’s spending allocation and potential structural shifts within its portfolio,” Fishman said. “More specifically, we continue to believe that a bid for Warner Bros. Discovery remains a logical next step for the company, one that could meaningfully alter its current trajectory.”
Paramount has submitted three separate bids to acquire all of Warner Bros. Discovery, which ranged between $19 and $23.50 per share, and were rejected for being too low. When asked about WBD and its M&A strategy in general, Paramount CEO David Ellison that there are “no must-haves.”
“We really look at this as buy versus build, and we absolutely have the ability to build to get to where we want to go,” he explained. “We believe we can achieve our goals with our creative content engines, we believe we can achieve our streaming goals and that we can drive enterprise efficiency and create value and long term free cash flow generation all through the building standpoint.”
“We’re fortunate that we have the balance sheet to be able to be opportunistic when we think that M&A will accelerate our goals, but we’re also long term disciplined owner operators,” Ellison added. “So from that standpoint, we’ll always approach things through the lens of how do we maximize value for shareholders.”
In the absence of a combination with WBD, Guggenheim Securities analyst Michael Morris said the company is running a very similar playbook to Warner post-Discovery merger in 2022, where “optimism and increased synergies yield lower financial estimates.”
“We believe that Paramount Skydance could be different from prior media industry combinations. But lowering initial profit guidance by 12% due to content acquisitions, despite raising run-rate synergy estimates by $1 billion gives us media merger déjà vu,” Morris said.
If the company does not make a transformative acquisition, Morris questioned how content production would increase while reducing headcount driven costs, whether the UFC viewership would be enough to stabilize subscription trends and how it would become the industry’s most technologically capable media company when competing against Netflix, YouTube, Amazon and others.
Paramount has said it plans to invest in excess of $1.5 billion in programming in 2026, including streaming investment in the UFC, Paramount+ originals, third-party catalog licensing and ramping up its film slate, with plans to target at least 15 movies per year over the next few years. Paramount+, Pluto TV and BET+ will also move to a unified backend infrastructure by mid-2026.
Looking ahead, Paramount expects $8.1 billion to $8.3 billion in revenue, or growth of 1% to 4% year over year, for the fourth quarter, driven by strength in streaming offset by declines in the TV Media and Filmed Entertainment segments.
It also expects $500 million to $600 million in adjusted operating income. Additionally, the company anticipates a restructuring charge of $500 million in the fourth quarter related to its “realignment and transformation.”
More than $1.4 billion in savings will have been generated between the merger closing in August and the end of 2025, with an additional $1 billion plus in cost savings planned for 2026. It expects to complete those cuts by the end of 2027, generating approximately $800 million in 2026 and between $400 million and $500 million in 2027.
In addition to its recent layoffs of roughly 1,000 employees and approximately 600 employees who took voluntary severance in its return to office push, the media giant is also looking at areas such as real estate, procurement and workflow to find efficiencies.
As part of a “comprehensive strategic review” of its assets, Paramount recently divested the Argentinian free-to-air network Telefe and is in the process of divesting Chilevisión in Chile, which the company expects to complete in the first quarter of 2026. These divestitures will reduce the company’s workforce by approximately 1,600 additional employees.
Paramount+ net adds are expected to come in lower than the third quarter due to the termination of two international hard bundles. On a full year basis, it expects streaming to be profitable in 2025, but with losses in the fourth quarter due to “seasonally-weighted content costs.” The streamer will raise prices in the U.S. in the first quarter of 2026. Theatrical revenue is also expected to be down as it reworks its film slate and is impacted by the comparison to “Mission: Impossible – The Final Reckoning.”
Starting in the first quarter of 2026, Paramount will change its reporting structure to reflect its reorganization. The move will house all production and IP in one place with Studios, including almost all licensing revenue, while the remaining TV Media segment will be comprised of its broadcasting and cable businesses.
For 2026, it is forecasting $30 billion in revenue, a 4% increase from the midpoint of its 2025 forecast, driven by streaming revenue growth due to price increases and the termination of additional international hard bundles, and an adjusted operating income of $3.5 billion, driven by progress in cost-cutting and investments in content and technology.
The company expects a “more moderate” decline in linear advertising versus 2025 due to political spending in 2026, new ad agency partnerships, the sale of Telefe and the planned sale of Chilevisión. It also expects to grow streaming profitability in 2026, driven by the UFC, South Park and “several hundred million” dollars of investment in film and series for Paramount+, and return to profitability in its Filmed Entertainment segment on a full-year basis in 2026.
Paramount expects to return to investment-grade debt metrics by the end of 2027. The company ended the quarter with $3.3 billion in cash and cash equivalents and $13.6 billion in gross debt. It also has $433 million in debt maturing within the next 12 months.
