NEW YORK — The first-ever quarterly earnings report from Paramount Skydance Corp., led by CEO David Ellison, arrived after Monday’s Closing Bell for U.S. financial markets with great anticipation. And, as Ellison and the C-Suite sees it, the company that is parent to CBS has taken “early but meaningful steps” towards advancing what it calls “North Star” priorities across the first 100 days of the company’s existence.
That said, just how did Paramount Skydance perform in the third quarter?
That requires a close-up look at predecessor and successor weeks across Q3, and comparisons to last year, which Paramount Skydance provides as follows:
As shown above, Direct-to-Consumer growth continues, fueled by the Paramount+ OTT platform. As expected, TV Media was down due to poor comps associated with political advertising in Q3 2024. This was offset by a strong quarter for Filmed Entertainment, with Paramount enjoying several box office successes going into the Labor Day Weekend holiday.
While Operating Income was slightly down, adjusted OIBDA was on the rise to $953 million, on a combined basis.
Still, the EPS missed forecasts by a cool 53 cents per share, coming in at -$0.12. Analysts polled by Yahoo! Finance pegged EPS to come in at $0.41.
In a shareholder letter discussing the first quarterly earnings report from Paramount Skydance, the company outlined how since Day One it is “investing in our growth businesses anchored by our creative engines and exceptional storytelling; scaling our direct-to-consumer business globally; and driving efficiency enterprise-wide with a focus on long-term free cash flow generation.”
Add in new leadership hires, “high-impact partnerships” and increased studio investment, and Paramount Skydance believes it is driving efficiency across the organization.
A PARAMOUNT PRIORITY
Given the growth opportunities still ahead with Paramount+, the Direct-to-Consumer business is a “top priority,” driving subscribers through content and “critical back-end tech upgrades.”
Does this mean TV Media including CBS News, the CBS Television Network and CBS Owned Stations are secondary to Paramount+. Likely not, as content fuels the app and the legacy media outlets remain vibrant with key audience groups.
In Q3, combined TV Media revenue in Q3 moved to $3.796 billion, from $4.298 billion — again on difficult comps.
Direct-to-consumer revenue soared to $2.167 billion from $1.86 billion on a combined basis.
ANALYSIS FROM KEY ANALYSTS
The Q3 results from Paramount Skydance were scrutinized by several high-profile media and advertising analysts. Brian Wieser of Madison & Wall took note of the 12.1% decline in TV Media advertising revenues, noting that roughly 3% of the decline was linked to “exceptional” Q3 2024 revenue from Sky associated with underpayments of prior-year amounts owed. An additional 5% of the dip was tied to the absence of strong Q3 2024 political revenue.
Interestingly, as the full realization of DTC growth is in progress for Ellison and the executive leadership team, Wieser acknowledges that DTC advertising revenues across Paramount+, Pluto and BET+ fell by 5.5% year-over-year. Madison & Wall’s take? “Our general observations are that as a relatively mature FAST platform, and in context of an overall TV market that is experiencing secular decline, an absence of growth should be considered unsurprising,” Wieser says.
At MoffettNathanson, Senior Analyst Robert Fishman says Paramount Skydance is off “to a promising start,” including the introduction of 2026 guidance targeting $30 billion in total revenue and $3.5 billion in adjusted EBITDA.
But, Fishman says, “Questions remain about the path ahead. Like Polaris itself, Paramount Skydance’s guiding light may end up evolving in new directions – particularly if M&A becomes the next step.”
With a first priority of “supercharging its creative engine” through greater content output, this means more than $1.5 billion in spending across the DTC portfolio and for Paramount’s studios is coming. While these moves clearly reinforce the growth pillar of the company’s “North Star,” Fishman believes they also surface a central tension: “how management plans to balance the near-term cash drag of these investments — which could constrain free cash flow generation and delay deleveraging toward investment-grade status — against the long-term benefits of scale.”
MoffettNathanson’s conclusion? Paramount Skydance’s “disciplined approach to cost-cutting and refocusing content investment towards DTC (and away from linear TV) will be the primary means of unlocking these efficiencies. Still, questions remain around where Paramount Skydance will identify additional cost savings without constraining growth in its first two priorities — beyond potential reductions in TV Media content output.”
MoffettNathanson maintained a “Neutral” rating for Paramount Skydance, which trades on the Nasdaq market as “PSKY,” but raised its target price to $16 from $15 based on higher estimates. Ahead of Tuesday’s Opening Bell for U.S. financial markets, “PSKY” was trading at $16.08 in pre-market trading.
