Paramount Global (PARA) reported its first-ever streaming profit on Thursday, but its linear TV business reported a sharper-than-expected slowdown as the company prepares to merge with Skydance Media.
In the second quarter, Paramount reported operating income of $26 million for its direct-to-consumer (DTC) segment, up $450 million from the same quarter a year ago. The company reported a loss of $286 million in the segment in the first quarter.
“Our strong performance in the second quarter demonstrates that we are achieving our strategic priorities,” co-CEOs George Cheeks, Chris McCarthy and Brian Robbins said in a press release.
“We will continue to aggressively execute on our strategic plan, which focuses on transforming streaming to accelerate profitability, streamlining our organization (including achieving at least $500 million in annual cost savings), increasing free cash flow and optimizing our asset mix to improve our balance sheet.”
Shares rose more than 5% as investors digested the results. Paramount shares are down about 30% this year, according to the report.
Overall, the company reported second-quarter adjusted earnings of $0.54 per share, which beat the $0.13 analysts polled by Bloomberg had expected and was higher than the $0.10 Paramount reported in the same quarter last year.
Revenue came in at $6.81 billion, missing consensus estimates of $7.24 billion and down 11% from the $7.62 billion reported in the year-ago period. Linear ad revenue declined by double digits in the quarter, falling 11% year over year compared to the 10% decline analysts had expected.
Linear ad revenue recovered 14% in Q1. Super Bowl Ad Sales RecordBut the second quarter exposed the challenges faced by traditional media companies amid the growing cord-cutting trend.
Similar to its traditional media rival Warner Bros. Discovery, the company took a $5.98 billion goodwill impairment charge related to its cable networks.
Despite its streaming revenue, Paramount+ took a $2.8 million hit in the quarter, to $68 million, “primarily reflecting the planned exit from a hard-bundle agreement in South Korea.” However, global average revenue per user (ARPU) grew 26% year over year in the quarter. That helped Paramount+’s revenue grow 46% year over year.
The streaming division still lost $260 million for the six months ended June 30, but the company reiterated its previous guidance that Paramount+ was on track to become profitable domestically by 2025.
The film division also faced a double-digit decline in revenue, with an 18% drop, which the company attributed to “quarterly release timing” and difficult comparisons to last year’s “Transformers: Age of the Beast.”
Skydance Acquisition Imminent
Thursday’s results came as Skydance announced it was set to acquire the company, a deal expected to close in the third quarter of 2025.
Skydance, which will be valued at $4.75 billion once the all-stock deal is completed, said it will invest $6 billion in cash in Paramount, with $1.5 billion of that invested directly into the debt-ridden company’s balance sheet.
Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal executive Jeff Shell, who was fired last year for an “inappropriate relationship” with a female employee, will serve as president.
Last month, the new leadership team laid out a strategic vision for Paramount that includes $2 billion in cost cuts that will happen “quite quickly.”
“We love the creative engine of this company, but obviously a big chunk of the company is in the linear world, and we recognize that linear is challenged and in decline,” Shell said. “I think a lot of people in our business recognize that as these businesses decline, we have to operate in a different way.”
Alexandra Canal She is a senior reporter for Yahoo Finance. Follow her on X @allie_canal, linkedin, Email alexandra.canal@yahoofinance.com.
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