Paramount Global’s Q3 Earnings: A Pivotal Moment Ahead of Skydance Merger
As Paramount Global prepares to release its third-quarter earnings on Friday, investors are keenly focused on the entertainment giant’s progress in cleaning up its balance sheet and revamping its streaming business. The company’s upcoming merger with Skydance Media, slated to close in the first half of 2025, adds an extra layer of significance to these results.
Streaming Business: A Mixed Bag
Analysts expect Paramount to report a direct-to-consumer (DTC) loss of $161.5 million for the quarter, a narrower loss than the previous year but a reversal from the surprise profit in Q2. Despite this, the company remains committed to reaching domestic Paramount+ profitability in 2025. The streaming service currently boasts 68.4 million total subscribers, having lost 2.8 million users in Q2 due to the exit of a hard bundle agreement in South Korea. However, gains are expected this quarter, driven by the return of NFL and college football.
Revenue and Earnings Expectations
Wall Street consensus estimates point to revenue of $6.95 billion, down from $7.13 billion in the same period last year. Adjusted earnings per share (EPS) are expected to come in at $0.23, a decline from $0.30 in the year-earlier period. Paramount+ subscribers are anticipated to increase by 2.4 million net additions, down from 2.7 million net additions a year ago.
Linear Advertising Revenue: A Declining Trend
Linear advertising revenue is expected to decline once again, although analysts predict an improvement on a sequential basis. Consensus estimates suggest a 5% drop in segment revenue from the year-earlier period, following an 11% decline in Q2. The ongoing cord-cutting trend has slowed carriage-free growth and pressured distribution rates, leading to a nearly $6 billion write-down on the value of Paramount’s cable business.
Layoffs and Restructuring
The company’s efforts to streamline its operations will continue, with plans to lay off 15% of its US workforce by the end of the year. This restructuring is expected to result in $2 billion in cost cuts, with $500 million already underway.
Skydance Merger: A New Era Ahead
Friday’s results will set the stage for Paramount’s pending takeover by Skydance Media, valued at $4.75 billion. The all-stock deal is expected to inject $6 billion in cash into Paramount, with $1.5 billion going directly into its debt-ridden balance sheet. The new leadership team, led by Skydance CEO David Ellison and former NBCUniversal executive Jeff Shell, has outlined a strategic vision for the combined company, including significant cost cuts and a focus on growth initiatives.
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