Paramount Global (PARA) reported third-quarter results before the bell on Friday, showing further strength in streaming as the company reported its second profitable quarter for the segment, increasing profitability by more than $1 over the past four quarters billion improved.
But revenue fell short of expectations as the media giant saw continued declines in its linear TV business and declines in its studio segment.
The report comes as the entertainment giant focuses on cleaning up its balance sheet ahead of its merger with Skydance Media, which is expected to close in the first half of 2025.
Shares rose more than 1% in premarket trading immediately after the results.
Revenue came in at $6.73 billion, missing Bloomberg consensus expectations of $6.95 billion and down 6% from $7.13 billion in Q3 2023.
The company reported adjusted earnings per share of $0.49, compared to $0.30 a year earlier. Consensus expectations had expected earnings to be closer to $0.23 per share.
Streaming was a bright spot in the quarter, with Paramount reporting operating income for its direct-to-consumer (DTC) segment of $49 million, an improvement of $287 million from the same period last year.
Analysts had expected a loss of $161.5 million for the segment after it reported operating income of $26 million in the second quarter, following a loss of $286 million in the first quarter.
In the nine months ended September 30, the streaming division is still operating at a loss of $211 million, but the company is maintaining previous expectations that it remains on track to reach domestic profitability for Paramount+ by 2025.
The streamer currently has 72 million total subscribers, following 3.5 million net additions in the quarter, thanks largely to the return of the NFL and college football, along with original series like “Tulsa King” and post-theatrical releases like “A Quiet Place.” : Day One” and “If.”
Analysts had expected a subscriber increase of 2.4 million, compared to the 2.7 million net additions the company reported a year ago.
Aside from the strong subscriber base, the company saw an 18% year-over-year increase in streaming ad revenue.
On the other hand, linear ad revenues fell again but improved on a sequential basis. The segment declined 2% year over year, compared to the 11% decline in the second quarter. Consensus estimates projected segment revenue to decline 5%.
Straight-line profits also fell 19%, continuing their decline amid larger cord-cutting trends, which have slowed growth in transit-free products and put pressure on distribution rates.
As a result, the company recently took a nearly $6 billion writedown on the value of its cable business, in addition to announcing plans to lay off 15% of its U.S. workforce. The layoffs are expected to be completed by the end of this year.
Meanwhile, studio segment revenue fell 34% compared to the prior year, driven by a 71% decline in theatrical revenues “reflecting the number and timing of releases in the quarter compared to the prior year.”
Friday’s results come as the company’s upcoming acquisition by Skydance looms.
Skydance, which will be valued at $4.75 billion upon completion of the stock deal, said it would inject $6 billion in cash into Paramount, with $1.5 billion going directly to its debt-ridden balance sheet.
Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal executive Jeff Shell, who was ousted last year over an “inappropriate relationship” with a female employee, will become president.
Over the summer, the new leadership team laid out its strategic vision for Paramount. This includes $2 billion in cost savings, of which $500 million is already underway.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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