Paramount Global (PARA) reported third-quarter results before the bell on Friday, showing that streaming is even stronger as it prepares to combine with Skydance Media.
The media giant posted its second straight quarter of profit for the segment, meaning it improved profitability by $1 billion over the past year.
But third-quarter revenue fell short of expectations as the company posted continued declines in its linear TV business and declines in its studio segment.
The financial update 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 jumped more than 1% higher 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.
Paramount reported adjusted earnings per share of $0.49, compared to $0.30 in the same period last year. Consensus expectations were for earnings to be closer to $0.23 per share.
Streaming was a bright spot in the quarter. Paramount reported 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 the company reported operating income of $26 million in the second quarter, following a loss of $286 million in the first quarter.
For the nine months ended September 30, the streaming division still operated at a loss of $211 million. But the company maintains previous expectations that it remains on track to achieve domestic profitability for Paramount+ by 2025.
The streamer currently has 72 million total subscribers, following 3.5 million net additions in the third quarter. The gains are mainly due to the return of 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.
Outside of subscribers, Paramount saw an 18% year-over-year increase in streaming ad revenue.
On the other hand, linear advertising revenues fell again, although they improved on a sequential basis. The segment declined 2% year over year, compared to the 11% decline in the second quarter. Consensus estimates projected a 5% decline in segment revenue.
Straight-line profits also fell 19%, continuing their decline amid larger cord-cutting trends that have slowed transit growth and put pressure on distribution rates.
As a result, Paramount recently implemented 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 ahead of the company’s impending acquisition by Skydance.
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. Of that, $1.5 billion will go directly to the 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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