Finance
Paramount Reports First Quarter Streaming Profits, Plans 15% Layoff, Takes $6 Billion in Cable Business
Paramount Global (PARA) reported a profit for the first time in its streaming division on Thursday, while its linear TV business reported a sharper slowdown than expected as the company took a nearly $6 billion writedown on the value of its cable business.
During a conference call, the company also announced plans to lay off 15% of its U.S. workforce. The layoffs will “occur over the coming weeks and be largely completed by the end of the year,” management said.
The results come as Paramount prepares for its expected merger with Skydance Media, expected to close in the third quarter of 2025.
In the second quarter, Paramount reported operating income for its direct-to-consumer (DTC) segment of $26 million, an improvement of $450 million from the same period last year. The company reported a loss for this segment of $286 million in the first quarter.
“Our strong performance in the second quarter demonstrates that we are delivering on our strategic priorities,” co-CEOs George Cheeks, Chris McCarthy and Brian Robbins said in the press release.
“We will continue to aggressively execute our strategic plan, which focuses on transforming streaming to accelerate profitability, streamlining our organization – including at least $500 million in annualized cost savings – and improving the balance sheet through free cash flow grow and optimize our asset mix. “
Shares rose about 5% higher in after-hours trading as investors digested the results. The report shows that Paramount shares are down about 30% this year.
Overall, the company reported second-quarter adjusted earnings of $0.54 per share, above the $0.13 expected by analysts polled by Bloomberg and higher than the $0.10 that Paramount reported in the same quarter last year.
Revenue came in at $6.81 billion, missing consensus expectations of $7.24 billion and down 11% from the $7.62 billion reported in the same period last year. Linear advertising revenue fell by double digits in the quarter, declining 11% year-over-year compared to the 10% decline analysts had expected.
As a result, linear advertising revenues recovered 14% in the first quarter record sales of Super Bowl adsbut the second quarter highlighted the challenges traditional media companies have faced as a result of the larger cord-cutting trends.
Like older media competitor Warner Bros. Discovery, the company took a $5.98 billion goodwill impairment charge related to its cable networks.
Paramount CFO Naveen Chopra said the charge comes after the company “assessed the relevant factors that may affect the fair value of our reporting units, including the estimated aggregate market value of the company as indicated by the Skydance transactions and recent indicators in the linear affiliate market.”
Despite posting gains in the streaming segment, Paramount+ lost 2.8 million euros to 68 million in the quarter, “primarily reflecting its planned exit from a hard deal in South Korea.” But global average revenue per user, or ARPU, grew 26% year over year this quarter. That helped boost revenue at Paramount+ by 46% compared to the previous year.
In the six months ended June 30, the streaming division is still operating at a loss of $260 million, but the company reiterated previous expectations that it remains on track to reach domestic profitability for Paramount+ by 2025.
During the earnings call, the company said there are opportunities for more strategic partnerships and possible joint ventures between competing streaming platforms to achieve greater scale.
Meanwhile, revenue in its film division faced a double-digit decline of 18%, as the company blamed the miss on “the timing of the quarter’s releases” and difficult comparisons to “Transformers: Rise of the Beasts” from last year.
Takeover of Skydance in sight
Thursday’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.
Last month, the new leadership team laid out their strategic vision for Paramount. This includes $2 billion in cost savings, of which $500 million is already underway. Thursday’s layoff announcement underscored these efforts.
“We love the creative engine of this company. But obviously a large part of the business is in the linear world and we know that linear is being challenged and declining,” Shell said at the time. “I think many of us in the industry know we have to run these businesses differently as they decline.”
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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