Paramount Global (PARA) reported third quarter earnings before the bell on Friday that showed further improvement in its streaming business it gets ready to combine with Skydance Media.
The media giant posted its second quarter of profit in a row for the segment. For the first nine months of the year, streaming losses stand at $211 million, a nearly $1 billion improvement from the $1.18 billion the company lost through the first nine months of last year.
But overall revenue in the quarter missed expectations as the company booked continued declines in its linear TV business and saw a pullback in its studios 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.
Revenue came in at $6.73 billion, missing Bloomberg consensus expectations of $6.95 billion and was a 6% drop compared to the $7.13 billion seen in Q3 2023
Paramount reported adjusted earnings per share of $0.49, versus $0.30 in the year-earlier period. Consensus expectations were for earnings to come in closer to $0.23 a share.
Streaming was a bright spot in the quarter. Paramount reported operating income for its direct-to-consumer (DTC) segment of $49 million, a $287 million improvement from the prior-year period.
Analysts had expected a loss for this segment of $161.5 million after the company reported operating income of $26 million in the second quarter, following a loss of $286 million in the first quarter.
Management warned on the earnings call that, despite the two quarters of streaming profits, the DTC division will post a loss in the fourth quarter.
The streamer currently boasts 72 million total subscribers after gaining 3.5 million net additions in the third quarter. The gains are mostly due to the return of NFL and college football, in addition to original series like “Tulsa King” and post-theatrical releases like “A Quiet Place: Day One” and “If.”
Analysts had expected subscriber gains of 2.4 million, compared to the 2.7 million net additions the company reported a year ago.
Outside of subscriber strength, Paramount saw an 18% year-over-year jump in streaming advertising revenue.
On the flip side, linear advertising revenue once again declined, though it did improve on a sequential basis. The segment dropped 2% year over year, compared to an 11% drop in Q2. Consensus estimates had pegged segment revenues to fall 5%.
Linear profits also fell 19%, continuing their plunge amid greater cord-cutting trends that have slowed carriage-free growth and pressured distribution rates.
Paramount recently took a nearly $6 billion write-down on the value of its cable business as a result, in addition to announcing plans to lay off 15% of its US workforce. The layoffs are expected to be completed by the end of the year.
In the third quarter, the company reported a $104 million charge related to the value of its FCC licenses and a separate $321 million charge tied to severance payments following its recent layoffs and the exit of former CEO Bob Bakish.
Meanwhile, revenue from its studios segment nosedived 34% compared to the prior year, driven by a 71% plunge in theatrical revenue “reflecting the number and timing of releases in the quarter compared to the prior year.”
Friday’s results come with Skydance’s pending takeover of the company on the horizon.
Skydance, which will be valued at $4.75 billion following the all-stock deal’s completion, said it would inject $6 billion in cash into Paramount. Of that, $1.5 billion will go directly into its debt-ridden balance sheet.
Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal executive Jeff Shell, ousted last year over an “inappropriate relationship” with a female employee, will serve as president.
Over the summer, the new leadership team laid out its strategic vision for Paramount. This includes $2 billion in cost cuts with $500 million 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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