Paramount Global (PARA) shares rose 6% in premarket trading on Friday.
On Thursday, Paramount reported its first profit for its streaming division, while its linear TV business reported a larger-than-expected decline as the company took a nearly $6 billion writedown on its cable business.
In a conference call, the company also announced plans to lay off 15 percent of its U.S. workforce. The layoffs would “occur in the coming weeks and be largely completed by year-end,” management said.
The results come as Paramount prepares for its expected merger with Skydance Media, which is expected to close in the third quarter of 2025.
In the second quarter, Paramount reported operating income of $26 million for its direct-to-consumer (DTC) segment, an improvement of $450 million from the same period last year. In the first quarter, the company reported a loss of $286 million for this segment.
“Our strong second quarter performance demonstrates that we are executing on our strategic priorities,” said co-CEOs George Cheeks, Chris McCarthy and Brian Robbins in the press release.
“We will continue to aggressively execute on our strategic plan, with a focus on transforming streaming to accelerate profitability, streamlining our organization – including cost savings of at least $500 million per year – and improving the balance sheet by increasing free cash flow and optimizing our asset mix.”
Shares rose about 5% in after-hours trading as investors digested the results. Before the report was released, Paramount stock had fallen about 30% this year.
Overall, the company reported adjusted earnings of $0.54 per share for the second quarter, above analyst expectations of $0.13 polled by Bloomberg and above the $0.10 Paramount reported in the same quarter last year.
Revenue was $6.81 billion, below consensus expectations of $7.24 billion. This represents a decline of 11 percent compared to the same period last year ($7.62 billion). Linear advertising revenue fell by double digits in the quarter, falling 11 percent year-on-year. Analysts had expected a decline of 10 percent.
Linear advertising revenues rebounded 14% in the first quarter thanks to record Super Bowl advertising, but the second quarter highlighted the challenges facing traditional media companies amid the increasing trend toward cable television.
Similar to established media competitor Warner Bros. Discovery, the company had to take a $5.98 billion impairment charge on the goodwill of its cable networks.
Paramount CFO Naveen Chopra said the charges came after the company “assessed the relevant factors that could affect the fair value of our reporting units, including the estimated total market value of the company resulting from the Skydance transactions and recent indicators in the linear affiliate market.”
Although Paramount+ made a profit in the streaming segment, the company lost $2.8 million to $68 million in the quarter, “primarily due to the planned exit from a hard-hit deal in South Korea.” However, global average revenue per user (ARPU) increased 26% year-over-year in the quarter. This helped drive Paramount+’s revenue up 46% year-over-year.
The streaming division still posted a loss of $260 million for the six months ended June 30, but the company reiterated its previous forecast that it remained on track to break even domestically with Paramount+ in 2025.
During the conference call, the company said there is opportunity for further strategic partnerships and possible joint ventures between competing streaming platforms to achieve greater scale.
Meanwhile, the film division also saw a double-digit decline of 18 percent, as the company attributed the failure to the “timing of releases in the quarter” and the difficult comparison with last year’s “Transformers: Rise of the Beasts.”
Skydance takeover in sight
Thursday’s results come as the company’s impending acquisition by Skydance remains pending.
Skydance, which is valued at $4.75 billion after the all-stock transaction, said it would inject $6 billion in cash into Paramount, with $1.5 billion going directly to the company’s 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 fired last year for having an “inappropriate relationship” with an employee, will serve as president.
Last month, the new leadership team laid out its strategic vision for Paramount, which calls for $2 billion in cost cuts, $500 million of which have already been implemented. Thursday’s layoff announcement underscored those efforts.
“We love the creative engine of this company. But of course a big part of the company is in the linear world and we know the linear world is challenged and in decline,” Shell said at the time. “I think a lot of us in the industry know that when these companies are in decline, we have to run them differently.”
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send her an email at [email protected].
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