Paramount reports first quarter of streaming profits, plans 15% layoff and takes $6 billion charge on cable business
Paramount Global (PARA) on Thursday reported a profit in its streaming division for the first time while its linear TV business posted a sharper-than-expected slowdown as the company took a nearly $6 billion loss in the value of its cable business.
In a conference call, the company also announced plans to lay off 15% of its U.S. workforce. According to management, the layoffs will occur “in the coming weeks and will be largely complete by the end of the year.”
The results come as Paramount prepares for its expected merger with Skydance Media, which is scheduled to complete 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 compared to the same period last year. The company reported a loss for the segment of $286 million in the first quarter.
“Our strong second quarter performance demonstrates that we are delivering on our strategic priorities,” co-CEOs George Cheeks, Chris McCarthy and Brian Robbins said in the statement.
“We will continue to aggressively execute on our strategic plan, which focuses on transforming broadcasting to accelerate profitability, simplifying our organization — including at least $500 million in annual cost savings — and improving our balance sheet by increasing free cash flow and improving our asset mix.”
Shares rose about 5% in after-hours trading as investors digested the results. By the time the report was released, Paramount’s stock had fallen about 30% this year.
Overall, the company reported adjusted second-quarter earnings of $0.54 per share, higher than the $0.13 analysts surveyed by Bloomberg had expected and higher than the $0.10 Paramount reported in the same quarter last year.
Revenue was $6.81 billion, missing expectations of $7.24 billion and down 11% from $7.62 billion in the year-ago period. Linear ad revenue fell by double digits in the quarter, falling 11% year over year compared to the 10% decline analysts had expected.
Linear ad revenue grew 14% in the first quarter as a result of Super Bowl Ad Sales RecordBut the second quarter highlighted the challenges faced by traditional media companies amid growing trends of cord cutting.
Like its traditional media rival Warner Bros. Discovery, the company took a $5.98 billion goodwill impairment charge related to its cable networks.
Paramount Chief Financial Officer Navin Chopra said the charges came after the company “evaluated relevant factors that could impact the fair value of our reporting units, including the estimated aggregate market value of the company as indicated by Skydance transactions and recent indicators in the linear affiliate market.”
Despite the streaming business posting a gain, Paramount+ lost 2.8 million in the quarter to 68 million, “primarily reflecting the planned exit from a failed agreement in South Korea.” But global average revenue per user, or ARPU, grew 26% year-over-year in the quarter. That helped boost revenue at Paramount+ by 46% compared to the previous year.
In the six months ended June 30, the streaming division still ran at a loss of $260 million, but the company reiterated previous guidance that it remains on track to reach domestic profitability for Paramount+ in 2025.
In the earnings call, the company said there is opportunity for more strategic partnerships and potential joint ventures between competing streaming platforms in order to achieve greater scale.
Meanwhile, revenue in the film division saw a double-digit decline, falling 18%, with the company blaming “timing of releases in the quarter” and tough comparisons to last year’s “Transformers: Rise of the Beasts.”
Skydance acquisition on the horizon
Thursday’s results come as Skydance’s takeover of the company remains on the horizon.
Skydance, which will be valued at $4.75 billion after the all-stock deal closes, said it will inject $6 billion in cash into Paramount, with $1.5 billion going directly to its debt-laden balance sheet.
Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal CEO Jeff Shell, who was ousted last year over an “inappropriate relationship” with an employee, will take over as chairman.
Last month, the new leadership team laid out its strategic vision for Paramount. That includes cutting costs by $2 billion, with $500 million already underway. Thursday’s layoff announcement highlighted those efforts.
“We love the creative engine of this company. But obviously a large part of the company is in the linear world and we know that the linear world is challenged and is declining,” Shell said at the time. “I think a lot of us in the business are realizing that we have to manage this business differently as it declines.”
Alexandra Channel She is a senior reporter at Yahoo Finance. You can follow her on X @Ali_Canal, LinkedIn, You can email her at alexandra.canal@yahoofinance.com.
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