Skydance — Q3 2026 Earnings Summary

Financial Performance:

• Paramount Skydance (excluding WBD) reported Q3 2026 total revenue of $7.0 billion, a 5% year-over-year increase.
• Net earnings were $73 million, and adjusted EBITDA was $1.0 billion, representing a 14% margin on revenue.
• Adjusted EBITDA margin was 14.2% (up from 12.1% in the predecessor period of Q3 2025).
• Direct-to-Consumer (DTC) revenue grew 11% year-over-year to $2.5 billion; pro forma DTC revenue including WBD grew 15%.
• Studios revenue increased 23% year-over-year to $1.5 billion.
• TV Media revenue declined 7% year-over-year to $3.0 billion.
• Free cash flow for the quarter was $31 million, inclusive of $174 million in restructuring, transaction-related, and transformation costs.
• Paramount+ revenue grew 21% year-over-year to $2.13 billion, with ARPU up approximately 14%.
• Paramount+ subscribers reached 82.2 million, a 6% year-over-year increase.
• Skydance ended the quarter with $1.4 billion in cash and cash equivalents and $15.0 billion in gross debt prior to the WBD acquisition.
• Following the October 6, 2026 acquisition of WBD, gross debt increased to $87 billion with approximately $10 billion in cash.

Guidance and Future Outlook:

• Paramount Skydance remains on track for the high end of its 2026 profitability outlook at $3.9 billion.
• For Q4 2026, the company expects continued strong DTC revenue growth and consistent TV revenue trends, though Warner Bros. film slate underperformance is expected to result in a profit impact of up to $200 million versus prior expectations.
• For 2027, the company expects continued strong DTC revenue growth, higher Studios revenue, and an increase in pro forma total company adjusted EBITDA year-over-year.
• Medium-term goals include mid-single-digit annualized revenue growth, mid-20% adjusted EBITDA margins, and more than $10 billion in free cash flow by 2030.
• The company targets at least $6 billion in annualized run-rate synergies within three years, with 30% realized in year one and 70% through year two.
• Net leverage is targeted to reduce to 3.0x by the end of 2029, reaching investment-grade credit metrics within approximately three years of closing.
• One-time cash costs to achieve synergies are expected to be roughly $1.5 to $2 billion in 2027 and roughly $4 billion throughout the transformation.
• The company will transition to providing annual guidance rather than quarterly guidance, prioritizing long-term value creation.

Business Segments and Product Lines:

• Studios: Generated $1.5 billion in revenue with $129 million in adjusted EBITDA (8.6% margin). The segment includes Paramount Pictures, Warner Bros. Pictures, New Line Cinema, DC Studios, and Skydance Animation.
• Direct-to-Consumer: Generated $2.5 billion in revenue with $225 million in adjusted EBITDA (9.0% margin). The segment includes Paramount+, HBO, HBO Max, Discovery+, and Pluto TV.
• TV Media: Generated $3.0 billion in revenue with $1.0 billion in adjusted EBITDA (34.0% margin). The segment includes CBS, MTV, Comedy Central, CNN, and TNT.
• Paramount+ revenue growth was driven by subscriber growth and accelerating advertising growth following price adjustments and the full-quarter impact of the BET+ integration.
• TV Media affiliate revenue decreased 5% year-over-year due to pay TV subscriber erosion, while advertising revenue was down 8%, partially offset by higher political advertising.
• Skydance produced 7 of the top 10 most watched series across linear and streaming and the top 4 original titles on streaming.
• Skydance is the second largest media distributor by share of total U.S. TV time, per Nielsen's The Gauge.
• A bundled offering of HBO Max and Paramount+ is planned for launch in early 2027.
• The integration of Pluto TV with Paramount+ is largely complete, moving to a unified backend system to lower operating costs and improve personalization.
• The company will no longer provide quarterly subscriber disclosures starting in Q4 2026, focusing instead on engagement and KPIs.
• Upcoming film releases include Dune: Part Three (December 18), The Angry Birds Movie 3 (December 23), and Mr. Irrelevant (Christmas Day).
• Upcoming TV content includes Harry Potter and the Philosopher's Stone (Christmas Day) and NCIS: New York.

Market and Competitive Landscape:

• Skydance is the second largest media distributor by share of total U.S. TV time after YouTube.
• The combined company has a global DTC footprint available in over 130 markets.
• CBS leads the new fall season with the #1 show on television and 11 shows up year-over-year.
• The NFL on CBS posted its highest viewership through Week 8 on record, averaging 19.6 million viewers, up 5% year-over-year.
• Sports advertising commitments have risen over 20% year-over-year for current and upcoming seasons leading into 2027.
• The combined portfolio includes marquee sports rights such as NFL, NHL, UFC, MLB, NASCAR, March Madness, and the Olympics in Europe.
• U.S. pay TV subscriber declines moderated sequentially in Q3 as genre-based packages gained traction.

Risks and Challenges:

• The Warner Bros. film slate in Q4 2026 is expected to underperform, impacting near-term revenue growth and profit.
• Integration of the WBD business carries risks regarding the realization of expected synergies and financial targets within anticipated timeframes.
• The industry faces relentless competition for attention, with legacy business models being disrupted by technology and changing consumer behavior.
• Risks include potential disruption to business operations, labor disputes, and the inability to hire or retain key creative talent.
• The company faces risks related to the incurrence of substantial indebtedness ($87 billion post-merger) and meeting financial covenants.
• Potential risks include stockholder litigation, regulatory scrutiny, and the impact of changes in consumer behavior on advertising revenues.

Management Commentary and Tone:

• Management expressed confidence in the combined company's ability to win by executing on three strategic goals: establishing Skydance as a premier global content engine, accelerating the integrated DTC platform, and optimizing the TV portfolio.
• The tone is described as having "unmistakable energy" with teams bringing "discipline and urgency."
• Management emphasized a "creative-first, audience-focused, tech-forward, and globally scaled" strategy.
• David Ellison (Chairman & CEO) and Ynon Kreiz (Co-CEO) signed the letter, stating they are "steadfast in our operational goals and financial commitments."
• Management highlighted the "playbook" from Paramount as a model for the WBD integration, citing the Paramount program's success in raising its efficiency target to over $3 billion.
• The company plans to hold an Investor Day in the first half of 2027 to share more details on the roadmap.

Other Key Points:

• The acquisition of Warner Bros. Discovery (WBD) was completed on October 6, 2026, funded with $47 billion of new equity and $57 billion of new secured debt.
• The company changed its name from Paramount Skydance Corporation to Skydance Corporation upon the closing of the WBD acquisition.
• More than 20 workstreams are underway to achieve the $6 billion synergy target, focusing on corporate overhead, marketing, technology, and procurement.
• The combined company has identified multi-billion dollar opportunities in cost reduction, including at least $2.2 billion in corporate overhead, $1.0 billion in marketing, $1.4 billion in technology, and $1.4 billion in procurement.
• The company owns a library of more than 15,000 films and hundreds of thousands of series hours.
• The NCIS franchise has generated $10 billion of lifetime revenues across platforms over 24 years.
• The company has identified approximately forty franchises that have generated at least $1 billion in revenue across platforms over the past 15 years.
• The company expects to release over 30 theatrical films and produce more than 180 television and streaming series in 2027.
• The integration of Paramount+ and HBO Max backend systems is targeted to be completed within a year of closing.