Paramount Skydance Beats Q2 Estimates, Raises Outlook as Streaming Gains and WBD Merger Trial Set

Paramount Skydance on Tuesday reported second-quarter revenue that edged past analyst estimates, lifted by streaming subscriber growth and cost savings from last year’s Skydance merger, while linear television revenue continued to decline. The company also raised its full-year outlook and reiterated confidence in its pending combination with Warner Bros. Discovery, which faces a March 2027 antitrust trial.

Revenue totaled $6.91 billion in the period ended June 30, compared with the $6.88 billion expected by analysts surveyed by LSEG, according to CNBC. Reported net earnings attributable to the company were $41 million, or 4 cents per share, down from $57 million, or 8 cents per share, a year earlier. On an adjusted basis, TheWrap reported earnings of 18 cents per share, versus the 17 cents expected by Wall Street.

The initial market reaction was positive, with shares rising in late trading after a 2% gain during the regular session, according to Deadline. The gains later reversed, and shares were down about 1%. Paramount Skydance shares have been pressured by delays surrounding the Warner Bros. Discovery merger.

Streaming Strength Drives Profit

The direct-to-consumer segment, which includes Paramount+, BET+, and Pluto TV, posted revenue of $2.47 billion, up 9% year over year. Segment profit soared 44% to $366 million, driven by Paramount+ subscriber growth and cost efficiencies.

Paramount+ added 2 million subscribers in the quarter, bringing its global total to 81.6 million. The company said the second quarter was the "best quarter for retention in Paramount+'s history," powered by original programming such as "Dutton Ranch," live sports including UFC, and the FIFA World Cup in parts of Latin America, according to Deadline and CNBC. Paramount+ ad revenue jumped 30%, while total DTC advertising revenue grew 8%.

Paramount+ completed the integration of BET+ during the quarter, which TheWrap noted along with Showtime declines amounted to a "modest headwind" in the segment's total growth. The company remains on track to consolidate its streaming tech stacks onto a unified backend by the end of the summer.

Linear TV Revenue Falls, Studios Swings to Profit

The TV Media segment continued to weigh on results, with revenue declining 9% to $3.1 billion, according to Deadline and CNBC. Advertising revenue fell 14%, including an eight-percentage-point headwind from lapping the prior year's NCAA Final Four and Championship game advertising, and three points from the sales of Telefe and Chilevision, TheWrap reported. Affiliate revenue declined 6% as pay TV subscribers continued to cut the cord.

Despite the revenue drop, the unit posted a profit of $1.1 billion, benefiting from Skydance merger-related cost-cutting, according to TheWrap.

The Studios division swung to a profit of $36 million, compared with a $31 million loss in the year-ago period, on revenue of $1.3 billion, up 16%. Growth was driven by third-party deliveries at Paramount Television Studios and the consolidation of Skydance licensing revenues, partially offset by lower theatrical revenue from lapping the prior year's "Mission: Impossible – The Final Reckoning," Deadline reported. The division handled the revival of the "Scary Movie" franchise in a distribution deal but drew a muted response to "Jackass: Best and Last," according to Deadline.

Guidance Raised, Merger Trial Set for March 2027

Paramount Skydance raised its full-year 2026 adjusted EBITDA outlook to a range of $3.8 billion to $3.9 billion, citing savings from the Skydance merger, and said it expects over $2.7 billion in cost savings by the end of the year, above its previous projection. The company continues to expect $3 billion-plus in efficiencies from the Skydance-Paramount combination, according to Deadline and CNBC. Total revenue for 2026 is expected to be about $30 billion, representing 4% growth.

The update comes as the company's proposed $110 billion all-cash merger with Warner Bros. Discovery remains on hold. A group of 12 state attorneys general secured a temporary restraining order, and a 12-day antitrust trial is set to begin March 2, 2027, according to a court filing reported by TheWrap and CNBC. Paramount said it would push the closing of the merger to five days after the outcome of the trial, or June 1, 2027, whichever comes first.

The delay activates a "ticking fee" of 25 cents per WBD share per quarter, starting Oct. 1, which amounts to roughly $650 million per quarter, or $7 million per day, TheWrap reported. By the time the trial starts, David Ellison would be on the hook for at least $1 billion in ticking fees. Paramount could also face up to approximately $190 million in external financing costs if the deal isn't closed until June. In the event the deal does not close due to regulatory matters, Paramount would pay WBD a $7 billion termination fee.

Chief Financial Officer Dennis Cinnelli said that Paramount's $1.6 billion in cash and $3.2 billion in undrawn revolver capacity is sufficient to fund the business through the extended timeline, according to TheWrap.

CEO David Ellison told analysts on the earnings call that management remains "highly confident" in the merger closing. "We continue to believe very strongly that the combination of these two businesses create a stronger competitor that is good for Hollywood, good for consumers, and good for the creative community," Ellison said, as reported by TheWrap. "We're absolutely open to finding a solution out of court, but we also really believe that we'll win at trial. We believe that the facts and the law are on our side."

The merger has received clearance from the U.S. Department of Justice, Warner Bros. shareholders, the European Commission, and authorities in 65 jurisdictions including Australia, Brazil, China, Canada, and others, according to Deadline and TheWrap. However, the United Kingdom's Secretary of Culture, Media and Sport has said she is "minded to intervene," and the country's Competition and Markets Authority is reviewing the deal.

Separate lawsuits filed by a Paramount shareholder and a group of consumers to block the merger were also noted, though a judge denied a preliminary injunction in the consumer case after ruling that the plaintiffs failed to show irreparable harm.

In a letter to shareholders, Ellison wrote: "One year in, we are proud of the progress we’ve made and confident in our strategy. These results are a testament to our people, whose hard work and dedication have made them possible."