Skydance’s highly anticipated Q3 earnings hit Monday, its first quarterly report since clinching the $81-billion acquisition of Warner Bros. Discovery on October 6. The numbers show $73 million in net income on revenue of about $7 billion for Paramount Skydance alone. Since the merger didn’t close until the current fourth quarter, most numbers won’t be consolidated with WBD until the next earnings hit.
Paramount+ revenue grew 21%, its fastest quarterly growth this year, with ARPU up roughly 14%. Studios revenue grew 23% and TV Media achieved a 34% adjusted-EBITDA margin.
The numbers, commentary by Co-CEOs David Ellison and Ynon Kreiz and call set for 5 pm ET today will be Wall Street’s longest look at the powerhouse that controls two major Hollywood studios, streaming platforms and a giant linear TV portfolio. Skydance did outline key targets and highlights it sees for the merged company: at least $6 billion of synergies within three years, reducing net leverage ratio to 3x by the end of 2029 and reaching investment-grade credit; and launching a bundled offering of HBO Max and Paramount+ in early 2027.
At Paramount Skydance, third-quarter DTC revenue rose 11% year-over-year to $2.5 billion, led by a 21% acceleration at Paramount+. DTC profit was $225 million.
Studios revenue increased 23% to $1.5 billion, reflecting a strong quarter for secondary market licensing and content produced for third parties. Profit was $129 million. Offering some color here with a warning, the co-CEOs said they “expect the Warner Bros film slate in Q4 to underperform.”
“As we integrate the businesses, we are applying the playbook we ran at Paramount: testing earlier, tailoring our marketing and release strategy to the size of each opportunity, enhanced with real-time market data and strengthening the slate we greenlight.”
Paramount Pictures will double its output to 15 releases in 2026. Last quarter, PAW Patrol: The Dino Movie, grossed more than $160 million worldwide, and David Ayer’s Heart of the Beast, starring Brad Pitt, has grossed more than $180 million globally.
Paramount Pictures and Warner Bros Pictures releases include The Cat in the Hat, which opened Friday; Ebenezer, starring Johnny Depp, coming this weekend; and Focker-in-Law on November 25, with Paramount distributing internationally. Dune: Part Three is out December 18; The Angry Birds Movie 3 hits December 23; followed on Christmas Day by Mr. Irrelevant, the first theatrical release under Skydance Sports’ partnership with the NFL.
TV Media revenue declined 7% to $3 billion. Advertising revenue fell 8% year-over-year, affiliate revenue was down 5% year-over-year, consistent with continued pay TV subscriber erosion. Profit in the sector was $1 billion.
The company has said it expects to generate a combined $70 billion in annual revenue. It also launches with well over $80 billion in debt. Some Wall Streeters fear the leverage may be crippling. Others are more sanguine but note little margin for error.
“They have not done a lot to lay out the strategy. How do you integrate WBD? What does this company look like?” asked Rich Greenfield of Lightshed Parters on CNBC.
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Questions posed by him and others over the past month include: How do you protect the linear networks? Are executives ready to do battle as they head into challenging negotiations with distributors? How will they bring the debt down? Are they willing to sell assets? Can they creatively reduce leverage? What’s coming in terms of transaction related write-downs, restructuring and deal costs? What about NFL risk? The opt-out is 2029, but there’s technically a 2027 change in control provision the league could trigger.
Leverage and integration risks are high, TD Cowen analyst Doug Creutz said in a recent note.
“The strategic case for owning Skydance here is scale in content, and on that measure, the combination has no peer,” says a more upbeat Daniel Turnos of StoneX. “We also do not believe that they will default either, which is the biggest fear today.”
Skydance has committed to releasing 30 films annually, increasing to 32 films, over a five-year settlement period with state attorneys general who had sued to block the merger. It is targeting $30 billion in combined content spending, has the most diverse film and television library of any studio, the largest theatrical output in the industry, and more than 200 million streaming subscribers, he noted.
Since the deal close on October 6, the company has been setting its management team and announced major reshuffling of the decks with high-profile appointments, new teams across the sprawling media empire, and surprising ousters – including of DC Studios’ James Gunn and Peter Safran announced earlier Monday.
In a letter to shareholders Monday that included the numbers, Ellison and Kreiz promised that, “Growing our business and paying down debt are our top priorities, and we strongly believe we can achieve both simultaneously. We expect to reduce net leverage to 3.0x by the end of 2029, reaching investment grade credit metrics within approximately three years of closing. To get there, we expect to ramp our annual free cash flow to more than $10 billion in 2030. One-time cash costs to achieve the synergies are expected to be roughly $1.5 to $2 billion in 2027 and roughly $4 billion throughout our transformation, 60% to 70% of which will impact 2027 and 2028, and have been contemplated in our financial and leverage outlook.”
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They added: “Until we reach our leverage target, we will use excess cash, beyond our reinvestment into the business and our current dividend, to repay debt. We came together to build something bigger, bolder and better, with the stories, the technology and the scale to win. We’ll move quickly over the coming months and share more with investors, partners and consumers at an Investor Day in the first half of 2027. There is still a lot to work through, but our vision is clear, and we are steadfast in our operational goals and financial commitments. We are confident in our plan, excited for what’s ahead and just getting started.”
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