Paramount Global (PARA) reported its first profit in its streaming division on Thursday, while its linear TV division reported a bigger-than-expected slowdown as the company took a nearly $6 billion writedown on its cable division.
During a conference call, the company also announced plans to lay off 15% of its U.S. workforce. The layoffs will “take place in the coming weeks and will be largely completed by the end of the year,” management said.
The results come as Paramount prepares for its anticipated merger with Skydance Media, which is expected to close 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 from the same period last year. The company reported a loss for this 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 press release.
“We will continue to aggressively execute on our strategic plan, which focuses on transforming streaming to accelerate profitability, streamlining our organization – including at least $500 million in annual cost savings – and improving our 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, Paramount shares had fallen about 30% this year.
Overall, the company reported adjusted earnings of $0.54 per share for the second quarter, higher than the $0.13 analysts polled by Bloomberg had expected and higher than the $0.10 Paramount reported in the same quarter last year.
Revenue came in at $6.81 billion, missing consensus expectations of $7.24 billion and down 11% from the $7.62 billion reported in the year-ago period. Linear ad revenue fell by double digits in the quarter, down 11% year over year compared to the 10% decline analysts had expected.
Linear ad revenue grew 14% in the first quarter, driven by record ad volumes during the Super Bowl. But the second quarter highlighted the challenges traditional media companies face as cable cancellations continue to grow.
Like longtime media rival Warner Bros. Discovery, the company recorded a $5.98 billion goodwill writedown related to its cable networks.
According to Paramount CFO Naveen Chopra, the lawsuit comes after the company “assessed relevant factors that could affect the fair value of our reporting units, including the estimated aggregate market value of the company as evidenced by the Skydance transactions and recent indicators in the linear affiliate market.”
Despite gains in the streaming segment, Paramount+ lost $2.8 million in the quarter to $68 million, “primarily due to the planned exit from a hard bungle agreement in South Korea.” But global average revenue per user, or ARPU, rose 26% year over year in the quarter. That helped boost revenue at Paramount+ by 46% compared to the prior year.
For the six months ended June 30, the streaming division still lost $260 million, but the company reiterated previous guidance that it is on track to achieve domestic profitability for Paramount+ by 2025.
During its earnings presentation, the company said there are opportunities for more strategic partnerships and potential joint ventures between competing streaming platforms to increase scale.
Meanwhile, revenue at the film division fell by double digits, 18 percent. The company blamed the failure on the “timing of the releases in the quarter” and said the film struggled to compare with last year’s “Transformers: Rise of the Beasts.”
Skydance takeover imminent
Thursday’s results come as the company’s acquisition by Skydance remains on the horizon.
Skydance, which will be valued at $4.75 billion after the all-stock deal closes, said it would pump $6 billion in cash into Paramount, $1.5 billion of which would go directly to pay off the company’s debt.
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 a female employee, will serve as president.
Last month, the new leadership team unveiled their strategic vision for Paramount, which includes $2 billion in cost savings, $500 million of which is already underway. Thursday’s announcement of layoffs underscored those efforts.
“We love the creative engine of this business. But obviously a large part of the business is in the linear world and we know that linear is challenged and in decline,” Shell said at the time. “I think many of us in the business know that we have to run these businesses differently as they decline.”
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send her an email at alexandra.canal@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that affect stock prices
Read the latest financial and business news from Yahoo Finance