Paramount lifts outlook as streaming grows despite merger uncertainty

MUMBAI: The credits may have rolled on the quarter, but the biggest cliffhanger is still waiting for its ending. Paramount delivered stronger streaming momentum even as its blockbuster merger with Warner Bros. Discovery remains stuck in a legal sequel.

Paramount reported a mixed set of second-quarter results, with streaming and studio businesses offsetting continued weakness in its traditional television operations, while the company’s proposed $111 billion (around Rs 9.66 lakh crore) acquisition of Warner Bros. Discovery remains tied up in court.

The media giant posted revenue of $6.9 billion (around Rs 60,030 crore) for the quarter, up 1 per cent year-on-year. However, net earnings slipped to $41 million (around Rs 357 crore), or four cents per share, from $57 million (around Rs 496 crore), or eight cents per share, in the corresponding quarter last year.

Chief executive David Ellison said the company remains focused on executing its standalone strategy while continuing preparations for the proposed merger.

Paramount’s TV Media business, which includes CBS and its cable television networks, remained under pressure, with revenue declining 9 per cent year-on-year to $3.1 billion (around Rs 26,970 crore).

In contrast, direct-to-consumer revenue increased 9 per cent to $2.5 billion (around Rs 21,750 crore), while studio revenue jumped 16 per cent to $1.3 billion (around Rs 11,310 crore), driven by content licensing, television production and the theatrical success of Scary Movie.

Streaming continued to be the standout performer.

Paramount+ revenue rose 16 per cent to $2.1 billion (around Rs 18,270 crore), with the platform adding 2 million subscribers during the quarter to reach 81.6 million globally, representing 6 per cent year-on-year growth.

The company credited record subscriber retention to strong audience engagement driven by Dutton Ranch, UFC programming and the FIFA World Cup.

Reflecting the stronger operational performance, Paramount raised its full-year guidance and now expects adjusted EBITDA of $3.8 billion to $3.9 billion (around Rs 33,060 crore to Rs 33,930 crore) while forecasting free cash flow conversion of at least 10 per cent.

The company also increased its target for operational efficiencies, expecting to deliver more than $2.7 billion (around Rs 23,490 crore) in annualised cost savings by the end of 2026, up from its earlier target of $2.5 billion (around Rs 21,750 crore). It continues to expect more than $3 billion (around Rs 26,100 crore) in synergies from the planned Skydance-Paramount combination.

Despite the improved outlook, uncertainty surrounding the Warner Bros. Discovery acquisition continues to cast a shadow.

The deal has been delayed until 1 June 2027, or until antitrust litigation brought by 12 US state attorneys general is resolved. Shortly after the earnings announcement, a judge scheduled the trial for March 2027, rejecting Paramount’s request for a November hearing.

From 1 October, Paramount will begin paying a ticking fee of around $7 million (around Rs 61 crore) per day to Warner Bros. Discovery shareholders until the transaction closes.

Chief financial officer Dennis K. Cinelli said the company also expects to incur monthly bridge financing costs of $8 million to $9 million (around Rs 70 crore to Rs 78 crore), with total bridge-related costs reaching about $190 million (around Rs 1,653 crore) if the deal closes in June 2027.

In addition, the ticking fee amounts to 25 cents per share per quarter, or roughly $650 million (around Rs 5,655 crore) every quarter until completion.

Cinelli said Paramount ended the quarter with $1.6 billion (around Rs 13,920 crore) in cash and $3.2 billion (around Rs 27,840 crore) of undrawn revolving credit facilities, which he said would comfortably support operations, dividends and transaction-related expenses during the extended merger timeline.

While streaming continues to gain momentum and profitability expectations are improving, Paramount’s next major milestone now lies less in subscriber growth than in the courtroom, where the fate of one of Hollywood’s biggest media mergers will ultimately be decided.