Paramount Reports Blowout Q1 Earnings, Plans 15% Layoffs, Takes $6 Billion Charge on Cable Business

Paramount Global (PARA) saw its shares rise 6% in pre-market trading on Friday.

On Thursday, Paramount reported a profit within its streaming division for the first time, while its linear TV business posted a sharper-than-expected slowdown, with the company writing down the value of its cable business by about $6 billion.

In a conference call, the company also announced plans to lay off 15% of its U.S. workforce. The layoffs will occur “in the coming weeks and will be substantially complete by the end of the year,” according to management.

The results come as Paramount prepares for its expected merger with Skydance Media, which is scheduled 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 year-ago period. The company reported a loss for the 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 statement.

“We will continue to aggressively execute on our strategic plan, which focuses on transforming broadcasting to accelerate profitability, simplifying our organization — including at least $500 million in annual cost savings — and improving our balance sheet by increasing free cash flow and improving our asset mix.”

Shares rose about 5% in after-hours trading as investors digested the results. When the report came out, Paramount’s stock was down about 30% this year.

Overall, the company reported adjusted second-quarter earnings of $0.54 per share, above the $0.13 analysts surveyed by Bloomberg expected and above the $0.10 Paramount reported in the same quarter last year.

Revenue was $6.81 billion, missing the consensus estimate of $7.24 billion and down 11% from $7.62 billion in the year-ago period. Linear ad revenue was down by double digits in the quarter, down 11% year over year compared to the 10% decline analysts were expecting.

Linear ad revenue enjoyed a 14% rebound in the first quarter as a result. Super Bowl Ad Sales RecordBut the second quarter highlighted the challenges faced by legacy media companies amid growing cord-cutting trends.

Similar to longtime media rival Warner Bros. Discovery, the company took a $5.98 billion goodwill impairment charge related to its cable networks.

Paramount CFO Naveen Chopra said the charges come after the company “evaluated relevant factors that could impact the fair value of our reporting units, including the estimated aggregate market value of the company indicated by the Skydance transactions and recent indicators in the linear affiliate market.”

The story continues

Despite a gain in streaming, Paramount+ lost $2.8 million in the quarter to $68 million, “primarily reflecting the planned exit from a failed deal in South Korea.” But global average revenue per user, or ARPU, grew 26% year-over-year in the quarter. That helped boost Paramount+ revenue by 46% compared to the previous year.

In the six months ended June 30, the streaming division still ran at a loss of $260 million, but the company reiterated previous guidance that it remains on track to reach domestic profitability for Paramount+ in 2025.

In the earnings call, the company said there is opportunity for more strategic partnerships and potential joint ventures between competing streaming platforms in order to achieve broader scale.

Meanwhile, revenue in the film division faced a double-digit decline, falling 18% as the company blamed “timing of releases in the quarter” and tough comparisons to last year’s “Transformers: Rise of the Beasts.”

Skydance Capture on the Horizon

Thursday’s results come as Skydance’s pending acquisition of the company still looms.

Skydance, which will be valued at $4.75 billion after the all-stock deal closes, said it will inject $6 billion in cash into Paramount, with $1.5 billion going directly to its debt-laden balance sheet.

Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal CEO Jeff Shell, who was ousted last year over an “inappropriate relationship” with an employee, will take over as chairman.

Last month, the new leadership team laid out its strategic vision for Paramount. That includes $2 billion in cost cuts, $500 million of which is already underway. Thursday’s layoff announcement highlighted those efforts.

“We love the creative engine of this company,” Shell said at the time. “But obviously a big part of the company is in the linear world and we know that linearity is being challenged and declining in a different way because it’s declining.”

Alexandra Channel He is a senior correspondent at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, And email it to [email protected].

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