Paramount Skydance outlines $30B 2026 revenue target as company accelerates D2C and content investment

Earnings Call Insights: Paramount Skydance Corporation (PSKY) Q3 2025

MANAGEMENT VIEW

* David Ellison, Chairman & CEO, opened with, "We launched the new Paramount just 96 days ago. And as we approach the 100-day mark, we're encouraged by the meaningful progress we've made in a relatively short time." He emphasized the company's strategic focus on uniting entertainment assets, spanning film, television, animation, interactive games, news, and sports, to achieve scale in a competitive media landscape.
* Ellison stated, "We have increased our run rate efficiency target from $2 billion to at least $3 billion." He also announced a plan to grow theatrical output, targeting at least 15 movies per year over the next few years, beginning in 2026, and incremental programming investments exceeding $1.5 billion across theatrical and direct-to-consumer platforms in the coming year.
* Ellison added, "In Q3, we added 1.4 million new subscribers for a total of 79 million," and highlighted Paramount+ as a top three most sought-after streaming platform over the past 12 months.
* Andrew Warren, Executive VP & Interim CFO, stated, "We definitely want to get to investment grade so that we do want to get delever. And three, the goal is to have high cash flow conversion as we get through the initial investment cycle."

OUTLOOK

* The company issued a letter to shareholders detailing 2026 guidance, including total revenue of $30 billion, driven by strong growth in direct-to-consumer (D2C) revenue and global profitability, as well as adjusted OIBDA of $3.5 billion.
* Management announced an increase in the run rate efficiency target to at least $3 billion, up from the prior $2 billion target.
* Plans to make incremental programming investments in excess of $1.5 billion across both theatrical and D2C platforms over the next year were reiterated.
* The company aims to grow theatrical output to at least 15 movies per year starting in 2026.

FINANCIAL RESULTS

* Paramount+ added 1.4 million new subscribers in Q3, reaching a total of 79 million, with segment revenue growth up 17% and Paramount+ revenue growth up 24% for the quarter, according to Ellison.
* The company highlighted an increased run rate efficiency target and noted that free cash flow for 2026 will be negatively impacted by about $800 million in transactional and transformation costs but will be positive on an adjusted basis, as Warren explained.
* Management referenced significant content write-downs that have benefited Q3 results and will continue to impact future quarters, with details on the size and scope to be provided in future updates.

Q&A

* Robert Fishman, MoffettNathanson LLC: Asked about global scaling for Paramount+ and balancing subscriber growth with international investment reductions. David Ellison explained the strategy focuses on increased investment in content and technology, and highlighted the convergence of streaming services onto a unified platform to enhance user experience and engagement. Jeffrey S. Shell expanded on global content investments, particularly in filmed entertainment and the strategic use of Pluto for low-ARPU international markets.
* Steven Cahall, Wells Fargo: Inquired about the scale of investment and studio turnaround. Ellison detailed a $1.5 billion incremental content investment and the aim to double the annual film slate, while Warren emphasized the focus on ROI, deleveraging, and high cash flow conversion.
* Jessica Reif Cohen, BofA Securities: Sought clarity on the intersection of tech and entertainment, and digital ad sales partnerships. Ellison described ongoing tech platform unification, Oracle Fusion integration, and AI deployment. Shell discussed marketing cost savings and new revenue commitments through partnerships with Publicis and IPG.
* Benjamin Swinburne, Morgan Stanley: Asked about M&A philosophy and investment-grade targets. Ellison indicated a build-versus-buy approach for growth, while Shell and Warren discussed recent divestitures and the focus on achieving investment grade across ratings agencies.
* Richard Greenfield, LightShed Partners: Questioned the UFC strategy and content investment guidance reduction. Ellison described the UFC as a "unicorn" asset to drive year-round engagement and subscriber growth, and Warren attributed revised OIBDA guidance to increased content investment and greater efficiency targets.
* John Hodulik, UBS: Probed D2C profitability and free cash flow trends. Warren stated, "For '26, we know there's going to be about $800 million of transactional and transformation costs. So on a reported basis, it will be negative. But on an adjusted basis, taking out those kind of onetime items, it will still be positive."
* Kutgun Maral, Evercore: Asked about the allocation and ROI of the $1.5 billion programming investment. Ellison and Warren described a unified review process across verticals to ensure investments drive long-term value and share price appreciation.

SENTIMENT ANALYSIS

* Analysts repeatedly pressed for clarity on investment scale, content ROI, international strategy, and the impact of major content deals, reflecting a slightly skeptical but engaged tone. Questions on profitability, content write-downs, and M&A direction indicated concern for near-term financial health and strategic discipline.
* Management maintained an upbeat, confident tone throughout, emphasizing progress, efficiency gains, and long-term vision. Ellison frequently referenced confidence in the new strategy and described ongoing initiatives as "energized" and "well positioned."
* Compared to the previous quarter, management's tone shifted from the transitional and reflective remarks of the outgoing team to a more forward-looking and assertive stance. Analysts' tone remained probing but focused more on execution risk and financial discipline amid heightened investment.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter marked the first under the combined Paramount Skydance entity, with a new management team and strategic priorities centered on D2C scaling, technology integration, and operational efficiency.
* While the previous quarter celebrated content-driven D2C growth and cost reductions, the current call focused on substantial new investment plans, a raised efficiency target, and an ambitious $30 billion revenue target for 2026.
* Guidance now features higher programming investment and theatrical output, and the run rate efficiency target increased by $1 billion.
* Management's confidence in technology as a lever for operational improvement and creative output took center stage, contrasting with the more legacy content-centric focus of the prior quarter.
* Analysts shifted from querying about streaming performance and linear declines to probing investment ROI, integration risks, and the financial impacts of large content deals.

RISKS AND CONCERNS

* Management cited $800 million in transactional and transformation costs expected to weigh on 2026 reported free cash flow, but indicated positive adjusted free cash flow after these one-time items.
* Analysts highlighted concerns about the returns on significant content and sports rights investments, particularly regarding the UFC acquisition and the $1.5 billion incremental programming spend.
* The integration of multiple streaming platforms and the successful unification of technology stacks were presented as both a challenge and an opportunity for future growth and efficiency.
* Content write-downs were noted as impacting quarterly results, with the scale and impact to be clarified in future disclosures.

FINAL TAKEAWAY

Paramount Skydance's first quarter as a unified company was marked by ambitious targets and bold investment in content, technology, and operational efficiency. Management set a clear 2026 revenue goal of $30 billion and raised its run rate efficiency target, while outlining major programming and film output expansion. While transitional costs and integration risks remain, leadership expressed confidence in delivering profitable growth through a scaled D2C business, global content investments, and strategic partnerships across technology and advertising.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/psky/earnings/transcripts]

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