Skydance shares fall 8.7% after Q3 sales miss estimates

Skydance (SKYD) shares fell 8.7% at 11:25 a.m. ET on Nov. 10, from an $8.70 close.

Third-quarter figures cover Paramount Skydance alone and exclude Warner Bros. Discovery. From the fourth quarter, Skydance will report results on a consolidated basis.

Here's how the company did:

• Adjusted EPS: 45 cents per share, against a 5-cent loss expected
• GAAP diluted EPS: 6 cents per share
• Revenue: $7.03 billion vs. $6.7 billion a year earlier, against a $16.27 billion consensus estimate

Revenue grew 5%, led by Studios and direct-to-consumer, partly offset by TV Media.

Operating income was $368 million, a 5.2% margin, including $187 million of restructuring and transaction-related costs.

Adjusted EBITDA was $1.0 billion, a 14.2% margin, stable year over year.

Net earnings attributable to the parent were $73 million.

Segment results

Paramount+ revenue grew 21%. Subscribers grew about 6%, and average revenue per user about 14%.

Direct-to-consumer revenue rose 11% to $2.5 billion. Adjusted EBITDA was $225 million, a 9.0% margin. Higher costs reflected planned programming investment, including the UFC and originals.

Studios revenue rose 23% to $1.5 billion. Studios adjusted EBITDA was $129 million, an 8.6% margin.

TV Media revenue fell 7% to $3.0 billion. Advertising revenue declined 8%, and affiliate revenue fell 5%.

TV Media adjusted EBITDA was $1 billion, a 34.0% margin, benefiting from cost savings.

Warner Bros. Discovery deal

Skydance changed its name from Paramount Skydance Corporation.

The deal was funded with $47 billion of new equity and $57 billion of new secured debt. Gross debt after closing and related debt activity was $87 billion, with cash of about $10 billion.

Skydance is targeting at least $6 billion in annualized run-rate synergies within three years, with more than 20 workstreams underway.

The company plans to launch a bundled offering of HBO Max and Paramount+ in early 2027.

Beginning with fourth-quarter 2026 results, the company will no longer provide quarterly subscriber disclosures.

Guidance and outlook

The company expects a profit impact of up to $200 million versus prior expectations for the fourth quarter, from underperformance of the Warner Bros. film slate.

Standalone, Paramount Skydance remains on track for the high end of its prior 2026 adjusted EBITDA outlook of $3.9 billion, within a $3.8 billion to $3.9 billion range set Aug. 4.

Skydance will provide its full-year 2027 outlook with fourth-quarter results. Guidance will be annual going forward.

The company expects to reach mid-single-digit annualized revenue growth, mid-20% adjusted EBITDA margins, and more than $10 billion in free cash flow by 2030.

Cash and debt

Paramount Skydance ended the quarter with $1.4 billion in cash and $15.0 billion in gross debt, before the acquisition. Free cash flow was $31 million.

Top priorities are growing the business and paying down debt.

The company expects to reduce net leverage to 3.0x by the end of 2029. One-time cash costs to achieve the synergies are expected to be roughly $1.5 billion to $2 billion in 2027.