Skydance Sales Grow 5% — But Warner Bros. Films Could Cost $200 Million In Profit
Paramount+ growth accelerated to 21%, while the enlarged company faces $87 billion in gross debt and a costly integration.
Skydance, which owns film studios, television networks and streaming services, posted a 5% sales increase for Paramount's third quarter, but expects Warner Bros. films to reduce fourth-quarter profit by up to $200 million against previous expectations. Monday's earnings filing puts revenue excluding Warner Bros. Discovery at $7.025 billion, versus $6.714 billion a year earlier on a pro forma basis.
Streaming And Licensing Outrun Television
Paramount+ revenue grew 21% to $2.134 billion, its fastest quarterly growth this year. Subscribers increased approximately 6%, while revenue per subscriber rose approximately 14%, helped by earlier price increases and accelerating advertising growth.
The wider streaming segment generated $2.51 billion in revenue, up 11%, and $225 million in adjusted earnings before interest, taxes, depreciation and amortization, a 9% margin. Programming investment included UFC and original shows; BET+'s integration into Paramount+ and Showtime declines reduced the segment's revenue growth by six percentage points.
Studios revenue rose 23% to $1.496 billion as licensing and productions for outside customers expanded. TV Media went the other way: sales fell 7% to $3.024 billion, with advertising down 8% and distributor revenue down 5% as pay-TV subscribers continued to leave. Cost savings helped TV Media achieve a 34% adjusted earnings margin.
Paramount Skydance earned $73 million, or $0.06 per diluted share. Operating profit was $368 million after $187 million in restructuring and transaction costs; adjusted earnings before interest, taxes, depreciation and amortization were $1 billion, up 0.3% year over year.
Warner Films Change The Outlook
Paramount completed the purchase of Warner Bros. Discovery on October 6, adding HBO, CNN and Warner Bros. studios. Because the deal closed after September ended, these quarterly results cover Paramount Skydance; the acquired businesses enter reported results in the fourth quarter.
The enlarged company makes and licenses films and television shows, sells advertising and collects subscription and distributor fees. Its operations now span Skydance Studios, Skydance Direct-to-Consumer and Skydance TV.
Management expects Warner Bros.' weaker film performance to more than offset improvements in Paramount's theatrical releases, slowing fourth-quarter Studios revenue growth and delivering the potential $200 million profit hit. Paramount alone would still be on track for the high end of its previous 2026 adjusted earnings outlook, at $3.9 billion.
Skydance plans to offer HBO Max and Paramount+ together in early 2027. It will stop publishing quarterly streaming subscriber counts with fourth-quarter results, emphasizing financial performance and measures such as engagement instead.
An $87 Billion Debt Load
The acquisition required $47 billion in new equity and $57 billion in new secured borrowing. Following the closing and related financing, gross debt stood at $87 billion, compared with $15 billion before the purchase. Cash was approximately $10 billion, partly reserved for employee equity payments and repayment of WBD's securitization program.
Skydance targets at least $6 billion in annual savings after reinvestment within three years. Management expects 30% of those savings in the first year and 70% through the second, through measures including consolidated corporate functions, marketing, technology and purchasing.
Achieving the savings will itself consume roughly $4 billion in one-time cash costs, including $1.5 billion to $2 billion in 2027. The third quarter produced $31 million in free cash flow after $174 million in restructuring, transaction and transformation payments.
Chairman and CEO David Ellison and co-CEO Ynon Kreiz wrote, "Growing our business and paying down debt are our top priorities." They pledged excess cash beyond business reinvestment and the current dividend to debt repayment until the company reaches its leverage target.
Skydance will deliver its 2027 forecast with fourth-quarter results and switch to annual guidance. An investor day is planned for the first half of 2027.
Sources
- 8-K Filing — Skydance Corp (SKYD) — SEC EDGAR
- Exhibit ex99_q326.htm — Skydance Corp 8-K exhibit — SEC EDGAR
- Skydance First Earnings Release Post-Warner Deal Q3 2026 Revealed — hollywoodreporter.com
- Paramount+, HBO Max Bundle Is Coming Ahead of Skydance Streamer Merger - Business Insider — Business Insider
- Skydance Q3 Profit Powered By Studios, Streaming — variety.com
- Skydance Floats First Earnings Report As Hollywood Mega-Studio — deadline.com
- HBO Max Subscriber Losses Temper Skydance Streaming Growth — Yahoo Finance
- 8-K filed 2026-10-06 — Skydance Corp (earlier disclosure) — SEC EDGAR
