Q1 2026 Earnings Call Transcript

Good afternoon. My name is Krista and I will be your conference operator today. I would like to welcome everyone to Paramount Skydance Corporation Class B Common Stock's First Quarter 2026 Earnings Conference Call. At this time, all lines have been muted to prevent any background noise.

After the speakers' remarks, there will be a question and answer session. To ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw your question, please press star 1 again. I would now like to turn the call over to Kevin Creighton, Paramount Skydance Corporation Class B Common Stock's EVP of Corporate Finance and Investor Relations.

You may now begin your conference call.

Good afternoon and thank you for taking the time to join us for the Paramount Skydance Corporation Class B Common Stock Q1 2026 earnings call. I am Kevin Creighton, EVP of Corporate Finance and Investor Relations. Joining me today is our Chairman and Chief Executive Officer, David Ellison, our Chief Financial Officer, Dennis Cinelli, and our Chief Strategy and Operating Officer, Andrew Gordon. As a reminder, we will be making forward-looking statements today that involve risks and uncertainties.

Our remarks will also include non-GAAP financial measures. Reconciliations of these measures can be found in our earnings letter or in our trending schedules which contain supplemental information. These can be found on our Investor Relations website. I will now turn it over to David for a few brief remarks before we take analyst questions.

Good afternoon, everyone. As you have seen in our first quarter results and most recent shareholder letter, we are off to a strong start in our first full year at Paramount Skydance Corporation Class B Common Stock. The progress we have made in just nine months is a testament to the amazing team we have assembled that has worked tirelessly and with great conviction to deliver on all areas of our business. We are executing deliberately against our priorities and seeing tangible results: attracting top creative talent, nearly doubling our film slate, delivering shows audiences love, and greenlighting dozens of new and returning series while achieving our financial goals.

At the same time, we are transforming how we operate, unifying platforms, data, and workflows, and embedding advanced technology to drive efficiency, better serve our partners, and elevate the overall consumer experience. Across the business, we are getting things done, and it is translating into real momentum. As a storytelling company, our top priority is and always will be delivering great films and television series from the world’s leading creators that resonate with broad global audiences. Recent highlights include Scream 7, which became the highest-grossing installment in the franchise’s 30-year history, Landman, now the most-watched series in Paramount Plus history, and the continued strength of CBS, which has 13 of the top 20 primetime series including all four of the top new series, an achievement no broadcast network has matched since the early 1990s.

On streaming and sports, engagement remained strong, with more than 10 million households watching over 100 million hours of UFC programming on Paramount Plus, and CBS Sports delivering the most-watched final round of The Masters in over a decade. These are just a few examples of the progress and growth taking place companywide. We are also making meaningful strides improving our products to deliver more dynamic, personalized experiences and superior monetization. New features such as enhanced mobile experiences, short-form video, and more advanced recommendations are helping us better serve consumers.

We are leveraging AI-powered capabilities across the businesses, including our agentic data warehouse and Precision Plus, our targeting and optimization platform, to move faster and operate with greater effectiveness in support of our advertising partners. While there is still significant work ahead, we remain confident in our strategy and the trajectory we are on. Finally, we continue to make steady progress towards completing the Warner Bros. Discovery transaction, which we believe will accelerate our transformation, strengthen our competitive position, and enhance our ability to help shape the next era of entertainment.

To date, we have satisfied our U.S. HSR obligations and there are no statutory impediments remaining, and we continue to advance through European and other international regulatory approvals, several of which have already been secured. Earlier in April, we announced a broad syndication of the PIPE equity commitment to strategic investors, underscoring continued investor confidence, secured $10 billion in permanent financing, and syndicated the remaining $49 billion of our bridge to a group of leading banks and institutional lenders. Additionally, on April 23, WBD shareholders voted to approve the transaction.

We are pleased with the momentum and will continue to take the necessary steps to bring this deal to completion. At every stage, we remain guided by our strong conviction that the combination of these two iconic companies and their extraordinary teams will create a leading global media and entertainment company, powered by storytelling and accelerated by technology, that strengthens competition, better serves the creative community, and delivers even more compelling stories to audiences worldwide. We are excited for all that is ahead and look forward to the opportunities it will create. And with that, I will turn it back over to Kevin for your questions.

Thanks, David. Just a quick note before we open the line: given the pending transaction for WBD, we will not be taking questions on the deal today beyond what we wrote in the shareholder letter. We will now open the call for questions. Krista, please open the line.

Thank you. For any additional questions, please re-queue. Your first question comes from Sean Diffely with Morgan Stanley. Please go ahead.

Great, thanks very much. I was hoping you could comment on business transformation early learnings as you converge your tech stacks between Paramount Plus and Pluto. Any things that you could apply to a larger asset base? And then broadly, how you see AI transforming the business? You mentioned on the ad tech front, but anything else that you think is notable to call out?

Yes, absolutely. On early learnings, what I would highlight is our ability to execute and move quickly. We are on track, as discussed previously, to consolidate our three streaming services into one unified platform by the middle of this year. Those learnings will be crucial as we progress.

We have had strong execution on cost saves and efficiencies and have been delivering against our plan. With respect to the pending transaction, as Kevin said, we are going to stay away from specifics while the process is ongoing. I will turn it over to Andrew to add more on the product side.

As we integrate BET Plus, Pluto, and Paramount Plus into one tech stack, it is going to accelerate our ability to do the same upon closing with WBD. When you see the consumer product that comes out this summer, we think you will be pleased with how they function together and create a better experience both for free consumers in the FAST channel business of Pluto and for the paid subscription tiers of Paramount Plus, both ad-supported and ad-free. We remain on track for convergence, which has significant benefits across personalization and recommendations. On the front end, we are modernizing the consumer-facing technology to create more dynamic, personalized experiences.

As of April, you can see short-form video clips surfacing trailers, sports highlights, and library content in a curated, personalized feed. We are working on enhanced personalization across discovery, including AI-driven artwork, and building other mobile-optimized experiences like live stats for live sports, all designed to deepen engagement across the platform. This summer, Pluto is getting the most significant update since the inception of the platform. Across our tech and product org, approximately 80% of our engineering organization is using code-assisted technology, which is driving meaningful productivity gains and cutting approval times by more than half.

These investments accelerate how we work across the business, support our long-term DTC growth, and are foundational to where we are taking the business.

Around AI transformation, we are spinning up pods to pursue AI-based workflows in the back office—finance, HR, and operational functions. We are enabling these both on the Paramount Skydance Corporation Class B Common Stock side and, we believe, setting ourselves up for the combination, to drive meaningful efficiencies. That will benefit us today and in the future as well. One more point on Oracle Fusion, our ERP system: we achieved a major milestone in the first quarter, with the remainder of the transformation to the Oracle Fusion system for Paramount Skydance Corporation Class B Common Stock standalone targeted by early 2027. That puts us in a much better spot as part of closing with Warner Bros.

Discovery as well.

Great. Thanks, Sean. We appreciate the question.

Krista, next question, please.

Your next question comes from the line of Jessica Reif Cohen with Bank of America Securities. Please go ahead.

With WBD, you will undoubtedly have some of the best industry assets and libraries. But you really do need to integrate and execute. Are there any changes in how you are thinking about allocating capital or management attention as you integrate for the second time in two years? And then on films, you seem committed to having 30 films once you combine.

Why that many, and how do you think about the marketing and distribution needs? What will it do to elevate Paramount Skydance Corporation Class B Common Stock and the combined company?

Thanks, Jessica. Before we jump in, we want to focus most of the call on our results for the quarter and the outlook for the business. With that, I will kick it over to David.

Thanks, Jessica. Zooming out, we view our pending acquisition of Warner Bros. Discovery as a powerful accelerant to our strategy. It expands reach, enhances our ability to create the world’s most compelling stories and experiences, and positions us to build a next-generation media and technology company.

Across three pillars: production, DTC, and linear. On production, we will be the premier destination for leading creative voices. We are firmly committed to 30 theatrical films per year. We have 15 films on the calendar to release this year, up from eight last year, nearly doubling Paramount’s output.

WBD also has 15 films on its calendar this year, so together the companies are already making 30 films to date, supported by beloved franchises like Harry Potter, Top Gun, Star Trek, Looney Tunes, Game of Thrones, and Yellowstone. On DTC, the combination creates a scaled competitor, with over 200 million DTC subscribers across more than 100 countries, positioning us to compete with the leading streaming services. On linear, we would have a presence in over 200 countries and a portfolio of cable and free-to-air networks, such as CBS, CNN, TBS, TNT, and Food Network. Operationally, we are pleased with our execution at Paramount Skydance Corporation Class B Common Stock and believe we can deliver at WBD as well.

Strategically, we could not be more excited. We remain on track to complete by September. With respect, we need to stay away from further WBD specifics and focus on the company we are operating today.

Your next question comes from the line of Robert Fishman with MoffettNathanson. Please go ahead.

Hi, good afternoon. Is the current plan to allocate more of your overall company programming budget toward higher-quality content like NFL, UFC, and blockbuster Paramount movies, or do you prefer to spread your budget out to a more volume-based approach going forward? And then on a related note, after launching short videos and clips in Paramount Plus, is the goal to compete for short-form ad dollars with YouTube and TikTok, or is it primarily to drive engagement and extend the premium ad dollars you already get from your networks?

I will take the first half. A core theme for us is that quality is the best business plan—aim high and do not stop working until you get there. In today’s competitive landscape, that is essential creatively. CBS Sports has focused on big events that matter, delivering a record-setting NFL season, and one of the most successful Masters finals.

We emphasize quality and aiming high across our film and television studios as well as streaming. At the same time, we have increased our content investment this year. We have roughly doubled the output of the film studio year-over-year and nearly doubled the output of original series greenlit in DTC. We believe we can maintain the quality bar while scaling, which is essential to our growth goals.

Think about the content portfolio across our segments. In TV Media, the CBS team is managing linear declines by rightsizing programming while hitting creatively with a strong primetime lineup—13 of the top 20 shows in primetime. In DTC, this is a multiyear journey to build a portfolio that drives growth and engagement, and you are seeing that come through in Q1: Paramount Plus revenue was up 17% through a combination of delivering on the January price increase and healthy underlying subscriber growth. We added nearly 2 million underlying subscribers in the quarter.

In the studio, overall studio revenue was up 11% in Q1, driven by films like Scream and continued progress building our third-party TV studio. We are spending a lot of time on content ROI analysis to ensure every investment is underwritten with rigor. On clips, we know audiences watch on multiple screens. A vertical short-form product deepens engagement, keeps people more involved, and increases time spent with our content.

We view this as a beta test, but early engagement is high, with viewers moving from clips into news, sports, and entertainment. We are excited about what that means for the future, and there is incredible momentum as we take a test-and-learn, fast-iteration approach. Metrics are encouraging, but it is still early days.

Your next question comes from the line of Richard Greenfield with LightShed Partners. Please go ahead.

Thanks for taking the question. David, you have very large D2C ambitions. As you think about your engagement goals for Paramount Plus in 2026 and 2027, given the size of investments since taking control, how fast can you move the goalposts on engagement, and how does the UI/tech stack rebuild this summer play into that step-change? And what is your view on channel stores, given Paramount Plus has used them aggressively historically—use them or not long term?

Great questions. In summary, it is a combination of increased content investments and increased tech investments. To achieve our streaming goals, we need more content on platform. In 2026, we have new seasons of The Agency, Star Trek, Lioness, 1923: The Mob, and Tulsa King.

Dutton Ranch is coming this summer from Taylor Sheridan. On sports, UFC is year-round; we have the NFL, March Madness, UEFA Champions League, and a new partnership with the WNBA. We have also greenlit significant new series from our studios, such as Discretion with Nicole Kidman and Elle Fanning, Nine Twelve with Jeremy Strong, and Fear Not with Anne Hathaway. On tech, we are on track to accomplish convergence by midyear.

You will see significant improvements once we roll that out, but that gets us to the starting line of becoming best-in-class. We are hiring engineering and AI talent to compete with industry leaders; it is the combination of art and technology that drives growth, engagement, and scaled business metrics. The pending transaction serves as an accelerant toward that goal. On channel stores, it is case by case.

We evaluate partnerships looking for win-wins across the board and will continue with that philosophy.

On engagement, we are focused on high-quality, high-calorie engagement. UFC viewers, for example, are averaging 15 years younger and staying on the platform longer. On Pluto, we are shifting to VOD, with VOD up 60% per user. These are higher-quality engagement metrics that help monetization.

As we continue to invest in ads monetization, fill rates were up in Paramount Plus and Pluto. We are pursuing engagement that translates into better monetization.

Next question comes from the line of Steven Cahall with Wells Fargo. Please go ahead.

Thank you. A couple of questions on DTC. Paramount Plus grew around 17% in the quarter, strong for sure. I know it slowed a little the last couple of quarters even with the addition of UFC.

Your guidance has revenue growth second-half weighted. How should we think about the underlying drivers of growth at Paramount Plus and the acceleration in the back half? And then on DTC EBITDA, I think there was a programming amortization benefit, maybe a change in accounting from Skydance. How does that impact adjusted EBITDA going forward, and is there any comparability we should be aware of?

For context on the quarter, we came in at the high end on revenue and beat on adjusted EBITDA. Expenses were a bit lighter than planned, primarily around slower pacing of hiring and some timing shifts in content. We generally view overall expenses for the year, including DTC, as on track with expectations. On DTC EBITDA, you will see some margin pressure in the back half as the slate launches in Q3 and Q4. On Paramount Plus, we feel good about the trajectory: revenue up 17% year over year, driven by a 14% increase in ARPU from the January price increase and continued improvement in the subscriber mix.

Headline net adds were approximately 700 thousand, but underneath that we added about 2 million underlying subscribers and exited a little over 1 million international hard-bundle subscribers; for context, those hard bundles have ARPU of less than $1, so they are uneconomic. Growth for the rest of the year will be driven by healthy underlying subscriber adds as the content slate fills in, as well as continued improvement in ad monetization. On the content amortization benefit, as noted, there was some timing in the quarter and we do have benefit from the Skydance transaction that flows through this year and steps down next year.

We are not getting into specifics, but we recast the financials and you will see that in the recast. We will call out anything material each quarter.

Your next question comes from the line of Peter Supino with Wolfe Research. Please go ahead.

Good afternoon. Can you talk about the programming cost environment generally? You and others seem focused on targeted but increasingly aggressive investing—are you seeing that in unit programming costs? And on ad sales, now that you have owned the assets for almost a year, any fresh ideas about how Paramount Skydance Corporation Class B Common Stock should be selling advertising, especially in DTC?

On programming, we are competitive through our greenlight process. In TV Media, especially at CBS, the team is managing linear decline by rightsizing programming while delivering creatively with the slate. Across the studio, we are not seeing notable pressure on budgets or creative costs that we would call out as a trend.

On advertising, particularly ad tech, this is a major focus and opportunity we identified early on. We are retooling go-to-market, consolidating national sales into a single client-centric structure under unified leadership, and have brought in new talent from leading digital platforms like Amazon, Google, Hulu, and Roku. We are making platform investments. On ad tech, Precision Plus—our AI-powered ad product combining first- and third-party data—is generating positive early feedback and driving performance above benchmarks.

Our format innovation pod is creating new ad experiences, including streaming fixed units and sports DAI, and we are scaling for UFC. We are also using AI-driven QA. We just completed our first upfront under the new structure and feedback has been incredibly positive. Momentum is building, there is work to do, but we are pleased with the acceleration.

In terms of results, Q1 overall ads declined 3%, but DTC ad revenue returned to growth and improved versus Q4. For the rest of the year, we expect total company ad revenue to return to growth in the back half, driven by DTC accelerating and more than offsetting declines in TV Media.

We have time for one more question, and that question comes from Michael Morris with Guggenheim Securities. Please go ahead.

Thank you. First, can you share more detail on UFC and how it has performed in the first several months now that you have had about 10 events? How is it benefiting the broader business, and are there more things to come this year as you use that property? Second, in the letter, you noted several studio titles in production that will be released on Netflix and on Prime Video.

Why is it important for the studio to sell content to services that are also competitors for engagement and subscriptions?

We could not be more pleased with our seven-year UFC partnership; it has exceeded our early expectations across the board. More than 10 million households have watched UFC programming on Paramount Plus, with over 100 million hours viewed. Average UFC viewership across our platform is more than 15 times the average pay-per-view event over the past two years. New UFC subscribers are, on average, 15 years younger than the average Paramount Plus viewer and they come in for UFC and then engage with our broader offering, including series like South Park, spending more time overall.

On CBS, main fight cards like UFC 326 and 327 averaged 2.8 million viewers, nearly 50% higher than ABC’s NBA primetime game on the same night. Advertising demand has exceeded expectations and meaningfully contributed to Q1 advertising. We are under a year into a seven-year journey and we are very excited about how UFC is driving the business. On selling to third parties, we do not believe in a one-size-fits-all approach.

Content licensing is an important part of our business and will continue to be. Some series should remain exclusive to our owned-and-operated platforms; others make sense to sell to third parties, and often those series see increased viewership when they later return to our platforms. On originals, our goal is to be the number one home for top talent. Being able to place projects on our platforms or sell to third parties when appropriate makes us a more desirable home for creators.

We own those shows and they generate revenue for us. We evaluate these decisions case by case and that approach has served us well.

Thank you. I will now turn the call back over to Kevin for closing comments.

Thanks, Krista, and thank you to everyone for taking the time to join today.

We appreciate the questions, and please reach out if you have any follow-ups.

Thanks all.

This concludes today’s conference call. Thank you all for joining and you may now disconnect.