Paramount Puts Up an Adjusted Profit Surprise, as Higher Streaming Prices Boost Revenue

Paramount Global Inc. experienced an after-hours surge in its shares on Wednesday following the announcement of a surprising adjusted quarterly profit. The media and entertainment giant, responsible for overseeing entities like CBS, Comedy Central, and Pluto TV, reported a per-share profit of 4 cents when adjusted for impairments and restructuring. This surpassed FactSet's estimated 1 cent per-share loss. The boost in profit was attributed to higher subscription prices contributing to enhanced sales for its Paramount+ streaming platform.

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Despite the positive adjusted profit, the company faced a 6% decline in revenue, amounting to $7.64 billion, falling short of the anticipated $7.83 billion. Paramount's Chief Executive, Bob Bakish, expressed optimism about the future, highlighting the company's expectation to achieve domestic profitability for Paramount+ by 2025, marking a significant milestone.

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Bakish outlined the company's strategic focus, emphasizing the maximization of returns on content investments and the expansion of streaming services, all while undergoing a transformation in the cost structure of the business. Following this positive outlook, shares rose by 1.2% in after-hours trading on Wednesday.

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The release of Paramount's financial results coincides with a trend in the streaming industry where companies are consolidating, raising subscription prices, and streamlining costs associated with film and series development. After years of aggressive subscriber acquisition strategies, investors are now pressuring streaming services to demonstrate greater profitability.

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In the backdrop of its financial report, Paramount has reportedly explored potential mergers or acquisitions. On Tuesday, CNBC reported that talks on acquisition with Warner Bros. Discovery Inc. had halted, while Skydance Media was reportedly still contemplating its options for a potential deal. However, during the earnings call on Wednesday, Paramount declined to comment on any ongoing deal-making discussions or provide details about related timelines.

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Within Paramount's direct-to-consumer segment, which encompasses streaming services such as Paramount+, Pluto TV, and BET+, there was a notable surge in revenue, increasing by 34% during the quarter. Subscription sales experienced a robust 43% growth, driven by both subscriber expansion and pricing adjustments for Paramount+. Additionally, ad sales within this segment increased by 14%.

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Despite these positive trends, challenges were evident in Paramount's TV business. Factors such as last year's Hollywood strikes and a softer global advertising market impacted the TV segment negatively, leading to a 12% decline in revenue. Ad revenue within this segment specifically witnessed a 15% drop. Paramount acknowledged the influence of strong NFL viewership on its overall performance but acknowledged the challenges in the TV business due to external factors.

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