Paramount Global significantly cuts U.S. workforce as Q2 earnings lift shares

Paramount Global has announced a 15% reduction in its U.S. workforce, in line with a global cost-cutting strategy in anticipation of its upcoming merger with Skydance Media.

The company disclosed plans to achieve $500 million in cost savings, contributing to a larger $2 billion in synergies expected from its merger with Skydance. The upcoming layoffs, scheduled to begin soon and be completed by the end of the year, will primarily affect departments such as marketing, communications, finance, legal, technology and other support roles, the company noted in its recent earnings conference call.

Last month, Paramount confirmed its merger with Skydance Media, initiating a 45-day “go-shop” period to seek alternative proposals, which will conclude by the end of the month.

Meanwhile, Paramount posted a profit increase, led by a surprise profit in its streaming business, marking the first profitable quarter for its direct-to-consumer business.

Following these announcements, Paramount shares rose more than 5% in after-hours trading.

In terms of financial performance for the quarter, compared to Wall Street forecasts:

• Adjusted earnings per share were 54 cents, beating the 12 cents forecast.
• However, revenue was lower at $6.81 billion, compared to projections of $7.21 billion.

The company reported an 11% decline in second-quarter revenue, missing estimates primarily due to lower licensing, TV advertising and cable subscription revenue. This shortfall represents the most significant discrepancy from analysts’ expectations since February 2020. The decline in TV licensing revenue posed challenges to analysts’ projections due to variable start and end dates.

Despite this, Paramount+ revenue increased 46% year-on-year, driven by subscriber growth and price increases, even as the platform saw a 2.8 million subscriber decline following the termination of its partnership in Korea with CJ ENM’s TVing.

Paramount’s streaming services posted a profit of $26 million for the quarter, reversing a year-earlier loss of $424 million and defying analysts’ expectations of a loss of $265 million.

The company remains on track to reach U.S. profitability for Paramount+ by 2025, helped by price increases and reduced content spending. Quarterly earnings in particular benefited from the absence of NFL licensing rights, which are expected to begin later in the year.

Paramount shares are down 31% year-to-date, driven by declining cable subscribers and a weaker linear advertising market. The company also absorbed a one-time $6 billion impairment charge related to the decline in its cable networks, following a significant writedown by Warner Bros. Discovery.

This strategic adjustment is part of the terms of the transaction with Skydance.