PSKY

Paramount Skydance Corp. 10-Q Summary: Q2 2026

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2026. Paramount Skydance Corporation (PSKY) operates as a global media and entertainment company following the August 2025 Skydance Transactions, which established a new accounting basis ("Successor" period) compared to the prior Paramount Global structure ("Predecessor" period). The company is currently pursuing a definitive merger agreement to acquire Warner Bros. Discovery (WBD), announced in February 2026, though the closing is delayed due to ongoing antitrust litigation.

Key Financial Metrics (Six Months Ended June 30, 2026)

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 2% year-over-year, driven by Paramount+ subscriber growth (81.6 million subscribers) and higher licensing revenues from the inclusion of Skydance. This was partially offset by declines in linear advertising and theatrical revenues compared to the Q2 2025 release of Mission: Impossible - The Final Reckoning.
• Profitability: Operating income rose 15% to $1.09 billion, primarily due to lower content costs resulting from the "pushdown" of the Ultimate Parent's basis (fair value adjustments to programming assets) and cost-saving initiatives. However, GAAP Net Earnings remained flat at $209 million due to higher interest expense and a significant increase in the effective tax rate (45.3% vs. 29.3% in 2025).
• EPS Dilution: Diluted EPS decreased 39% to $0.19, reflecting the increased share count from the Skydance Transactions and NAI Transaction.
• Segment Restructuring: The company transitioned to three new segments: Studios, Direct-to-Consumer (DTC), and TV Media. DTC Adjusted EBITDA grew 147% to $617 million, while TV Media Adjusted EBITDA grew 14% to $2.12 billion.

Guidance, Outlook, and Risks

• WBD Merger Status: The merger with Warner Bros. Discovery is subject to regulatory clearance and ongoing litigation. A stipulation was reached in July 2026 to postpone closing until the earlier of five days following a court ruling or June 1, 2027. A trial is scheduled for March 2027.
• Financing: Paramount has secured commitments for $54 billion in debt financing and up to $46.7 billion in equity investment from the Ellison Parties and syndicated investors to fund the WBD acquisition. The company paid a $2.8 billion termination fee to Netflix on behalf of WBD in Q1 2026.
• Legal Risks: Significant litigation includes antitrust actions filed by twelve U.S. states and the Writers Guild of America seeking to block the WBD merger. Additionally, the company faces potential liability for a $7.0 billion Regulatory Termination Fee if the merger fails due to antitrust or regulatory grounds.
• Outlook: Management expects continued declines in linear television revenues and relies on streaming growth and cost synergies from the WBD merger to offset these trends. The company is currently incurring substantial transaction costs related to the merger.

Investor Verification Checklist

• Merger Closing Probability: Assess the likelihood of the WBD merger closing given the antitrust litigation and the stipulated delay until mid-2027.
• Debt Service Capacity: Verify the company's ability to service its current debt load ($15.2 billion) and the projected post-merger debt load (estimated at ~$86 billion) without refinancing.
• Streaming Economics: Monitor Paramount+ subscriber retention and ARPU growth, particularly following the integration of BET+ and the impact of UFC rights.
• Termination Fee Exposure: Evaluate the financial impact of the potential $7.0 billion regulatory termination fee payable to WBD if the merger is blocked.
• Accounting Basis Impact: Understand how the "pushdown" of the Ultimate Parent's basis affects comparability of asset values and amortization expenses between 2025 and 2026.