Business Context and Reporting Period
Company: Fox Corporation (FOX)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three months ended September 30, 2025 (Fiscal Q1 2026)
Business Overview: A news, sports, and entertainment company operating primarily through two reportable segments: Cable Network Programming and Television. Corporate and Other includes the newly launched direct-to-consumer streaming service FOX One (launched August 2025), Credible, and the FOX Studio Lot.
Key Financial Metrics
| Metric (in millions, except per share) | Q1 2026 (Sep 30, 2025) | Q1 2025 (Sep 30, 2024) |
|---|---|---|
| Total Revenues | $3,738 | $3,564 |
| Net Income | $609 | $832 |
| Net Income Attributable to Stockholders | $599 | $827 |
| Diluted EPS | $1.32 | $1.78 |
| Adjusted EBITDA | $1,065 | $1,048 |
| Operating Cash Flow | $(130) | $158 |
| Cash and Cash Equivalents (End of Period) | $4,368 | $4,052 |
| Total Borrowings | $6,603 | $6,602 |
| Capital Expenditures | $104 | $64 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 5% ($174 million) driven by higher distribution, advertising, and content revenues. Advertising revenue rose 6% due to digital growth (Tubi) and higher sports pricing, partially offset by the absence of 2024 election-related political advertising.
- Profitability Decline: Net income decreased 27% ($223 million). This was primarily driven by a $358 million swing in "Non-operating other, net," which turned from a $233 million gain in the prior year to a $125 million loss. This loss is largely attributed to a decrease in the fair value of the company's investment in Flutter Entertainment.
- Segment Performance:
- Cable Network Programming: Revenues up 4%; Segment EBITDA up 7%.
- Television: Revenues up 5%; Segment EBITDA up 7%.
- Corporate and Other: Revenues up 37% due to FOX One launch, but Segment EBITDA worsened significantly (down 86%) due to high marketing and launch costs.
- Cash Flow: Operating cash flow turned negative ($130 million used) compared to positive ($158 million provided) in the prior year, driven by lower political ad receipts and higher programming payments.
Guidance, Outlook, and Risks
- Capital Allocation: The Board authorized an additional $5 billion in stock repurchases, bringing the total authorization to $12 billion. Approximately $250 million was spent on buybacks in Q1. A $1.5 billion accelerated share repurchase transaction is expected to commence in late October 2025.
- Dividends: Declared a semi-annual dividend of $0.28 per share, paid September 24, 2025.
- Strategic Launch: FOX One, the company's direct-to-consumer streaming service, launched in August 2025. Initial costs are impacting the Corporate and Other segment's profitability.
- Legal Contingencies:
- Smartmatic Lawsuit: A defamation lawsuit seeking $2.7 billion remains pending; a hearing on summary judgment is scheduled for December 2025. Management believes the claim is without merit but cannot predict the outcome.
- FOX News Allegations: Ongoing litigation regarding sexual harassment and discrimination allegations; management does not anticipate a material adverse effect.
- Derivative Litigation: Stockholder lawsuits regarding election fraud coverage are ongoing in Delaware Court of Chancery.
- Risk Factors: Risks include declining MVPD subscribers, competitive digital advertising markets, regulatory changes, and the ability to renew sports programming rights on favorable terms.
Investor Verification Checklist
- Investment Volatility: Verify the impact of the Flutter Entertainment investment valuation on future earnings, as fair value changes significantly impacted Q1 net income.
- FOX One Economics: Monitor the trajectory of FOX One's subscriber growth versus the high marketing costs currently depressing the Corporate and Other segment's EBITDA.
- Share Repurchase Execution: Confirm the timing and volume of the announced $1.5 billion accelerated share repurchase and subsequent buyback activity.
- Legal Exposure: Track the status of the Smartmatic defamation lawsuit and any potential settlement ranges or court rulings in late 2025/early 2026.
- Operating Cash Flow: Assess whether the negative operating cash flow in Q1 is a seasonal anomaly or a structural shift due to programming payment cycles and reduced political ad revenue.