Paramount Earnings: New Management Offers a Compelling Vision and Is Off to a Good Start

Key Morningstar Metrics for Paramount Skydance

• Fair Value Estimate: $20.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

Paramount Skydance PSKY reported good third-quarter results, but those were less important than the detailed vision new management laid out in its first earnings call since the Paramount/Skydance merger. Targets for investment, cost reductions, and near-term growth were all encouraging.

Why it matters: Legacy television is in rapid secular decline, and Paramount’s streaming service has lagged peers in subscriber growth and profitability, while its studio business has recently struggled. Management is focused on significantly improving studios, streaming, and profitability.

• Streaming results were excellent in the third quarter (17% sales growth) and are poised to accelerate in 2026. With price increases planned in the first quarter and the beginning of the firm’s contract with Ultimate Fighting Championship, we expect sizable gains in subscribers and average revenue per user.
• The firm also expects streaming to become durably profitable in 2026—a feat it has not yet accomplished. Streaming adjusted EBITDA of $340 million in the third quarter was artificially boosted by accounting changes upon the merger.

The bottom line: We maintain our $20 per share fair value estimate. We believe management has an excellent investment agenda and like Paramount’s prospects. However, its plan carries significant execution risk, and with market talk of interest in Warner Bros. Discovery swirling, we expect even more moving parts.

• With its reliance on linear television and the relatively small scale of its streaming business, we don’t award Paramount a moat. However, with access to capital that allows it to invest heavily in its content and streaming platform, we believe its business can better keep up with competitors.
• The firm plans to invest an incremental $1.5 billion in content annually—about 10% more—but it also expects significant cost savings, now $3 billion annually, up from $2 billion initially. This is important to allow capital allocation where it is most needed—to enhance the consumer offering.