Paramount gets lift from ‘Top Gun’ but streaming losses a drag

Paramount Global (PARA.O) beat Wall Street expectations for quarterly revenue and profit on Thursday, powered by the May release of blockbuster Tom Cruise-starrer “Top Gun: Maverick” even as streaming subscriber growth slowed.

The sequel to the 1986 action flick “Top Gun” surged past Disney’s Marvel adventure “Doctor Strange in the Multiverse of Madness” as the highest-grossing movie of the year and garnered $1 billion in global box office sales, bringing much needed relief to the film unit struggling since the pandemic outbreak.

Still, shares slipped 2.5% on widening losses in its streaming business.

Losses in direct-to-consumer segment surged to $445 million from $143 million as the company, also home to CBS and Pluto TV, has been spending on content and international expansion.

“We expect the company to step up investment in content and international market expansions, which will drag OIBDA (operating income before depreciation and amortization) and free cash flow through 2023,” J.P. Morgan analysts said in a note.

Paramount’s reliance on advertising has also dragged its TV media business, as inflation-hit marketers reined in spending.

“They are short-term challenges that we’ve got to work through,” Chief Executive Bob Bakish told analysts.

The company is also likely to face pressure as bigger streaming rivals Netflix (NFLX.O) and Walt Disney’s (DIS.N) Disney+ dip their foot into advertising.

In the second quarter ended June, Paramount+, the company’s flagship streaming platform, added 4.9 million subscribers, compared to 6.8 million in the preceding quarter.

The company removed a total of 3.9 million streaming subscribers related to its Russia exit.

“Though we don’t have any imminent price changes, they will happen in the future,” Chief Financial Officer Naveen Chopra said.

Paramount earned 64 cents per share on revenue of $7.78 billion, while analysts expected 61 cents profit on revenue of $7.57 billion, according to Refinitiv data.