Paramount Reports Third Quarter 2025 Earnings Results

LOS ANGELES and NEW YORK, Nov. 10, 2025 -- Paramount Skydance Corporation (Nasdaq: PSKY) today announced financial results for the third quarter ended September 30, 2025, the company's first financial quarter since Paramount and Skydance Media merged in August 2025. Please visit the Paramount Investors homepage to view David Ellison's, Chairman & Chief Executive Officer (CEO), Paramount, a Skydance Corporation, letter to shareholders in full.

An audio replay of Paramount Skydance Corporation's 3Q25 conference call will be available on November 10 in the Events and Webcasts section of Paramount's Investors homepage, and at 866-813-9403 (domestic) or 929-458-6194 (international) using access code 474852.

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About Paramount, a Skydance Corporation

Paramount, a Skydance Corporation (Nasdaq: PSKY) is a leading, next‑generation global media and entertainment company, comprised of three business segments: Filmed Entertainment, Direct-to-Consumer, and TV Media. The Company's portfolio unites legendary brands, including Paramount Pictures, Paramount Television, CBS – America's most-watched broadcast network, CBS News, CBS Sports, Nickelodeon, MTV, BET, Comedy Central, Showtime, Paramount+, Pluto TV, and Skydance's Animation, Film, Television, Interactive/Games, and Sports divisions. For more information, please visit www.paramount.com.

PSKY-IR

November 10, 2025

Summary Points:

• In the first 100 days, we have taken significant steps to align our business around our North Star
priorities: 1) investing in our growth businesses anchored by our creative engines and exceptional storytelling; 2) scaling our direct-to-consumer business globally; and, 3) driving efficiency enterprise-wide with a focus on long-term free cash flow generation.

• We have taken early but meaningful steps towards advancing these priorities, including: key
leadership hires, high-impact partnerships, increased investment in our studios, and driving efficiency across the organization.

• True to our mission as a creative company, we are committed to increasing our creative output with more high-quality films, TV series, sports, news, and games to growing audiences worldwide.

• We are investing significantly in our DTC business, our top priority – both content and critical
back-end tech upgrades – to quickly reach scale in engagement, which will drive subscribers,
revenue, and profit, with a more balanced, year-round programming strategy and a focus on
profitable growth. On a full-year basis, we expect DTC to be profitable in 2025 with growth in
profitability in 2026.

• For 2026, we expect total revenue of $30 billion, led by a healthy acceleration in DTC revenue with global profitability. We expect 2026 adj. OIBDA of $3.5 billion and are increasing our run rate efficiency target from $2 billion to at least $3 billion.

Fellow shareholders,

Nearly 100 days have passed since we launched the new Paramount, and we are pleased with the
progress to date. Our goal in bringing together Paramount and Skydance was to honor a company with
over a century of storied history and profound cultural impact, while transforming it for the future
through investments in exceptional storytelling, innovative technology, and strategic growth
opportunities that will shape the next era of entertainment. Today, we are confident we are on the
right path – taking the necessary steps to build a stronger, more enduring company for the future.

Our conviction stems in large part from owning an extraordinary portfolio of world-class brands and
assets, including Paramount Pictures, Paramount Television Studios, CBS Television Network, CBS
Studios, CBS News, CBS Sports, TV Stations and Syndication, Paramount+, Pluto TV, Nickelodeon, MTV, BET, Comedy Central, Showtime, and Skydance’s Animation, Film, Television, Interactive/Games, and Sports divisions. This diverse and powerful lineup uniquely positions us to drive future growth and engage expanding audiences around the globe.

It also gives us the scale, diversity, and reach needed to thrive amid disruption. Our industry is
undergoing a generational transformation, and at Paramount, we are determined not only to adapt,
but to lead – competing with the best in media and entertainment. Our vision is to transform
Paramount into the global home of world-class storytelling, powered by one of the industry’s most
storied studios, the leading broadcast network, and a global, scaled streaming platform that delivers
must-watch programming to audiences everywhere. To achieve this, we must ensure our organization
is built to operate at its full potential – equipped with the right tools, resources, and talent, and
focused on driving sustainable, long-term growth.

With this in mind, on Day 1 we identified our North Star priorities – areas where we see the greatest
opportunity to invest, innovate, and drive meaningful progress:

• Investing in our growth businesses anchored by our creative engines and exceptional storytelling

• Scaling our direct-to-consumer business globally

• Driving efficiency enterprise-wide with a focus on long-term free cash flow generation

Over the past three months, we have taken early but meaningful steps to advance these priorities –
making key leadership hires, pursuing high-impact partnerships to deliver even more exceptional
stories, sports, and news to our audiences, expanding our world-class roster of creative talent,
reigniting performance across our studios, maximizing the value of our highly profitable CBS portfolio,
and streamlining overlapping functions to drive efficiency across the organization. Through it all, we’ve
stayed true to our guiding purpose: storytelling.

Supercharging Our Creative Engine

At Paramount, we are – and always will be – a creative company. Storytelling remains the heart and
soul of everything we do. Our mission is to entertain audiences around the world with the best films,
television series, sports, news, and games, and we’re committed to continuing to invest boldly in this
core strength.

This starts with talent. We’re proud to have a best-in-class roster of creative talent, both in front of
and behind the camera. Recent highlights include our five-year exclusive deal with Matt Stone and Trey
Parker, co-creators of South Park – the top acquisition driver on Paramount+ in Q3; a four-year
exclusive pact with the Duffer Brothers, the duo behind the global phenomenon Stranger Things, that
includes feature films, television, and streaming projects starting in 2026; an overall film deal with five
time Oscar-nominated filmmaker James Mangold; a first-look television deal with Jessica Biel and
Michelle Purple’s Iron Ocean Productions; a renewed partnership with The Conjuring franchise’s Walter
Hamada; as well as a new horror/thriller label for Paramount Pictures in collaboration with Weapons
producers J.D. Lifshitz and Raphael Margules of BoulderLight Pictures.

We also signed a landmark film partnership with Activision to produce Call of Duty, one of the most
successful video games of all time – uniting legendary director Peter Berg with visionary writer and
creator Taylor Sheridan. While our contract with Sheridan will conclude at the end of 2028, we look
forward to continuing our strong partnership over the next several years.

We’ve also taken important steps to streamline our studio and distribution operations under unified leadership. We merged Showtime/MTV Entertainment Studios, Nickelodeon Live Action, and Skydance Television to form the revitalized Paramount Television Studios. In parallel, our media networks have been restructured under one leadership team to combine CBS’s prolific broadcast and studios business across entertainment, sports, and news with iconic cable brands and platforms such as BET, Comedy Central, MTV, and Nickelodeon. Both changes were made with the goal of achieving greater alignment across leadership, resource allocation and efficiency, and creative focus.

Additionally, we are taking decisive steps to reinvigorate performance across our studios,
particularly within Paramount Pictures. Our 2025 film slate has underperformed, with most titles
expected to miss their lifetime profit targets. This presents an opportunity to recalibrate, and we are
focused on making the necessary improvements to our future slate. At the same time, we plan to grow
our theatrical output to at least 15 films annually beginning in 2026. While this rebuilding process will
take time, we are confident that our strategy positions us to deliver quality films that will resonate with
audiences worldwide and drive sustainable growth.

Beyond our theatrical initiatives, we anticipate a significant expansion of our total television studio output over the coming years, encompassing titles to be distributed both on our own platforms and licensed to third-parties. We’re complementing this strategy with partnerships that expand our reach – including our seven-year exclusive media rights deal with the UFC and our landmark agreement with Zuffa Boxing. Both are highly complementary to our existing sports portfolio. Our expansive UFC media rights partnership represents a once-in-a-decade opportunity to become the exclusive home of a major global sport – the most popular sport available through a single distributor – with marquee events every month, across the US, Latin America, and Australia.

As we expand our leadership in live sports, we’re also reinforcing the foundation of our linear
television business – where CBS continues to be a key driver of revenue growth and profitability.

CBS is a flagship asset for Paramount, and we’re incredibly pleased with the continued strong
performance of the entertainment, sports, and news businesses – both on CBS and Paramount+.
While the overall linear ecosystem faces persistent structural headwinds, CBS continues to perform
well, powered by an amazing line-up that includes: Tracker, NCIS, Boston Blue, Matlock, 60 Minutes,
Survivor, and CBS Sunday Morning, and CBS Sports’ best-in-class offerings, including the NFL, March
Madness, UEFA Champions League, the PGA Tour, The Masters, The PGA Championship, the NWSL,
and more.

Of note, the NFL on CBS had its best October in a decade, averaging more than 19 million viewers. And
November is off to a strong start as well, including the highly anticipated November 2^nd match-up
between the Kansas City Chiefs and the Buffalo Bills drawing 31 million viewers and earning
Paramount+ its most-streamed game of the 2025 season and the 3rd most-streamed regular season
game in the platform’s history. Season to date, the NFL on CBS has had its best viewership since the
NFL returned to CBS in 1998 – and we expect strong numbers going forward with CBS Sports set to
broadcast the Thanksgiving Day late afternoon matchup – traditionally the most-watched regular season game of the year – featuring two of the NFL’s biggest teams, the Chiefs and the Cowboys. To round out the season, we’ll have a full slate of NFL playoffs highlighted by the AFC Championship Game on CBS and Paramount+.

On the news side, we are proud to steward one of the world’s most iconic and trusted news
organizations, CBS News. Our mission is clear: to uphold this global platform as a place where people
can engage with facts, gain understanding, and seek open exchange. To further this vision, we acquired
The Free Press, a leading digital news organization co-founded by Bari Weiss, who now serves as
editor-in-chief of CBS News. We are confident that, in the years ahead, CBS News and The Free Press
will reach even broader audiences and set the standard for trusted, principled journalism, while
redefining how CBS News connects and engages with audiences.

Finally, as we’ve emphasized since day one, empowering our creative partners through technology
remains a central focus. This commitment is embodied in some of the recent hires we’ve made –
executives from leading technology companies with proven track records scaling businesses and
driving transformation. As we form our roadmap for priority areas across production, we see an
incredible opportunity in front of us to integrate innovation thoughtfully and responsibly across the
business. As we do this, we will always put creators first as we look to enable our partners with the
best tools and technology. For us, technology will always serve art – never the other way around.
Through these initiatives and investments, our goal is clear: to empower our creative teams to deliver
more high-quality films, television, sports, news, and games to growing audiences worldwide – in ways
that are more aligned, efficient, and performance-driven – while continuing to invest strategically in
areas where we see meaningful opportunities for growth.

Scaling Our Streaming Services

Among these opportunities, our direct-to-consumer business is our top priority, with exceptional
storytelling continuing to be the single greatest driver of subscriber growth and loyalty. In line with this
focus, we are increasing our investment in quality, exclusive programming across our streaming
platforms. This includes new seasons of some of our most popular series, including season 3 of Tulsa
King, which is the most-watched title on Paramount+ worldwide so far in Q4. Mayor of Kingstown
launched its fourth season in late October, and the highly anticipated second season of Landman will
premiere globally on Sunday, November 16. We also recently announced renewals of hit series Dexter:
Resurrection as well as the highly anticipated final seasons of fan favorites Yellowjackets and The Chi.

We also recognize that live sports are a powerful engine for regular engagement – addressing new
audiences, increasing retention, and supporting monetization over time. It is this belief that
underpins our long-term media rights agreements with the UFC – one of the fastest growing sports
with over 100 million domestic fans, Zuffa Boxing, and the Professional Bull Riders’ premier tour,
Unleash the Beast, starting in the 2026 season.

We’re especially excited about our plans for the UFC, whose schedule of monthly marquee events will
enable us to deliver a year-round lineup of live sports, driving stronger subscriber engagement and
retention following CBS Sports’ major events. Additionally, by removing the secondary pay-per-view
paywall – historically a key barrier for UFC fans – we’re making these premium events available to
every Paramount+ subscriber at no additional cost. We’re excited to deliver this exceptional value,
with the cost of an annual subscription to Paramount+ being less than just one UFC pay-per-view event
under prior distribution. We’re confident that greater accessibility will lead to significant incremental
subscriber growth and greater engagement across our platform, creating long-term value for both us
and the UFC.

Of course, live sports are just one part of how we engage audiences. To keep Paramount+ fresh and compelling, our studios will continue to drive original content, while we expand third-party licensing for both Originals and catalog, refreshing our library more regularly.

This approach is designed to deepen viewer engagement and strengthen retention. At the same time,
we are investing in a more balanced, year-round programming strategy for our streaming slate. This
includes establishing an Originals launch calendar with tentpole releases spread across the year,
moving away from the historical concentration around the sports season and year-end surge, which
has previously led to uneven engagement.

Our ongoing investments in Paramount+ are enhancing the value we deliver to consumers. To support
this continued investment, we plan to implement price increases in the US early in the first quarter of 2026, and we recently announced upcoming price adjustments in Canada and Australia. These changes will fuel continued reinvestment in the user experience and deliver an even stronger slate of programming for our customers in the year ahead and beyond.

In addition to delivering a bigger, better slate to Paramount+, we’re sharpening our focus on
optimizing our distribution strategy for long-term revenue and profitability. While we remain
committed to achieving scale from a subscriber perspective, we will prioritize quality growth that
delivers strong returns. This includes shifting away from certain hard bundles and low-margin
subscriptions, reducing investment in select international markets without a clear path to sufficient
scale, retiring free trials, and reviewing discount practices. Our goal is to build a large, loyal, and
profitable subscriber base, ensuring we optimize growth, long-term business value, and support future
investments through sound economic decisions.

Under our new leadership, we’ve also reorganized Paramount’s streaming operations to bring
greater alignment between our global and regional teams. This structure enables faster decision
making, more agile execution, and a cohesive content and distribution strategy across all markets.
We’re also ramping our investment in local content in key regions – including Latin America, Canada,
and parts of EMEA – where we see significant growth potential.

Finally, we are making critical upgrades to the backend of our streaming platforms, beginning with the implementation of a unified technology stack for both Paramount+ and Pluto TV which will
significantly enhance performance, elevate the consumer experience, and drive meaningful cost
efficiencies. At the same time, we are exploring how to best build and deploy AI across personalization
and recommendations, enabling smarter and more satisfying experiences for audiences while fueling
continued innovation across the business.

Driving Efficiency and Optimizing Investment Enterprise-wide

Our third North Star priority is to enhance efficiency and optimize investment across the enterprise, ensuring disciplined resource allocation that generates long-term, sustainable value – with particular emphasis on generating sustainable free cash flow over the long-term. This approach involves making strategic investments in our businesses based on the size of their future opportunities. For instance, in streaming, we will invest more resources to support future growth, while in some areas of our linear business, investment decisions will be focused on optimizing cash flow.

Since the transaction closed, we have been hard at work validating our pre-close plans – confirming
both the investments we intended to make and the efficiencies we expected to capture across the
organization. As anticipated, some areas have exceeded expectations, while others require additional
attention and focus.

One example is our digital advertising business, which has not yet reached the growth potential we
know it can achieve, despite a significant increase in time spent, including on Pluto TV, where
engagement continues to grow while lagging other FAST services in the market. To accelerate progress,
we have partnered with IPG and Publicis across both ad sales and media buying. We are confident
these partnerships will position us for meaningful growth as we continue to strengthen our product
and refine our go-to-market strategy.

Additionally, the opportunity to drive additional cost efficiencies has exceeded our expectations.
Through disciplined cost management and targeted investments in areas with the highest potential, we
are strengthening the business and positioning it for sustainable, long-term success.

Company-wide Workstreams

These and other ongoing efforts feed into our transformation plan, anchored by four enterprise-wide
workstreams focused on unlocking Paramount’s full potential.

The first workstream is making technology a core competency of the company. This will require
evolving our culture to embrace a test-and-learn mindset – encouraging experimentation, enabling
data-informed decisions, and continuously learning from outcomes. The reality is the pace of our
experimentation has slowed in recent quarters due to competing priorities, even as we aim to
accelerate innovation. We expect to quickly reverse this trend by prioritizing the critical role of
technology across our organization.

At the same time, we are advancing several innovation initiatives, including: a converged back-end
platform for our streaming services by the middle of 2026, unifying the company under a single ERP
system by early 2027, and leveraging the full scale of our business to optimize cloud computing spend.
These initiatives make sense financially and accelerate our ability to productize future innovations
including better user experiences, recommendation engines to power search and discovery, and a
reimagined digital ads product.

The second workstream is enhancing industrial efficiency and scalability across our operations.
Central to this effort is the launch of Global Operations, a new enterprise function that unites Global
Business Services, procurement, real estate and facilities, security, and other key functions. The goal is
to unlock value, drive efficiency, and strengthen our operating foundation as One Paramount. While
similar capabilities are common in other industries, they are rare in ours – especially at the scale and
scope we’re envisioning. This initiative will be a core advantage for the company for years to come.

Our Global Business Services organization is consolidating many corporate and business units' activities into end-to-end processes that will be optimized through automation, AI, and a global delivery
footprint. Of note, our real estate and facilities organization is implementing a robust enterprise-wide
plan to optimize our footprint to unify teams – enabling creative excellence, operational effectiveness,
and efficient space utilization as we focus on consolidating our owned facilities, where appropriate.

The third workstream is unifying the organization under clear, cohesive leadership. By consolidating core functions where it adds the most value, we eliminate redundancies and foster stronger collaboration across teams. We are reorganizing the company into three business units – Studios, DTC, and TV Media – streamlining operations and breaking down silos. This structure ensures that decisions are made in the best interest of Paramount overall, enabling faster, more effective choices and keeping us agile and aligned with our vision.

The fourth workstream is optimizing our workforce for the future. This represents the culmination of our broader transformation efforts. At the end of October, as part of our commitment to building a
more efficient and effectively structured organization, we implemented a significant workforce
reduction, impacting approximately 1,000 employees across the company. These were difficult but
necessary decisions, and we remain deeply grateful for the meaningful contributions of those
impacted.

As part of our broader organizational transformation, we have taken deliberate steps to flatten our
structure and enhance agility. Approximately one-quarter of our senior vice presidents and above were
impacted by the workforce reduction, enabling us to streamline decision-making and reduce the
friction that can prevent great ideas from advancing. By optimizing our leadership layers and overall
talent base, we are now better positioned to align resources with our strategic priorities and invest
boldly in areas with the greatest long-term potential.

To further unlock Paramount’s full potential and create a more connected, agile organization, we also
introduced a phased return-to-office plan beginning in January 2026. Under this plan, employees will
transition to being in the office full-time, five days a week. In Phase 1, employees in our LA and NY
offices, at the VP level and below, were offered the option of a voluntary severance package if they are
unable or unwilling to return to the office full time, and approximately 600 employees chose this
option.

In addition to these four enterprise-wide workstreams, we are conducting a comprehensive strategic review of our assets to ensure continued focus on our three North Star priorities. As part of this review, we have divested Televisión Federal, or Telefe, in Argentina, which operates TV stations in Buenos Aires and other domestic markets and maintains distribution agreements with FTA and Pay-TV operators across Argentina and select international regions. Likewise, we are in the process of divesting Chilevision in Chile, which we expect to complete in the first quarter of 2026. These divestitures, identified as non-core to our future growth, will streamline operations and reduce our workforce by approximately 1,600 additional employees.

Transformation Savings

Collectively, these actions – along with additional structural efficiencies still to come – reinforce our
confidence in achieving at least $3 billion in run-rate efficiencies, representing an increase of at least
$1 billion over our original target outlined at the time of the deal announcement in 2024.

Of the anticipated $3 billion plus in total efficiencies, more than $1.4 billion in run-rate savings will
have been executed between the deal announcement and the end of this year, with an additional $1
billion plus in run-rate actions planned for 2026. We expect to complete our transformation program
by the end of 2027. Achieving these efficiencies will require targeted one-time investments, estimated
at approximately $800 million in 2026 and between $400 and $500 million in 2027.

While streamlining the business, we recognize that growth cannot be achieved through cost-cutting.
Accordingly, a portion of the savings generated through our transformation program will be reinvested
in growth investments across programming, technology, and strategic partnerships. At the same time,
we will rigorously evaluate other areas of spend to maximize margins and drive strong free cash flow
generation. To this end, we expect to make incremental programming investments in 2026 in excess of
$1.5 billion, which include our DTC investments in the UFC, Paramount+ Originals, and third-party
catalog licensing and the ramp in our film slate.

Q3 Results and Q4 and 2026 Outlook

Below we discuss our Q3 results and our outlook for Q4 and 2026. Due to reporting requirements
associated with our transaction, our Q3 results and cash flows are reported separately for the period
July 1 through deal closing on August 6, 2025, and the post close period August 7 through September
30, 2025.

In the discussion of financial results, we discuss revenue on a pro forma basis in Q3, which can be
found beginning on page 15. We discuss profitability for the periods before (“predecessor”) and after
(“successor”) the transaction close (subsequently pre-close and post-close) separately in accordance
with the financial reporting requirements for our transaction. Additional supplemental information is
also available on our IR website.

In Q3, total revenue on a pro forma basis of $6.7 billion was flat versus predecessor revenue of $6.7
billion in Q3’24. Breakdown by segment:

• Revenue in our DTC business increased by 17% year-over-year, driven by a 24% increase in
Paramount+ revenue, which accounts for over 80% of our DTC business. Paramount+
subscribers and ARPU3 were similar contributors to revenue growth, with 10% and 11% year
over-year growth, respectively. DTC revenue from non-Paramount+ sources, primarily Pluto,
underperformed the growth of Paramount+, primarily due to lower sell out rates.

• In TV Media, revenue declined -12% year-over-year. Results were driven by advertising declines of -12%, including an eight percentage point headwind from political spending and from the comparison to the recognition in 2024 of revenue that had been previously underreported by an international sales partner; a decline in affiliate revenue of -7% year-over-year was due to a decline in pay TV subscriber volume; along with licensing and other declines of -22% year-over year due to the timing of content delivery.

• Filmed Entertainment pro forma revenue increased 30% year-over-year versus predecessor Q3’24 revenue, primarily due to the consolidation of Skydance licensing and other revenue.

Operating income was $80 million (3% margin) pre-close and $244 million (6% margin) post-close. Adj.
OIBDA was $297 million (12% margin) and $655 million (16% margin) in the same periods. By segment:

• DTC adj. OIBDA was $105 million (12% margin) and $235 million (18% margin) in the pre-close
and post-close periods, respectively. Our results reflect continued revenue growth and efficiency for Paramount+ in addition to a content expense benefit from reductions in content assets resulting from the change in accounting basis resulting from the merger.

• TV Media adj. OIBDA was $282 million (20% margin) and $540M (23% margin) in the same periods. Broad-based cost management supported our margin results in the periods.

• Filmed Entertainment adj. OIBDA was -$36 million (-13% margin) and -$13 million (-3% margin)
in the pre-close and post-close periods, respectively. Performance was below our expectations primarily due to the performance of the in-quarter film slate.

Cash flow from operations was -$175 million and $268 million in the pre-close and post-close periods,
respectively. Free cash flow was -$207 million and $222 million in the same periods. This included
payments for restructuring, transaction-related items, and transformation initiatives of $228 million
and $81 million, respectively.

In Q4’25, we expect total revenue of $8.1 billion to $8.3 billion or 1%-4% growth year-over-year versus
Q4’24 for the predecessor company led by strength in DTC, partially offset by declines in TV Media and Filmed Entertainment. We expect adj. OIBDA of $500 million to $600 million, or a 6.7% margin at the midpoint. We anticipate transformation costs of several hundred million in Q4, which will impact our Q4 reported free cash flow. Additionally, we expect to recognize a restructuring charge of
approximately $500 million in Q4 in our reported statement of operations as part of our realignment
and transformation.

We calculate average revenue per subscriber (“ARPU”) as total Paramount+ revenues during the applicable period divided by the average of Paramount+ subscribers at the beginning and end of the period, further divided by the number of months in the period.

As noted in the financial table above, the predecessor period reflects July 1 to August 6, 2025, and the successor period reflects results from August 7 to September 30, 2025.

For our Q4 forecast for Paramount+, we expect a similar year-over-year increase in ARPU with positive
net adds below the level in Q3 due to the termination of two low-ARPU international hard bundles as
we work to optimize our distribution strategy and maximize long term revenue, as noted above. For
DTC profitability in Q4, we expect adj. OIBDA losses on an absolute basis due to seasonally-weighted
content costs. On a full-year basis, we expect DTC to be profitable in 2025.

As a note on subscriber reporting, starting in Q4’25, we will count only paid Paramount+ subscribers in
our reported figures instead of including those on free trials, as we do currently. At the end of Q3, free
trial subscribers totaled 1.2 million.

For 2026, we expect total revenue of $30 billion, or 4% growth year-over-year versus the midpoint of
our 2025 forecast, led by a healthy acceleration in DTC revenue. In DTC, we expect a strong increase in
Paramount+ ARPU as a result of our upcoming price change and beneficial mix shift within our
subscriber base, driven in part by optimizing our distribution strategy as we expect to terminate
additional international hard bundles in 2026.

We expect our strong DTC revenue growth to be partially offset by declines in TV Media affiliate and
advertising with continued headwinds from the pay TV industry on affiliate revenue and lower
advertising revenue year-over-year. For linear advertising, we expect a more moderate decline versus
2025 including the combined effects of expected political spending in 2026, our new ad agency
partnerships, and the sale of Telefe and the planned sale of Chilevision. In Filmed Entertainment, we
expect theatrical revenue to be down year-over-year as we work to recalibrate our film slate and as we
compare against Mission: Impossible – The Final Reckoning in 2025.

For 2026, we expect adj. OIBDA of $3.5 billion, or an 11.7% margin, driven by progress against our $3
billion-plus efficiencies plan, as well as the incremental investments we are making in the business
across content and technology which are expected to drive both significant DTC revenue growth and
overhead cost reductions in 2027 and beyond.

For the DTC segment, we expect to grow our profitability in 2026, driven by accelerating revenue
growth as well as an ongoing benefit from the new accounting basis, even as we meaningfully bolster
our streaming slate including UFC, South Park, and several hundred million of investment in
incremental film and series for Paramount+ as we focus on building towards long-term success in
streaming. In Filmed Entertainment, we expect to return to profitability on a full year basis in 2026.
We expect free cash flow conversion of approximately 5% before roughly $800 million of non-recurring
transformation costs, as previously noted.

We intend to re-segment our financials starting with our Q1’26 results to reflect our business
reorganization across DTC, TV Media, and Studios. This change will effectively house all production and IP in one place with Studios, including almost all licensing revenue, to give a clearer picture of the
growth and value of our Studios business. The remaining TV Media segment will be comprised of our
broadcasting and cable businesses. There will be no impact to reporting for our DTC segment.

Relentless focus on our North Star priorities will enable us to achieve our medium-term financial
goals, which are:

• Transition the company to have sustainable topline growth driven by DTC leadership,

• with increasing margins and growing FCF conversion,

• while managing our balance sheet to quickly regain investment grade debt metrics.

We see a multi-year path ahead during which time we will make the necessary strategic changes and
investments to reach our goals. Over the mid-term we see a clear opportunity to deliver sustainable
topline growth and meaningfully close the gap between our profit margin and free cash flow
conversion versus those of other leading media companies.

Capital Structure & Capital Allocation

Paramount Skydance ended the quarter with $3.3 billion in cash and cash equivalents and $13.6 billion
in gross debt. As we make progress against our current transformation plan, we expect to achieve
investment grade debt metrics by the end of 2027. We have $433 million in debt maturing over the
next 12 months.

Our capital allocation priorities are to:

1. Invest organically for long-term profitable growth in our business

2. Consider M&A where it accelerates our path towards achieving our North Star and other financial goals

3. Manage our balance sheet to regain and then maintain investment grade credit metrics

4. Return excess cash to shareholders beyond our current dividend once we reach investment grade credit metrics

Closing

As we near the 100-day mark, we are energized by the progress we’ve made and the path ahead. By
maintaining our relentless focus on our North Star priorities, we are building a foundation for multi
year growth as well as technology and cost transformation.

Looking ahead, over the medium term we see real opportunity to expand our topline, grow profitability, and strengthen free cash flow conversion – moving us closer to the performance of leading media companies and driving lasting value for our shareholders.

Today, we are more committed than ever to building a company that honors Paramount’s storied
legacy while positioning us to lead and innovate for the future. Let’s go!

Sincerely,
David Ellison
Chairman & CEO
Paramount, a Skydance Corporation

Cautionary Note Concerning Forward-Looking Statements
This letter contains both historical and forward-looking statements, including statements related to our future financial results and performance, potential achievements, anticipated reporting segments and industry changes and developments. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Similarly, statements that describe our objectives, plans or goals are or
may be forward-looking statements. These forward-looking statements reflect our current expectations concerning future results and events; generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “may,” “could,” “estimate” or other similar words or phrases; and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. These risks, uncertainties and other factors include, among others: risks related to our streaming business; the adverse impact on our advertising revenues as a result of changes in consumer behavior, advertising market conditions and deficiencies in audience measurement; risks related to operating in highly competitive and dynamic industries, including cost increases; the unpredictable nature of consumer behavior, as well as evolving technologies and distribution models; risks related to our decisions to make investments in new businesses, products, services and technologies, and the evolution of our business strategy; the potential for loss of carriage or other reduction in or the impact of negotiations for the distribution of our content; damage to our reputation or brands; losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and content; liabilities related to discontinued operations and former businesses; increasing scrutiny of, and evolving expectations for, sustainability initiatives; evolving business continuity, cybersecurity, privacy and data protection and similar risks; content infringement; domestic and global political, economic and regulatory factors affecting our businesses generally, including tariffs and other changes in trade policies; the inability to hire or retain key employees or secure creative talent; disruptions to our operations as a result of labor disputes; the risks and costs associated with the integration of, and our ability to integrate, the businesses of Paramount Global and Skydance Media, LLC successfully and to achieve anticipated synergies; volatility in the prices of our Class B Common Stock; potential conflicts of interest arising from our ownership structure with a controlling stockholder; and other factors described in our news releases and filings with the Securities and Exchange Commission, including but not limited to Paramount Global’s most recent Annual Report on Form 10-K and their and our reports on Form 10-Q and Form 8-K. There may be additional risks, uncertainties and factors that we do not currently view as material or that are not necessarily known. The forward-looking statements included in this letter are made only as of the date hereof, and we do
not undertake any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.

Financial Statement Presentation
On August 7, 2025, Paramount Global and Skydance Media, LLC (“Skydance”) became subsidiaries of Paramount Skydance Corporation, pursuant to a transaction agreement entered into on July 7, 2024 (the transactions contemplated by the Transaction Agreement, the “Transactions”). Our consolidated financial statements within our Form 10-Q for the third quarter of 2025 are
presented in two distinct periods to indicate a new basis of accounting established for Paramount Global’s net assets upon the closing of the Transactions. The periods prior to August 7, 2025 include only Paramount Global and are identified as “Predecessor”, and the periods beginning on August 7, 2025 reflect Paramount Skydance Corporation and are identified as “Successor”. Due to the new accounting basis, the results of operations and cash flows are not comparable between the Successor and Predecessor periods.

The presentation within this letter, financial statements, and supplemental disclosures of non-GAAP financial measures also reflect the distinction between the Successor and Predecessor periods. In addition, in order to help investors view our results in a manner consistent with our management we are including the below supplemental presentation of pro forma revenue, which reflects the inclusion of Skydance revenues after the elimination of intercompany revenues from Paramount Global in each
of the Predecessor periods and, for the third quarter of 2025, the combination of the Predecessor and Successor periods during the quarter.

Refer to Note 1 of our Form 10-Q for the third quarter of 2025 for additional details regarding the new
accounting basis established following the Transactions.

###

Paramount Skydance Corporation (PSKY) Q3 2025 Earnings Call Transcript

Courtesy of Seeking Alpha.

Company Participants

David Ellison - Chairman & CEO

Jeffrey S. Shell

Andrew Warren - Executive VP & Interim CFO

Conference Call Participants

Robert Fishman - MoffettNathanson LLC

Steven Cahall - Wells Fargo Securities, LLC, Research Division

David Karnovsky - JPMorgan Chase & Co, Research Division

Jessica Reif Cohen - BofA Securities, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

Richard Greenfield - LightShed Partners, LLC

John Hodulik - UBS Investment Bank, Research Division

Kutgun Maral - Evercore ISI Institutional Equities, Research Division

Presentation

Operator

Good afternoon. My name is Nadia, and I'll be the conference operator today. At this time, I would like to welcome everyone to Paramount's Q3 2025 Earnings Conference Call. [Operator Instructions]

At this time, I would now like to turn the call over to Kevin Creighton, Paramount EVP of Investor Relations. You may now begin your conference call.

Unknown Executive

Good afternoon, and thank you for taking the time to join us for the Paramount Third Quarter 2025 Earnings Call. I'm Kevin Creighton, EVP of Corporate Finance and Investor Relations. Joining me today is our Chairman and Chief Executive Officer, David Ellison; our President, Jeff Shell; our Interim Chief Financial Officer, Andy Warren; and our Chief Strategy and Operating Officer, Andy Gordon. As a reminder, we will be making forward-looking statements today that involve risks and uncertainties. Our remarks will also include non-GAAP financial measures, and reconciliations of these measures can be found in our earnings letter or in our trending schedules, which contain supplemental information. These can be found on our Investor Relations website. I'll now turn it over to David for a few brief remarks before we take analyst questions.

David Ellison

Chairman & CEO

Good afternoon. Before we get to Q&A, I'd like to take a moment since this is our first earnings call to share some thoughts on what we've accomplished so far and where we're heading. We launched the new Paramount just 96 days ago. And as we approach the 100-day mark, we're encouraged by the meaningful progress we've made in a relatively short time. We moved quickly, laid a strong foundation for what's ahead, and there's a real sense of energy and purpose across the company. Our goal in bringing these 2 companies together was simple, to honor Paramount's incredible legacy of storytelling while taking the necessary steps to transform it for the future. The combination unites an extraordinary and diverse collection of entertainment assets, spanning film, television, animation, interactive games, news and sports, supported by a rich library of celebrated and award-winning content. This powerful portfolio gives us the tools to achieve scale and succeed in today's fiercely competitive media landscape, and we intend to build on this strong foundation, investing the necessary resources and talent to ensure our company is not only well positioned to compete, but to lead in the industry.

Our vision is to transform Paramount into the global home of world-class storytelling, powered by one of entertainment's most storied studios, the leading broadcast network and a scaled global streaming platform that delivers much-watched programming to audiences everywhere. Achieving this vision requires reimagining how we operate, driving greater efficiency, unlocking new opportunities for creativity and positioning the company for sustainable long-term growth. With this in mind, on day 1, we identified our North Star priorities, the areas where we see the greatest opportunity to drive meaningful progress. They are: first, investing in our growth businesses, anchored by our creative engines and exceptional storytelling. Second, scaling our direct-to-consumer business globally; and third, driving efficiency enterprise-wide with a focus on long-term free cash flow generation. Over the past 3 months, as part of a thorough review of our assets and organization, we've taken early but significant steps towards advancing these priorities by making key leadership hires, pursuing high-impact partnerships, expanding our world-class roster of creative talent, reigniting performance across our studios, maximizing the value of our highly profitable CBS portfolio and driving efficiencies across the organization, all while staying true to our mission as a creative company. Storytelling is and always will be the heart and soul of everything we do.

Every effort serves a single purpose to bring the best stories to the broadest possible audience. Thanks to our actions to date, we are now well positioned to align resources with strategic priorities and invest boldly in areas with the greatest long-term potential. Just prior to this call, we issued a letter to shareholders outlining our third and fourth quarter results and expectations, which we encourage you to review. The letter details our 2026 guidance, including total revenue of $30 billion, driven by strong growth in D2C revenue and global profitability as well as adjusted OIBDA of $3.5 billion. Additionally, we have increased our run rate efficiency target from $2 billion to at least $3 billion. Building on these financial and operational priorities, we're also taking decisive steps to streamline studio operations and elevate performance, particularly at Paramount Pictures. In the near term, this includes adjustments to our film slate. Our plan is to grow theatrical output, targeting at least 15 movies per year over the next few years, beginning in 2026. While this rebuilding will take time, we are confident that our creative direction and business strategy will deliver the quality films that will enable us to engage and expand audiences worldwide.

More broadly, over the next year, we plan to make incremental programming investments in excess of $1.5 billion across both theatrical and direct-to-consumer platforms. These investments are designed to expand our pipeline of premium films, television, sports, news and gaming content for global audiences. We've clearly demonstrated this commitment through a series of major creative partnerships and long-term deals from South Park and the UFC to the Duffer Brothers, James Mangold and our landmark collaboration with Activision to bring Call of Duty to life on the big screen and much more. Our top priority is our direct-to-consumer business, where we are focused on rapidly and efficiently scaling subscribers, engagement, revenue and profitability. Since 2023, Paramount+ has achieved the largest U.S. subscription growth among all major streamers, excluding bundles, and we aim to aggressively build on that momentum. In Q3, we added 1.4 million new subscribers for a total of 79 million. We are committed to scaling our subscriber base and are pursuing a more balanced year-round programming strategy to drive higher engagement. As we know, this is the single greatest factor in subscriber growth and loyalty. Over the past 12 months, Paramount+ is ranked as one of the top 3 most sought-after sources of preferred content among major streaming services.

We believe we can do even better, and we are fully committed to doing what it takes to become consumers' top choice for great storytelling. Finally, our goal is to accelerate innovation by making technology a core competency of our company. Competitors from Silicon Valley have quickly expanded into media and broader forms of entertainment. And if we want to remain competitive long term, we must strengthen our technology and do what it takes to position ourselves as the industry's most technologically capable media company. Again, I want to stress that technology at Paramount is not and never will be a replacement for human creativity. Rather, it serves as a powerful multiplier, enhancing performance, elevating the consumer experience and equipping our creative teams with the tools that will enable them to tell even better stories more efficiently and effectively. We're excited about several innovation initiatives already underway, and we'll be sharing more details soon. While we're still in the early stages, as I mentioned, this is only day 96, we're energized by the progress we've made and the clear path ahead, and we look forward to answering your questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question goes to Robert Fishman of MoffettNathanson.

Robert Fishman

MoffettNathanson LLC

Can you talk more about your confidence for Paramount+ to gain global scale? And what role does growing your overall content spend play into better competing with the other large SVOD platforms in the future? And then just on a related note, when you think about this global scale, how do you balance growing the overall subscriber base while reducing investments in select international markets that you called out?

David Ellison

Chairman & CEO

Yes, absolutely. By the way, David, thank you so much for the question. First, we just highlight, we had a really good quarter as it relates to our DTC business, 75 million total subs. Paramount+ revenue growth was up 24%, and we're up 17% for the segment. So I think we've made really good progress in that arena. To achieve scale, I think we really need to accomplish 2 main priorities.

One is we need to increase our investments, obviously, in content. As you guys know, high-quality storytelling, sports, entertainment, all increase engagement, which drives subscribers. We've been doing that across our business. That we've made the investment in the UFC and Zuffa Boxing, incremental, obviously, storytelling investments as well in addition to bringing over talents like the Duffer Brothers, all of which will be telling stories across our ecosystem and on Paramount plus. We're also making investments on the technology side of our business to really improve the product. We brought over Dana Glasgow, formerly of Meta. And we're really in the process of converging the 3 streaming services that we have now onto one platform.

For clarity, the company currently operates 3 separate streaming services across multiple clouds and multiple stacks. By unifying those all into one platform, we'll be able to significantly improve the user experience. We'll be able to significantly improve our recommendation discovery, obviously, work on platform. That will also improve our capabilities across the ad tech we'll be able to deploy. And we think while improving the content and the tech that's available on platform, that will lead towards incremental subscribers, growth and engagement.

Jeff, anything you want to add to that?

Jeffrey S. Shell

Yes. I just -- let me touch -- let me just touch really quickly on the international part of your question. So interestingly, the 2 big things that David just outlined, content investment and platform investment, both are global investments. So let me give you an example. One of the biggest content investments we're making is scaling up our studio output and film studio output, and there's nothing that drives platforms in most markets internationally other than filmed entertainment and good movies, both animated and live action. So that's a perfect example of where our content investment is going to be global, not just domestic. And then obviously, the platform investment that we're making is a global investment.

It's not market by market. And one really important piece of that is that Pluto, which is an asset we don't talk about that much, is a very critical asset in some international markets. which are low ARPU, which could be a weigh in for our DTC business and often a good business on its own. Right now, Pluto is on a separate tech stack, you can't even upgrade somebody from Pluto to Paramount+. So I am very hopeful that once the platform investment is live, we will be able to use that product to start with Pluto in some international markets and over time, use that to scale in markets which are not a high ARPU.

Operator

The next question goes to Steven Cahall of Wells Fargo.

Steven Cahall

Wells Fargo Securities, LLC, Research Division

So David, if I have maybe an initial conclusion from the shareholder letter, it's that you want more, more originals, more licensing, more sports, news, wide releases, tech and I guess, a lot more efficiency. Is there any way you can help us think about how much investment you plan to put into Paramount Skydance over the next several years? I'm guessing it's well in excess of that $3 billion, and there's a lot of revenue as well.

But just in terms of the size of the company, any way to put this into sort of a big number? And then just on the studio side, with the turnaround you're looking to do and the additional wide releases, what did you learn from your experience at Skydance, especially creatively that you all think you can now apply since the studio, at least financially has kind of underperformed historically?

David Ellison

Chairman & CEO

Yes. No, look, I really appreciate the question. Again, everything for us is really going back to driving our North Star principles that we outlined in the letter. We're going to continue to obviously invest in our growth businesses, anchored by our creative engines and superior storytelling and scaling our D2C business is absolutely one of our North Stars. So to your point, we're going to continue to do both of those 2 things. And the company we acquired, we think has an incredible foundation. But we do think that there's obviously more to be done there.

We talked about in the letter the additional $1.5 billion of content investments that we're going to make. And our goal is to be a global scaled streaming service. So from that standpoint, we are going to obviously invest accordingly. But please note, everything for us as owner and operators of the company the way we think about this is really how do we drive long-term value creation.

And as we're currently the largest shareholders and will continue to be the largest shareholders in the company, we really are looking at this in terms of how do we increase and drive value long term for all of our shareholders. Then I would say one of the things that we've obviously learned on the creative side at Skydance is a lot of our core principles was always quality is the best business plan when it comes to storytelling and a dedication to aiming high and you just don't stop working until you get there. That enabled us theatrically to deliver films like Top Gun: Maverick, and we've always had -- when we were just a stand-alone company at Skydance had an incredible partnership with Paramount. But we've consistently obviously delivered hits on all of the platforms that we've worked.

What we're really doing now is taking everything that we've learned at Skydance and that incredibly powerful creative content engine, partnering it with the phenomenal creative engines at Paramount to really be able to get to scale across all of our growth businesses.

That includes direct-to-consumer, but also for reference on the film side, as you said, the studio was making 8 movies a year roughly when we acquired the business. And we're getting to 15 movies a year minimum starting next year, and we will be -- and that will obviously lead towards increased scale and profitability across all those segments of the business.

Andrew Warren

Executive VP & Interim CFO

So David, maybe I'll just add, Steve, I think it's important to also understand that every investment we make, we're looking at how it drives value for the entire company and has a proper return on investment. Two, we definitely want to get to investment grade so that we do want to get delever. And three, the goal is to have high cash flow conversion as we get through the initial investment cycle. So all those things should be factored into how we think about investments.

Operator

The next question goes to David Karnovsky of JPMorgan.

David Karnovsky

JPMorgan Chase & Co, Research Division

With the TV Media segment, just be great to get your updated view on your portfolio of networks. How are you thinking about advertising and cord cutting trends from here and within your 2026 forecast and then within that context, investing into or optimizing these brands?

David Ellison

Chairman & CEO

Absolutely, Jeff, why don't you take that?

Jeffrey S. Shell

Great. David. So one of the original things that we, as a group, were kind of united on is that people talk about linear as one homogeneous business. It's really very different. And when you start to look at it that way and you look at the disconnect between broadcast and cable, it's pretty stark and growing more stark. And that's why CBS was one of the cornerstone assets that we were excited about when we acquired Paramount. And that -- those trends are continuing since we've owned the company, and we expect them to continue in the future. On the broadcast side, obviously, it's declining. It's a linear asset like any other linear asset, but the declines are very modest compared to the cable side.

And those don't even take into account the fact that the content on the broadcast side is increasingly a huge driver on DTC both in terms of subs and engagement, not just the sports, which is becoming barbell. If you look at where leagues are going, they want reach and they want dollars. The dollars increasingly come from streaming and the reach still comes from broadcast. And we have a perfect company for that barbell with the biggest reach vehicle in CBS, which is the most watched broadcast network for the last 17 years and will be so again this year. It's off to a great start, by the way, in this season. And then the streaming product, which is our North Star to grow and scale globally. So increasingly, we will put investments into the CBS side of the coin, and we see those trends continuing. On the flip side, cable is continuing to decline and each quarter is accelerating decline, not just for us, but for everybody around the media business. And -- it's increasingly clear that streaming, first and foremost, is a replacement for the multichannel cable environment.

We're fortunate, yes, we have cable channels, but we don't have -- they're not as large proportionately for us as for others. So we're really focused on taking those brands and seeing what we can do as far as driving value long term, both in terms of overall and in terms of for our streaming product as it scales. We're not going to spin off cable assets.

This company has a history of spinning assets and it hasn't gone very well for us, and we think for others. So one of the big rationales for spin is that when companies are stand-alone, they can focus on driving the value of the brands that they have in a more specific way. We are going to do that, but we're going to do that within our company, so our shareholders get the value of that. We think we have some pretty good brands on the cable side. Obviously, Nickelodeon is a core kids and family pillar for us, and that's going to be a very important segment for our company, not just in terms of streaming, but in terms of licensing and consumer products. So we just brought in a new leader for that business.

But if you look at music, which is an important category, MTV is the traditional leader there, comedy, where Comedy Central is a great brand and then BET, which has a great position with that audience. So our goal is to look at those brands, see if we can transform those businesses in a digital way to drive value long term and make them increasing pieces of our overall scaled global streaming strategy, which is our core business. So that's our plan.

Operator

The next question goes to Jessica Reif Ehrlich of Bank of America Securities.

Jessica Reif Cohen

BofA Securities, Research Division

One of the things that differentiates your narrative from other media and entertainment companies is the focus on entertainment and tech. I'm just wondering, David, can you give us your vision of how tech and entertainment interrelate and how you drive growth? Like can you give us concrete or specific examples or color on how you think about that? And then just one thing in the release, when you talked about your partnership with IPG and Publicis for digital ad sales, what did they bring to the company? Like what tools will they bring to help drive revenue growth?

David Ellison

Chairman & CEO

Jessica, great question. I'll take the first part of it, and then I'll pass it off to Jeff to jump into the second part of it. So Again, what I would say is, as we've stated, our goal is to become the most technologically capable media company. And there are several areas where that's going to directly impact our business, and I'll just talk about a couple of initiatives that are underway currently. When we acquired the company, as I said previously, we kind of -- we're operating in 3 streaming services currently, Paramount+, Pluto and BET+. Those are 3 completely independent tech stacks. They operate across 2 different clouds, and there's no connectivity, obviously, between those businesses currently. Convergence is currently underway to basically unite them into one unified platform, which should be done around the middle of next year. Then from there, we have a road map to obviously significantly improve the overall product for Paramount+. And again, when you improve products, you get benefits like you increase engagement, you get -- your recommendation engine obviously improves dramatically. Your ad sale monetization will improve as you improve the ad tech.

So there's several areas where obviously that this is going to impact the direct-to-consumer business. I'd say another bucket is we're currently in the middle of an Oracle Fusion integration. The company when we acquired it, did not have an enterprise solution. We're currently in process of deploying that across the business.

That will lead to significant operational efficiency across the entire company. It will also give better real-time information to managers to be able to think of it kind of like if you're a pilot, do you know I am, instrumentation is important. The better visibility you have in terms of how the company is doing on a day-to-day basis, that improves your decision-making. So we're in the process of deploying that. We also -- artificial intelligence, obviously, is going to have a significant impact across every business, and we do plan to utilize that here. We obviously feel that frontier technology, working with more traditional machine learning is going to really impact how things like search, rec and discovery work on platform.

There will be increased efficiencies across the business by deploying those tools. And we also believe it will have an impact on content creation. But I want to be really clear that when it comes to content creation, we really view AI as a tool for artists to be able to iterate more quickly, to be able to tell better stories and basically create even further accessibility really across the entire content creation pipeline.

So from that standpoint, we think technology is going to impact all aspects of our business, and we want to be a leader in that space. And with that, I will turn it over to Jeff to talk about the second part of your question.

Jeffrey S. Shell

Thanks, David. So Jessica, when we signed our deal before we owned the company, one of the things we found in due diligence is that the company hadn't done the traditional media reviews in a long time of their buying relationships with the agencies. So we worked with prior management to do a review. And the initial objective of the review is more traditional, which was we -- the cost by which we were buying marketing were much in excess of what I have seen in my previous employers and we've seen in the market. So the initial objective was try to use this review to lower the cost of buying marketing for our various marketing entities, most notably our streaming and our film divisions, which are the 2 largest buyers of advertising.

Once we got into the process, we realized that the opportunity was significantly bigger than that. And we met with all the top holding companies multiple times, us and previous management, and we ended up doing 2 deals with the 2 largest agencies, Publicis and IPG. And the relationships, the deals that we did were much broader than just buying. On the buying side, we're going to get significant savings in the cost of buying marketing across the company in addition to a lot of more benefit in going with the 2 largest buyers. But the real opportunity here is more 2 other areas. The first is just these agencies, these holding companies are not just buyers of advertisers, but represent all of our sales clients. And as part of the deal, we got significant revenue commitments over 3 years with both Publicis and IPG. As you can imagine, part of the nuance of this was what's incremental. We didn't just want to get advertising buys that we're just replacing current advertising. So we expect to see most of this advertising in the digital area where we need it the most, and that you should see that in our numbers over the next couple of years.

But more broadly, we're now partnered on a broad basis with the 2 biggest agencies as the world transitions from linear to digital. And we see lots of opportunities as we do the things that David talked about in building our platform and building our ad tech and our capabilities to work with the 2 biggest and most forward-looking partners we have.

And as part of that, we brought in a new head of our advertising business, Jay Askinasi, who most notably, he came from Roku, but before that was the Head of Digital for Publicis, who is one of our 2 new big partners. So this is obviously a big micro thing that we did. But on a macro basis, we see a lot of opportunities in the coming years to grow our business in this way.

Operator

The next question goes to Ben Swinburne of Morgan Stanley.

Benjamin Swinburne

Morgan Stanley, Research Division

David, I'm guessing you probably can't talk about all the WBD speculation out there in the press. But I was wondering if you could talk a little bit about Paramount S guidance's broader M&A philosophy and just how you think about industry consolidation as something that could benefit the company or benefit overall returns in the industry. Obviously, we've sort of seen kind of rolling M&A through this sector for a number of years.

And I noticed you guys divested some assets, so it would be interesting to hear how you think about just the portfolio broadly going forward. And then just one kind of clarification question from the letter. You guys talked about getting to investment-grade metrics by 2027. I was just curious if you could talk about what that actually entails in terms of leverage level that you're aiming for to help us think about your balance sheet goals.

David Ellison

Chairman & CEO

Yes, Ben, thank you for the question. And so look, first and foremost, we're focused on what we're building at Paramount and transforming the company. And today, 96 days in, we are more confident than ever in terms of our ability to achieve all of our North Star principles that we've discussed in the letter and previously on this call. And so -- and I appreciate that we can't comment on numbers and speculation. So first, I just want to say thank you, honestly, for saying that. Look, what I would also say, as it relates to M&A in terms of our mindset, I think it's important to know that there's no must-haves for us.

We really look at this as buy versus build, and we absolutely have the ability to build to get to where we want to go. We believe we can achieve our goals with our creative content engines. We believe we can achieve our streaming goals and that we can drive enterprise efficiency and create value and long-term free cash flow generation, all through the building standpoint. As it relates to M&A, everything for us is going to tie back to does it accelerate those 3 core principles. And for us, we're fortunate that we have the balance sheet to be able to be opportunistic when we think that M&A will accelerate our goals. But we're also long-term disciplined owner operators. So from that standpoint, we'll always approach things through the lens of how do we maximize value for shareholders. And from an M&A standpoint, it's always going to be how do we accelerate and improve our North Star principles. So that's on that standpoint. Actually, Jeff, do you want to talk about the divestitures?

Jeffrey S. Shell

Yes. I mean we -- as I think we mentioned in the letter, we are divesting 2 of our over-the-air businesses in Spanish-speaking Latin America. The company has a lot of different assets. We clearly laid out in the letter, as David just said, our North Star priorities. If there's assets in the company that don't -- aren't critical and aren't essential to our North Star priorities, then we'll look at them case by case and make decisions to divest when they don't -- we have enough to do and invest in without investing in things that are noncore to what's going to get us to global streaming scale. So I think you will periodically see us divest smaller assets.

Andrew Warren

Executive VP & Interim CFO

Yes. And I would just add on the leverage point, it's Andy, Ben, that we're not sort of investment grade across all the agencies today. So we want to get all 3 remaining agencies to rate us as investment grade. And as you know, there's a numerator and denominator to that equation relative to leverage ratios, and we're going to focus on.

Operator

The next question goes to Rich Greenfield of LightShed Partners.

Richard Greenfield

LightShed Partners, LLC

I guess from a really high level, David, it would be great to get your view on the UFC strategy. It was obviously by far, the biggest sort of statement you've made since acquiring Paramount. And how do you think about earning a return? You obviously put up a much bigger price than what was being paid before. And so between the subscriber base of Paramount+ getting this included, price increases, you said one is coming, but you didn't specify how much. Like how do we think about how you drive return and how you'll use the UFC assets across Paramount plus, CBS and even maybe some of your cable networks. I'd be curious just how you think about that. And then just for Andy, just a couple of housekeeping points. One, you -- the projections you made, and I realize this transaction took way longer to close than you had expected. But obviously, the projections in the original filings were, I think, like $3.4 billion and $4.1 billion for '25 and '26.

Those are now $3 billion and $3.5 billion, it looks like. Just would love any color beyond just took longer, but any color on why those came down or major issues to think about? And then you also made a comment about content write-downs that have helped Q3 and will help the go forward. How significant dollar-wise? Is there anything you can give us to quantify those comments would be really helpful as we think about modeling the next 12 months.

David Ellison

Chairman & CEO

Yes, Rich, thank you so much for the question. I'll obviously take the first part and then pass it off to Andy. One, we could not be more excited about our partnership with TKO, Dana White and UFC. And look, I'd also loop into that Zuffa Boxing. Those 2 deals obviously makes Paramount plus really the home for combat sports in -- obviously, in the United States, and we also have rights in Latin America and Australia. And when you also look at the UFC, it is the largest sport that is not basically split off across multiple platforms. And so it really is a unicorn sports property, and we think it's going to drive a tremendous amount of value in terms of both subscriber growth and engagement across Paramount plus as well as CBS, where there will be some aspect of the UFC that also lives on CBS. In addition to that, I think when you think about the UFC and the opportunity there, there's 100 million fans in the U.S. alone.

It's grown 25% since 2019 to date. And it's been doing all of that behind the double paywall in its previous home. And so from that standpoint, we think when you eliminate the double pay wall, it's going to become much more accessible, and we think that growth rate will increase. Additionally to that, we think we're offering to our subscribers at Paramount+ really significant value in the fact that for approximately pay-per-view, you basically can access all of the UFC across Paramount plus. And so from that standpoint, we think it's a great value for consumers. And really going back to kind of our North Stars of scaling our direct-to-consumer business, we need to obviously invest into more content. I mean, Rich, you know this, you talk about this all the time. having an asset like the UFC is going to increase engagement on platform. It's going to drive subscribers, and we're feeling incredibly confident in the investment that we just made.

With that, I'll -- and then look, bridging into the second part of the question, one of the things I would just note before Andy dives into some more of the details here versus kind of the -- where we were in the investor announced round numbers 18 months ago is I think what's important to note there is we are investing significantly more into content than was contemplated at that time. And we're also driving greater efficiencies. And we believe the combination of those 2 things will drive greater long-term value from a company perspective. With that, Andy, I'll let you.

Andrew Warren

Executive VP & Interim CFO

Yes. I mean I think you kind of hit it, which is when we put the investor deck out there is what we expected at the time of the announcement. And as David just mentioned, we had some really significant opportunity that came to us right around closing, South Park, UFC and all the different talent deals we've done between August 7 and today. You combine that with our increased goal and understanding and now actually confidence in our expense efficiencies going forward. And we think we made the right decision based on where we were last year versus today, i.e., the $4.1 billion that we put out versus our $3.5 billion guidance. So we think given those investments, we're making the right choice for the long term. And then I would just say, on the efficiencies, we're going to start '26 with $1.4 billion of those accomplished and run rate.

By the end of '26, we'll have accomplished most of the $3 billion plus that we've outlined in our letter. So we feel very good about our ability to hit our projection next year. And then look, on the -- on the content write-downs, I think, as you may know, in transactions like this, there is a review of all the content and all of the libraries, and we made the appropriate economic and accounting adjustments to make sure they're consistent with our strategy and the company going forward.

Jeffrey S. Shell

Can I add one thing on UFC?

David Ellison

Chairman & CEO

Yes.

Jeffrey S. Shell

To go back, Rich, if you don't mind on UFC. If you were going to go design a sport for us, UFC is perfect in so many ways. It just if I want to punctuate what David said, when we started looking at this asset Paramount, we had a real desert of sports that ended at the end of the masters and started again in the NFL, and we saw lots of churn over the summer as people turned off the service and then turned it back on for NFL. And this is a year around sport, which is very unusual for major sports. And then the second thing I'd want to add is the sports are not homogeneous.

They're increasingly bifurcated sports that are kind of regular and sports that are events. You kind of look at the recent NBA deals, there's a lot of regular season and then there's a lot of postseason. And I think everybody who bought those rights would say that post-season NBA is different than regular season NBA. And with the UFC, there is no regular season and postseason. Every one of these numbered events that David talked about coming out from behind the paywall is an event and the ability to have events throughout the year is exactly where we think sports is going. And then I will add one thing. We talk about CBS under George Chef's incredible leadership. We have huge volume of engagement on DTC and CBS. These tend to be older female. They skew a bit over female all of our procedurals and the shows that are awesome on CBS and ad hoc and Blue Buds and you can go down the list. So having a sports property like this that was available that year-round event-based and drives young male is like perfect. So this was a bit of a unicorn for us and where we were trying to go.

Operator

The next question goes to John Hodulik of UBS.

John Hodulik

UBS Investment Bank, Research Division

Two, if I could. First, David, how should we think of the long-term profitability of the D2C business? And what are the major levers to get there? It sounds like from the letter, you think ARPU is one of them where you guys could make some substantial headway in the near term. And then getting back to the comments on the investment, is this a situation where you guys are investing so heavily on the front end that, that free cash flow may turn negative in the near term before the platform scales up? Or how should we think of free cash flow trends over the next couple of years?

David Ellison

Chairman & CEO

Yes, Bob, I'm going to turn it over to Andy to take that question, and then I'll fill in after that.

Andrew Warren

Executive VP & Interim CFO

Sure. Yes. So the -- John, it's Andy. The free cash flow is one of the biggest opportunities that we have and we see going forward. For '26, we are -- we know there's going to be about $800 million of transactional and transformation costs. So on a reported basis, it will be negative. But on an adjusted basis, taking out those kind of onetime items, it will still be positive.

But I think most importantly, when we look at going forward, it really comes down to our ability to do 2 things. Working capital has been a big negative for this company for many years. It's a real opportunity for us to both get better payable and sales terms, but also one thing David spoke of was our ability to get better systems in place, visibility into accumulating receivables by customer and by area is going to be a big driver of this. The other area I mentioned that's going to, I think, accelerate our free cash flow growth is cash tax rates. Ours is marginal today and will get significantly better over time. One real benefit of having, as you know, a global portfolio of IP is where you domicile that IP has big influences on cash tax rate, and that's something else we're focused on.

David, do you want to answer -- do you want to go back real quick and double-click on D2C profitability?

David Ellison

Chairman & CEO

Yes. No, absolutely. Look, I think if you go and it's obviously outlined, the D2C segment, obviously, will be -- it is profitable next year. It will be increasingly profitable in 2026. And so from that standpoint, when we look at the growth rates across the business, we believe that we can grow and scale in service, and we're doing that in a fashion that is profitable.

Operator

The final question goes to Kutgun Maral of Evercore.

Kutgun Maral

Evercore ISI Institutional Equities, Research Division

I just had a follow-up on the content ROI discussion, maybe away from the UFC specifically and speaking more broadly in the context of the plan to make incremental programming investments in 2026 in excess of $1.5 billion. What does the $1.5 billion look like across the various categories or verticals, whether it's between sports, originals, licensing, DTC, theatrical? However way you're able to slice it would be helpful, along with what the total content spend budget looks like in 2025 versus 2026?

And then how are you approaching the decision-making process and ROI analysis of these investments as we move forward and manage the balance between investing for global scale while also anchoring around profitable growth?

David Ellison

Chairman & CEO

Yes. No, absolutely, great question. So as we've talked about, really revitalizing our creative content engines is obviously a key driver and goal for us.

So from that standpoint, like a couple of examples to talk through. We've talked about the UFC. We talked about Zuffa Boxing. South Park as an exclusive for -- obviously, for Paramount+ in terms of the streaming rights is another investment that we've obviously made, which has performed incredibly well for us, both in cable as well as on the DTC platform. Having the Duffer Brothers join next year is another area we've obviously invested in the content -- obviously, in the content space. We obviously announced the film with James Mangold and Timothée Chalamet. So we really are investing really across the board in our growth businesses.

I also think everything we do is through the lens of long-term value creation. So whether that's streaming, whether that's sports, whether that's our film business, it really is how do we grow and scale for -- to create long-term value for our shareholders. When you think about Paramount Pictures in particular, that's definitely an area where there was some weakness when we obviously came into the studio.

And so from that standpoint, we are diverting a lot of resources from the combined content engines, Paramount Pictures as well as Skydance to make sure that we can get that studio to scale and get that studio to scale profitably, which we're incredibly confident in our ability to be able to do that, especially with the great leadership under Dana Goldberg and Josh Greenstein. And so that's really kind of how we look at it. Andy, anything you want to add.

Andrew Warren

Executive VP & Interim CFO

Yes. I would just say also there's a unified review of our big content spending across all the verticals and the segments and corporate finance. And there's definitely buying that we're all trying to do is grow the top line, grow value creation for the company, which means share price appreciation and nothing is done in isolation. We're very careful about that with regard to our big content spend across film, television, DTC and broadcast and cable.

Unknown Executive

All right. Sounds good. David, do you have any closing remarks? That's our last question.

David Ellison

Chairman & CEO

Just one. I want to just thank everybody for -- who took time to dial into the call today. And just want to reiterate, there's tremendous energy and excitement across the company, and we're really excited for what we're going to get to build in the future. So just thank you.

Operator

Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.

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