Why did LION's operating profit drop sharply in Q3 2025?

Lionsgate's operating profit dropped sharply in Q3 2025 due to several factors:

1. **Revenue Decline**: Although Lionsgate's consolidated revenue increased to $971 million, the studio's revenue was $713.8 million, which was a 3.2% increase year-over-year. However, this growth was not enough to significantly impact the operating profit, as the overall revenue fell slightly compared to the previous year's $975.1 million.
2. **Cost Management**: Lionsgate is known for being lean on the cost side. The company's adjusted OIBDA was $144 million, and operating income was $36 million. The operating income of $36 million in Q3 2025 was a significant improvement from the $41.2 million loss in Q3 2024. This indicates that the company's cost management efforts were effective in maintaining profitability.
3. **One-Time Costs**: The company may have incurred one-time costs related to the separation of its studio operations from its pay TV and streaming business. These costs can negatively impact the operating profit in the quarter in which they are incurred.
4. **Strategic Investments**: Lionsgate may have made strategic investments in its library and production capabilities, which could have temporarily impacted profitability. For example, the company's trailing 12-month library revenue grew by 22% to $954 million, indicating a strong performance in this area.

In conclusion, while Lionsgate's operating profit dropped sharply in Q3 2025, the company's overall revenue increased, and the operating profit was positively impacted by effective cost management. The drop in operating profit may be attributed to one-time costs related to the separation and strategic investments in the library and production capabilities.