Gannett Sees Improved Outlook with New Revenue Sources and Cost Savings

Gannett Co. is undergoing changes to improve operations and increase profitability. The company is implementing cost savings measures and developing new revenue sources, including digital subscription growth and targeted advertising. These efforts are expected to drive revenue growth and reduce expenses, leading to improved financial performance. Overall, Gannett's outlook is positive, with a rating upgrade expected.

Gannett Co. Inc. (NYSE: GCI), a leading media company known for its flagship newspaper, USA TODAY, is undergoing significant transformations aimed at enhancing operational efficiency and boosting profitability. The company has implemented cost-saving measures and is developing new revenue streams, which are expected to drive revenue growth and reduce expenses, ultimately leading to improved financial performance. As a result, analysts have upgraded their rating for the stock.

Cost Savings Initiatives

Gannett has initiated several cost-saving measures that are expected to significantly improve its financial performance. CEO Michael Reed highlighted these efforts during the Q2 earnings call, noting that the company is witnessing a shift in its operations, with momentum building in key areas of the business. One of the primary cost-saving initiatives involves a $100 million reduction program, which includes the closure of two of its largest production facilities as part of a consolidation program and the adoption of AI-driven automation. Most of these cost savings are expected to be realized by the end of the third quarter, with some extending into the fourth quarter of 2025. This initiative is anticipated to lower operating costs throughout 2026 [1].

New Revenue Streams

In addition to cost savings, Gannett is exploring new revenue streams to bolster its financial health. The company has partnered with Perplexity, an AI-powered answer engine, which will provide Gannett with access to its archives and fair compensation for its content. This partnership is expected to generate substantial revenue, given Perplexity's current visitor base of approximately two million daily users [1]. Furthermore, Gannett is implementing technology solutions to prevent other AI companies from scraping its data without permission or compensation. This move is part of a broader strategy to protect its intellectual property and generate additional revenue through licensing agreements with enterprise developers, such as Snowflake Marketplace [1].

Financial Performance and Outlook

Gannett's efforts to reduce costs and increase revenue are expected to lead to improved financial performance. Analysts anticipate that the company will show a profit this year, marking the first profitable year since 2018. The Wall Street analysts expect earnings to stay in the black through 2026 and 2027, despite a projected pullback near the end of 2025. This positive outlook is reflected in the company's valuation, with a long-standing discrepancy between its basic earnings and share prices [1].

Conclusion

Gannett's initiatives to improve operational efficiency and develop new revenue streams are expected to drive positive financial performance. The company's cost-saving measures and new partnerships are anticipated to enhance its profitability and revenue growth. As a result, analysts have upgraded their rating for the stock, reflecting optimism about the company's future prospects.

References

[1] https://seekingalpha.com/article/4813938-new-revenue-sources-and-cost-savings-improve-gannett-outlook-rating-upgrade