Lionsgate Studios' Q2 2026: Contradictions Emerge on TV Market Pressures, Starz's Digital Strategy, M&A, Financials, and Content

Date of Call: November 6, 2025

Financials Results

• Revenue: $475 million (Lionsgate Studios total revenue for Q2 FY2026)
• EPS: Reported fully diluted loss of $0.39 per share; adjusted diluted loss of $0.20 per share

Guidance:

• Fiscal '26 is back-end loaded; sequential growth expected into Q3 and Q4.
• Motion Picture segment profit expected to build Q3 → Q4 as titles enter Pay 1 windows and P&A cadence shifts.
• TV delivery cadence and incremental licensing (e.g., The Hunting Wives international rollouts) to drive material scripted growth in fiscal '27.
• Company expects strong adjusted OIBDA growth in fiscal '27 versus fiscal '25.
• Net debt/leverage to peak around Q3 then delever as EBITDA ramps; target ~3.0–3.5x by '27/'28.
• Backlog ~ $1.6B (up 31% sequentially); ~85% expected to convert within 18 months.

Business Commentary:

• Library Revenue and Performance:
  
• Lionsgate Studios Corp. reported that their trailing 12-month library revenue reached $1 billion for the first time in Q2 2026.

• This record performance is attributed to the value of their library and entire portfolio of intellectual property, with significant contributions from both television and motion picture properties.

• Confidence in Future Slate and Market Trends:

• The company expressed confidence in their future growth, supported by strong metrics such as the Michael trailer receiving over 30 million views in its first 6 hours.

• This confidence is driven by excitement from industry partners and the anticipation for upcoming releases like Michael, The Hunger Games, and Resurrection.

• Operational and Strategic Decisions:

• Lionsgate made operational changes, including a 5% reduction in headcount, to align with a changing marketplace and enhance profitability.

• The company's strategic focus on retaining rights in their television shows and leveraging AI for productivity and cost savings is aimed at strengthening their long-term business model.

• TV and Content Strategy:

• Lionsgate's TV business scored wins with three consecutive renewals for second seasons, including The Studio, The Hunting Wives, and The Rainmaker.
• The company's strategy of retaining rights and playing the long game in television is shown by the doubling of TV's contribution to library revenue over the past decade.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • "We reported a quarter in line with our financial expectations and with all signs pointing to significant growth over the next 2 quarters and through fiscal '27." Trailing 12‑month library revenue reached ~$1B (up 13% YOY). Management reiterated expectations of sequential growth into Q3/Q4 and strong adjusted OIBDA growth in fiscal '27 versus fiscal '25, and highlighted record library performance and a tentpole-driven slate for fiscal '27.

Q&A:

• Question from David Joyce (Seaport Research Partners): Two questions, please. First, if you could drill down some more on what's giving you the confidence for the back half of this year in 2027 and beyond with your slate granted. You explained the backlog being up significantly. But are there other metrics with social media or audience testing that you or your licensees are doing? And then secondly, if you could please comment on your views of the M&A optionality and what's going on more broadly in the industry.
  Response: Confidence stems from strong online/social traction across multiple titles (e.g., Michael trailer performance) and a diversified portfolio—M&A remains uncertain, so management is focused on organic growth and monetizing a retained, high‑value library.

• Question from Brent Penter (Raymond James & Associates, Inc., Research Division): There was a thought in the past that you all have some optionality on Michael in terms of the ability to then make a second film, assuming that one performs well. Can you update us on where we stand on that option?
  Response: Director's cut of Michael is exceptional; while no sequel is formally confirmed, the creative team is preparing to deliver a follow‑up soon after the first film if warranted.

• Question from Brent Penter (Raymond James & Associates, Inc., Research Division): Now You See Me: Now You Don't coming out next weekend, what's the general sense you all are getting from tracking on that relative to what you were expecting when you green lit? And then the first 2 movies were pretty big internationally. So should we expect there's a bit more revenue locked in there via some of those international licensing deals than what we typically see?
  Response: Now You See Me is tracking near the performance of the prior film with an expected 3.5–4.5x multiple over time; international demand is strong and already considered in the film's economics, plus franchise releases create halo revenue across windows.

• Question from Brent Penter (Raymond James & Associates, Inc., Research Division): You talked about the strong growth at 3 Arts. Can you just remind us the sizing of that business in terms of revenue and EBITDA? And what kind of growth exactly you're seeing?
  Response: Management won't disclose standalone 3 Arts financials, but says the business is experiencing strong growth heading into the second half, with seasonal strength in December and momentum in production and sports representation.

• Question from Thomas Yeh (Morgan Stanley, Research Division): As an active seller to many of these companies, it seems like you're still seeing pretty broad strength in the series orders and series pickup environment. Is there a sense that consolidation of the buyer pool could change those dynamics if the broader view is that they'd still be spending as much content, if not more, perhaps on a consolidated basis?
  Response: Consolidation could be positive if larger buyers are healthy and signal appetite; uncertainty has reduced buying, but recent green shoots and renewals suggest improving demand.

• Question from Thomas Yeh (Morgan Stanley, Research Division): John, you mentioned ramping stage play adaptations and IP monetization starting to kick in. Can you help us think about the ancillary revenue opportunity and the economics you'd be participating in? Is this like a high‑margin licensing revenue sort of deal?
  Response: Ancillary monetization varies by project—many are no‑risk licensing deals, some involve investment positions when management is meaningfully additive; expect meaningful financial upside from stage, live experiences and gaming.

• Question from Omar Mejias Santiago (Wells Fargo Securities, LLC, Research Division): Jimmy, you talked about the backlog now at $1.6 billion or up 31% sequentially. Can you expand on the puts and takes of this incremental demand? And are market trends improving on the TV side? Or is this a Lionsgate specific driver? Any help on unpacking the underlying strength would be helpful.
  Response: Backlog strength is broad but weighted to TV—incremental orders and renewals across series drove the sequential $379M increase; it's indicative of market demand plus franchise lift and ~85% of backlog expected to convert within 18 months.

• Question from Omar Mejias Santiago (Wells Fargo Securities, LLC, Research Division): On leverage, can you remind us what you can do to bring down leverage? Where do you think you can get leverage to in the relative near term? And an update on where things stand with 3 Arts and the potential to bring in a partner there?
  Response: Leverage should peak in Q3 then decline as trailing EBITDA ramps; management targets ~3.0–3.5x by '27/'28; talks with 4–5 potential partners for 3 Arts are underway and a transaction could further delever.

• Question from Omar Mejias Santiago (Wells Fargo Securities, LLC, Research Division): Curious what's the early feedback on the Michael trailer? And what's the potential opportunity for this film globally?
  Response: Trailer response overwhelmingly positive with very strong engagement; management sees global upside comparable to top‑tier musical biopics and strong partner interest internationally.

• Question from Matthew Harrigan (The Benchmark Company, LLC, Research Division): On the Resurrection movie, are you completely confident you can get that together, and what is the possibility of that also breaking into 2 parts? Also what's your view on advertising costs and how you are changing marketing given AI/tracking challenges?
  Response: Resurrection is confirmed as two films, on time/on budget and management is confident; marketing is being run efficiently—using creative digital and earned content to drive engagement while spending 30–50% less than peers on some campaigns.

• Question from John Stid (Wolfe Research, LLC): With your upcoming slate increasingly concentrated behind larger, more IP‑driven films, do those films garner higher international presales as a percentage of production budget to offset concentration risk?
  Response: Yes—larger tentpoles can secure outsized foreign participation, though midsized films still attract strong foreign support; risk and required performance thresholds are evaluated before greenlighting.

• Question from Vikram Kesavabhotla (Robert W. Baird & Co.): Observations from The Long Walk and Good Fortune and how you plan to balance investment in small/midsized films versus tentpoles? And on the library, what are the drivers supporting the recent strength and sustainability?
  Response: Management intends to maintain a mix—targeting 2–4 tentpoles per year while continuing midsize investments; library strength is driven by retained rights, expanded series licensing, self‑directed channels and franchise halos, which management views as sustainable.

Contradiction Point 1

TV Market Demand and Production Pressures

It highlights differing perspectives on the state of the TV market and production pressures, impacting expectations for content delivery and financial performance.

How do you expect the broader M&A environment to impact series pickup dynamics? - Thomas Yeh (Morgan Stanley, Research Division)

2026Q2: The TV market is obviously under pressure, but we are focused on leveraging IP and shifting to digital. The fact that we have The Rookie's eighth season talks and Ghost is still on the air, I think, speaks to the fact that we are creating content that is valuable to our partners. And we continue to believe that we are in a stronger position to really deliver growth in the scripted market. - Kevin Beggs(Chairman, TV Group)

How is the industry resuming normal production and delivery schedules? What is the forecast for film and episode deliveries? - David Joyce (Seaport Research Partners)

2025Q3: The TV market is under significant pressure. There is pressure from change and corrosion of the traditional windows. There is pressure from the costs of talent. There is pressure from the entry of commercial marketplaces into the studio side. And I do think it's a market for the careful and the disciplined and the long-term thinkers, and that's who we are. - Kevin Beggs(Chairman, TV Group)

Contradiction Point 2

Starz's Digital Strategy and Subscriber Growth

It involves differing statements about Starz's digital strategy and subscriber growth, which are crucial for understanding the company's growth trajectory and revenue projections.

How do you balance investments in small/midsized films and tentpoles, and what drives library performance? - Vikram Kesavabhotla (Robert W. Baird & Co. Incorporated, Research Division)

2026Q2: Linear subscribers will continue to decline. OTT growth is strong due to bundling and new content. Strong Q4 subscriber growth is expected with new series like Canon. - Jeffrey Hirsch(President, Starz)

Will OTT subscriber growth continue at the same rate? Will linear subscriber losses persist? - Brent Penter (Raymond James & Associates Inc., Research Division)

2025Q3: We have been very pleasantly surprised in terms of the health of SVOD and the SVOD marketplace and how our platform is positioned to take advantage, particularly with our new customer acquisition focus that we have put on some digital platforms. - Jeffrey Hirsch(President, Starz)

Contradiction Point 3

M&A Environment and Strategic Focus

It involves differing perspectives on the M&A environment and strategic focus, which can impact the company's growth and investment decisions.

What is your confidence in the second half of this year and beyond, and how do you assess M&A opportunities in the industry? - David Joyce (Seaport Research Partners)

2026Q2: We recognize the unpredictability of each film but have a balanced portfolio that should deliver growth. - Adam Fogelson(Chairman of Motion Picture Group)

How are you redefining your zone of comfort with the evolving film approach? - Thomas Yeh (Morgan Stanley)

2025Q2: It's a combination of all the things that you talked about. The company has done an extraordinary job of being financially disciplined and looking at risk-mitigated models. - Adam Fogelson (Chairman of the Motion Picture Group)

Contradiction Point 4

Financial Growth and Performance

It involves differing expectations regarding the growth and performance of the company's financial metrics, impacting investor expectations.

Can you explain the backlog growth and discuss leverage and growth potential for 3 Arts? - Omar Mejias Santiago (Wells Fargo Securities, LLC, Research Division)

2026Q2: The company is in great financial shape. We generated $43 million of cash from operations in the quarter and our leverage continues to decline, having reduced the leverage from 7.9x at the start of the year to 4.5x as of the quarter-end. - James Barge(CFO)

Given the current leverage ratio, how do you assess your capacity for future stock buybacks, and do you prefer them over paying down debt or debt reduction? - Thomas Yeh (Morgan Stanley, Research Division)

2025Q2: We have exceptional balance sheet flexibility as we approach the second half of the fiscal year. We have a 4.8x leverage ratio at the end of December, and we expect to generate approximately $1.5 billion in free cash flow for the year. - James Barge(CFO)

Contradiction Point 5

Content Strategy and IP Development

It involves differing strategic priorities and content development approaches, which can impact the company's long-term growth and competitiveness.

How do you balance small/mid-sized film investments with tentpoles, and what drives library performance? - Vikram Kesavabhotla (Robert W. Baird & Co. Incorporated, Research Division)

2026Q2: We are continuing to invest in star power with the signing of Jet Li and the attachment of Dwayne Johnson to an untitled project. - Jon Feltheimer(CEO)

How do you reconcile the shift toward low-risk core franchises with the focus on high-reward long-term opportunities in your investment strategy? - Brian Abelson (Thomson Reuters)

2025Q2: In television, we've expanded our series orders on critical and fan favorite Series, such as Yellowstone and American Horror Story. - Jon Feltheimer(CEO)