News Corporation Outperforms Expectations with Robust Digital Growth and Strategic Resilience

News Corporation (NASDAQ: NWS, NWSA) has delivered a strong first-quarter fiscal 2025 performance, exceeding market expectations with a Non-GAAP EPS of $0.21 and $2.58 billion in revenue, showcasing its ability to navigate macroeconomic challenges through strategic focus on digital and subscription-based segments. The results highlight the company’s transformation into a content-driven, tech-adjacent powerhouse, even as traditional media sectors face headwinds.

Key Financial Highlights

• Revenue Growth: Total revenue rose 3% year-over-year to $2.58 billion, surpassing the $2.50 billion reported in the prior year. This marks the highest first-quarter revenue since the company’s separation, driven by growth in Digital Real Estate Services, Book Publishing, and Dow Jones.
• Profitability: Net income surged 148% to $144 million, while Adjusted EPS increased 31% to $0.21, significantly outperforming the $0.16 estimate.
• Segment EBITDA: Total segment EBITDA rose 14% to $415 million, fueled by record performances in REA Group (a 22% revenue jump) and Book Publishing (25% EBITDA growth).

Segment Breakdown: Winners and Challenges

1. Digital Real Estate Services:
2. REA Group (Australia’s leading real estate platform) reported $318 million in revenue, up 22% year-over-year, benefiting from strong residential listings and currency tailwinds. However, a withdrawn acquisition bid for Rightmove led to $12 million in deal-related costs.

3. Move (U.S.): Revenue dipped 1% to $140 million due to housing market softness but saw digital engagement growth (e.g., Realtor.com’s unique users rose 2%).

4. Book Publishing:

5. Revenue increased 4% to $546 million, with digital sales surging 15% (26% growth in audiobooks). Titles like Hillbilly Elegy and A Death in Cornwall drove demand.

6. Segment EBITDA jumped 25% to $81 million, reflecting cost efficiencies and partnerships like Spotify’s audiobook contributions.

7. Dow Jones:

8. Revenue grew 3% to $552 million, led by Risk & Compliance (up 16% to $81 million) and Dow Jones Energy (up 11% to $68 million).

9. WSJ Subscriptions: Total subscriptions rose 7% to 4.3 million, with digital-only subscribers accounting for 90% of the total.

10. Subscription Video Services:

11. Revenue increased 3% to $501 million (driven by Kayo and BINGE pricing), but EBITDA dipped 1% to $92 million due to higher programming costs for sports content.

12. News Media:

13. Revenue declined 5% to $521 million due to lower advertising and printing contracts, though EBITDA improved 14% to $16 million via cost-cutting.

Strategic Moves and Risks

• AI and Legal Battles: CEO Robert Thomson emphasized News Corp’s stance against AI firms misusing its journalism. Legal actions against Perplexity (via Dow Jones and the New York Post) underscore the company’s resolve to protect its content. A partnership with OpenAI aims to ensure ethical AI integration.
• Foxtel Sale: News Corp agreed to sell its Foxtel stake to DAZN for A$3.4 billion, signaling a pivot toward lighter asset ownership and higher-margin digital services.
• Free Cash Flow: Improved to $(31 million from $(179 million in the prior year, reflecting better operating cash flow and reduced capex.

Market Context and Valuation

News Corp’s stock has outperformed broader markets in 2024, rising 18% year-to-date as investors bet on its digital resilience. The company’s forward P/E ratio of 15.4 (vs. 23.2 for the S&P 500) suggests it remains undervalued relative to growth peers.

Conclusion: A Content Leader in a Noisy World

News Corporation’s first-quarter results demonstrate its strategic acumen in prioritizing high-margin digital and subscription businesses. With Adjusted EPS up 31% and record EBITDA growth, the company is well-positioned to capitalize on secular trends like premium digital content and AI-driven innovation.

However, risks linger: Subscription Video’s margin pressures and the lingering effects of macroeconomic uncertainty on housing markets remain concerns. That said, the sale of Foxtel and legal actions against AI misuse signal a disciplined focus on core strengths.

Investors should note:
- Growth Catalysts: Continued WSJ subscription momentum, audiobook partnerships, and monetization of REA Group’s dominance in Australian real estate.
- Valuation: At $17.85 per share (as of Nov 7, 2024), the stock trades at a discount to its peers, offering upside potential if digital segments sustain their growth.

In a fragmented media landscape, News Corp’s blend of trusted journalism and tech-driven platforms positions it as a rare winner. For long-term investors, this quarter’s results reaffirm the company’s staying power in an era of disruption.

Disclosure: This analysis is based on publicly available data and does not constitute investment advice.