News Corporation's Strategic Shift Drives Strong Q3 Gains Amid Sector Challenges

News Corporation (NWS) delivered a robust third-quarter fiscal 2025 performance, showcasing the efficacy of its digital-first strategy amid a challenging media landscape. With net income surging 67% year-over-year to $107 million and earnings per share (EPS) doubling to $0.14, the company demonstrated resilience across its diversified portfolio. However, the results also revealed stark contrasts between thriving digital segments and declining legacy media divisions, underscoring the need for continued strategic pivots.

Financial Highlights: A Mixed Bag of Growth and Transition

Total revenues rose 1% to $2.01 billion, driven by strong performances in the Dow Jones, Digital Real Estate Services (DRES), and Book Publishing divisions. Segment EBITDA jumped 12% to $290 million, with adjusted EBITDA climbing 15% to $301 million, reflecting operational efficiencies and cost discipline.

The Dow Jones division emerged as a standout performer, with revenue up 6% to $575 million. Growth was fueled by its Risk & Compliance and Energy subsegments, which saw double-digit gains, and a 9% rise in digital-only subscriptions to 5.5 million. This aligns with the company’s focus on premium, subscription-based content, a trend amplified by its partnership with OpenAI to combat unauthorized AI-generated content.

In Digital Real Estate Services, revenue rose 5% to $406 million, with EBITDA surging 19% to $124 million. Despite currency headwinds (a $14 million drag from foreign exchange), the segment’s Australian and international expansion efforts continue to pay off. Meanwhile, Book Publishing grew 2% to $514 million, driven by strong backlist sales and audiobook adoption, with titles like Wicked and Summer in the City contributing meaningfully.

News Media: Adapting to Declines

The News Media division faced headwinds, with revenue down 8% to $514 million due to weakened advertising and printing contracts. Yet, EBITDA rose 22% to $33 million, highlighting cost-cutting efforts. Digital revenue now accounts for 39% of the segment’s total, suggesting a gradual shift toward sustainable revenue streams. However, declines in unique users for The Sun and New York Post (down 41% and 32%, respectively) signal ongoing challenges in traditional print-based models.

Strategic Moves: Foxtel Sale and Capital Allocation

The sale of Foxtel to DAZN for A$3.4 billion in April 2025 marked a pivotal strategic move. Repaying A$592 million in shareholder loans and securing a 6% equity stake in DAZN positions News Corp to redeploy capital into higher-growth areas. Free cash flow for the first nine months of fiscal 2025 hit $539 million, a 13% year-over-year increase, signaling financial flexibility to invest in digital initiatives or shareholder returns.

Outlook: Balancing Growth and Transition

CEO Robert Thomson emphasized the company’s focus on “diversified portfolio strength” and “digital transformation.” While legacy media struggles, the surge in subscription-based revenue and EBITDA improvements suggest the strategy is working. The collaboration with OpenAI to protect content integrity and the recent launch of HarperCollins’ AI-powered tools for authors further position the company to capitalize on emerging technologies.

Conclusion: A Compelling, But Uneven Story

News Corporation’s Q3 results highlight a company in transition. Its digital divisions—Dow Jones, DRES, and Book Publishing—are driving growth, with combined revenue up 6-7% year-over-year. However, the News Media division’s decline underscores the need for continued cost discipline and innovation.

Investors should note the 13% rise in free cash flow to $539 million and the doubling of EPS, which signal improved profitability and potential for shareholder returns. The Foxtel sale also bolsters balance sheet health, freeing resources for strategic bets.

While risks remain—including macroeconomic pressures on advertising and the slow fade of traditional media—the company’s focus on premium digital content and operational efficiency provides a solid foundation. For long-term investors, News Corp’s blend of growth and cash generation makes it a compelling play on the evolving media landscape, provided they can tolerate near-term volatility in legacy divisions.

In short, News Corporation’s Q3 results are a testament to its ability to navigate disruption—a skill that will be critical as AI reshapes content consumption in the coming years.