Nexstar Media Group Navigates Ad Revenue Headwinds in Q1 2025, but Strategic Moves Offer Long-Term Clarity

Nexstar Media Group’s Q1 2025 earnings underscore the challenges of a media landscape buffeted by cyclical and structural forces. While political ad revenue dried up and non-political advertising softened, the company’s strategic focus on expanding its distribution footprint, leveraging sports programming on The CW, and maintaining disciplined capital allocation provides a foundation for resilience. Yet investors must weigh short-term turbulence against Nexstar’s long-term ambitions—and the risks that could upend them.

Revenue Dynamics: A Mixed Picture

Nexstar’s first-quarter net revenue totaled $1.23 billion, a 3.9% decline from Q1 2024. The drop was driven by a $46 million collapse in advertising revenue, with political ad revenue plummeting from $38 million to $6 million as the 2024 election cycle waned. Non-political advertising also weakened, shrinking by $20 million amid broader market softness. Meanwhile, distribution revenue hit a record $762 million, up 0.1%, thanks to contractual rate escalators, vMVPD subscriber growth, and CW affiliation expansions. These gains, however, were partially offset by MVPD subscriber attrition—a recurring headwind for traditional distribution models.

The stark contrast between advertising and distribution performance highlights Nexstar’s dual revenue engines. While distribution provides stability, advertising’s volatility underscores reliance on external factors like election cycles and economic conditions.

Profit Margins Under Pressure

Net income fell sharply to $97 million, a 41% year-over-year decline. This reflected not only lower revenue but also rising costs: amortization of broadcast rights surged due to expanded sports programming on The CW, and the absence of a $40 million non-recurring gain from the sale of an interest in BMI in Q1 2024. Adjusted EBITDA dropped 15.7% to $381 million, with margins narrowing to 30.9% as operational efficiency faced headwinds.

Cash flow, however, remained robust. Operating cash flow rose 22.1% to $337 million, driven by working capital adjustments, though adjusted free cash flow dipped 10.5% to $348 million due to reduced contributions from The CW partners. This underscores the company’s ability to manage liquidity even amid margin compression.

Strategic Priorities: Building for the Future

Nexstar’s Q1 moves reveal a focus on long-term value creation:
1. The CW’s Sports Pivot: Viewership for NASCAR Xfinity Series and WWE NXT races surged 19% year-over-year, while new partnerships with Grand Slam Track, AVP volleyball, and Texas Rangers games aim to solidify The CW’s position as a sports destination. This could stabilize advertising revenue by attracting younger demographics and corporate sponsors.
2. Distribution Expansion: The acquisition of WBNX-TV in Cleveland, Ohio—set to affiliate with The CW in September—creates a new duopoly, enhancing local advertising leverage and distribution scale.
3. Capital Allocation Discipline: Despite the earnings slump, Nexstar hiked its dividend by 10% (to $1.86 per share) and repurchased $75 million in stock, reflecting confidence in its balance sheet. Debt remains elevated at $6.5 billion, but the company has prioritized repayment ($31 million in Q1) and aims to reduce leverage over time.

Risks and Uncertainties

Nexstar’s outlook hinges on several variables:
- Political Ad Cycle: The 2026 election could reinvigorate advertising revenue, but the timing and scale of this recovery remain uncertain.
- Distribution Renewals: Nexstar must renew contracts covering 60% of its subscriber base in the coming years. Failure to secure favorable terms could pressure margins further.
- Programming Costs: The CW’s sports expansion requires substantial investment, and subscriber growth must offset rising amortization expenses.

Conclusion: A Stock of Contradictions, but One Worth Watching

Nexstar’s Q1 results are a reminder of the fragility of media revenue models in an era of shifting consumption habits and political cycles. Yet the company’s strategic moves—bolstering The CW’s sports portfolio, expanding distribution reach, and maintaining shareholder returns—suggest a coherent path forward.

The numbers tell a story of trade-offs: While net income and EBITDA fell sharply, operating cash flow held up, and free cash flow remains substantial enough to fund dividends and strategic acquisitions. The CW’s 19% viewership gains for key sports programming are particularly encouraging, as they signal a shift toward content with broader appeal.

Investors should also note Nexstar’s balance sheet: despite $6.5 billion in debt, its adjusted free cash flow of $1.39 billion in 2024 (annualized from Q1’s $348 million) gives it flexibility to manage obligations. The dividend increase—a 12th consecutive annual raise—also reinforces management’s confidence in cash generation.

In the near term, Nexstar faces headwinds from soft advertising and distribution renewals. Yet its ability to pivot toward high-engagement sports content, coupled with disciplined capital allocation, positions it to weather these challenges. For investors seeking a media stock with both defensive qualities and growth potential, Nexstar’s mix of cash flow resilience and strategic ambition makes it a compelling—but not risk-free—play. The next 12 months will test whether its long-term bets can offset short-term turbulence.