Paramount Skydance's Profit Improvement Is Real-But the $110 Billion Warner Deal Still Faces the Real Test

Paramount Skydance's first quarter improved, but the stock still hinges on closing risk

Paramount Skydance's latest quarter looks genuinely better operationally. The company posted 59% higher first-quarter adjusted EBITDA at $1.16 billion, streaming revenue rose 11%, and adjusted profit reached 23 cents per share versus 15-cent estimates.

That is a meaningful improvement, but it does not settle the main question facing investors: can this $110 billion Warner Bros. Discovery deal actually close, and on what terms?

The stock still reflects that uncertainty. PSKY is trading at $10.62, near the low end of its $8.62 to $20.86 52-week range, while the consensus target is only about $13. Even after a solid quarter, deal risk still looks like the main force driving the valuation.

Management also gave investors another reason to stay cautious in the near term. Second-quarter revenue is guided at $6.75 billion to $6.95 billion, below Wall Street estimates of $7.07 billion, as the company misses some usual tentpole and sports tailwinds. The quarter improved the operating story, but it did not remove the overhang.

Warner Bros. Discovery still looks like a credible acquisition target

If Paramount's own quarter was the first check, Warner Bros. Discovery is the second. Warner posted adjusted EBITDA up 5% in the first quarter even with a large reported net loss, because that result was weighed down by deal-related charges. Its streaming business also kept expanding, with over 140 million subscribers worldwide.

The strategic logic is about scale and content

The deal is explicitly aimed at expanding scale in film and television by tapping Warner's deep library of films and series. That matters because the combined company would have a larger back catalog to support streaming, create more licensing options, and spread risk across a wider content base.

Warner's own management has made a similar point, with HBO Max described as "really the linchpin" and expected to be a "huge benefit" to Paramount after closing. Combined with Paramount's stated commitment to produce a minimum of 30 theatrical films annually, the strategic case is about building a more durable content-and-platform engine rather than relying on cost cuts alone.

Integration still has to prove the thesis

That said, signing the deal is only the first step. The harder test is whether two large studios, streaming platforms, and production operations can be combined without losing momentum. The operating story is more credible than a pure merger narrative, but integration still has to be proved.

Regulatory and political hurdles still dominate the timeline

The operating story is healthier, but the stock is still waiting on the real-world gatekeepers. Even if the businesses keep improving, investors are unlikely to fully re-rate PSKY until they have more confidence about whether the deal closes and when.

EU approval removed one hurdle

European Union antitrust regulators signed off, and WBD shareholders approved the deal in April. That clears some of the easier steps, but it does not eliminate the main uncertainty in the U.S.

The U.S. pause extends the wait

The bigger problem is timing. Paramount has agreed to freeze the merger until at least next June while a federal judge considers an antitrust lawsuit brought by Democratic state attorneys general. That does not automatically kill the deal, but it does compress the near-term upside and keep the stock trading more like a regulatory setup than a straight operating story.

Foreign ownership still has to clear FCC scrutiny

There is another political hurdle. Paramount disclosed the combined company would be 49.5% owned by foreign investors, with about 38.5% of equity tied to sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi. Lawmakers are pressing the FCC to delay closing until the national security review of the foreign investment is complete. That review could remain procedural, or it could become a more serious obstacle.

What matters most from here

• Whether the court pause starts to look manageable rather than terminal after next June
• Whether FCC scrutiny remains procedural or hardens into a real barrier on foreign ownership
• Whether EU approval turns into visible progress toward a closing

If those signals improve, the stock has room to be reassessed. If they worsen, the operating gains will matter less to shareholders.

The base business is stronger, but the market still values the deal outcome more

Paramount Skydance is no longer just a merger wrapper. Paramount+ now has 79.6 million subscribers, and Warner's streaming unit already had over 140 million subscribers worldwide, with management expecting more than 150 million by year-end. That is a meaningful streaming footprint.

Even after the profit improvement, PSKY still sits near the low end of its $8.62 to $20.86 52-week range, which suggests the market is holding back on paying full straddle for the combined content engine until the legal and regulatory picture is clearer.

The next milestones are about closure, not cost cuts

• Whether the paused U.S. review freezes the merger until at least next June begins moving toward closure after EU approval
• Whether the FCC foreign-ownership fight stays focused or turns into a real block
• Whether Warner's streaming business keeps progressing toward the company's year-end subscriber target

If the pause turns into a long slog and the foreign-ownership battle hardens, PSKY could remain trapped near current levels. If closing risk eases, the improved operating base is finally in a better position to get more credit.