Paramount Skydance Q3 2025: Streaming Momentum vs. Integration Headwinds

Wall Street expects Paramount Skydance to report Q3 earnings of $0.49 per share, flat year-over-year, on total revenue of $6.79 billion-a-modest 0.83% increase from a year ago. The consensus view highlights stark contrasts across segments. While TV Media advertising revenue is projected to decline sharply by 15.1% to $1.42 billion, Direct-to-Consumer subscription revenue is forecast to surge 22.5% to $1.64 billion. This divergence underscores the core transformation thesis: the company's future hinges on streaming momentum overcoming linear TV erosion.

Paramount+'s subscriber growth remains the primary driver, having reached 79 million global subscribers in Q1 2025-a 11% year-over-year gain. Streaming revenue grew 16% that quarter, fueled by original content like 'Dexter: Resurrection' and improved unit economics. Analysts expect this trajectory to continue into Q3, with the merger integration costs-a necessary burden to achieve $2 billion in synergies-temporarily dampening profitability despite DTC strength.

The key falsifier emerges here: Can the streaming growth rate sustain itself? The company's own Q1 call acknowledged impending Q2 subscriber declines due to content seasonality and a terminated international bundle partnership. If Q3 subscriber momentum stalls-or worse, reverts to decline-despite the merger, it would signal that linear TV's structural decline is outpacing streaming gains. This would fundamentally challenge the thesis that Paramount Skydance is successfully pivoting to a sustainable digital-first model, potentially leaving profitability hamstranged by legacy TV pressures and integration costs without the offsetting scale from streaming.

Building on the momentum discussed previously, Paramount Global's direct-to-consumer segment demonstrated remarkable resilience and improving economics in Q2 2025. While Paramount+ subscribers dipped slightly to 77.7 million from the prior quarter, the decline was largely attributed to the expiration of an international bundle partnership rather than core service weakness. Despite this temporary subscriber blip, the streaming unit delivered a substantial profit surge, jumping from $26 million in Q2 2024 to $157 million in Q2 2025. This dramatic improvement underscores the powerful linkage between subscriber growth, ARPU enhancement, and operational efficiency. Management explicitly identified these factors-specifically rising ARPU alongside improved subscriber retention-as the primary drivers behind the streaming segment's profitability transformation.

The profitability leap wasn't accidental; it reflected strategic pricing power and cost discipline. Paramount+ revenue still managed to grow 23% year-over-year in Q2 2025, fueled by subscriber gains in select regions and successful price hikes. Crucially, the CFO previously highlighted improved churn rates as a key positive factor alongside subscriber count and ARPU, suggesting the subscriber base becoming more valuable and stable. This combination of higher revenue per user and lower customer attrition created significant margin expansion. The direct-to-consumer division's profit more than quintupled year-over-year, a clear validation of the streaming business model reaching a more sustainable profitability threshold.

Meanwhile, Pluto TV continued to bolster the streaming ecosystem. Its global viewing time increased 26% year-over-year in Q1 2025, reaching record levels, providing substantial free ad-supported streaming content that likely supports broader platform engagement and monetization strategies. This strong performance in the FAST (Free Ad-Supported Streaming TV) space complements the premium Paramount+ offering and contributes to overall subscriber and revenue growth in the digital direct-to-consumer channel. The profitability surge in DTC, coupled with these engagement metrics, signals that the core streaming engine is not only growing but becoming significantly more efficient and valuable, positioning Paramount favorably post-Skydance merger close.

Paramount's revenue engine is fundamentally shifting as streaming gains momentum while traditional TV media loses ground. Direct-to-consumer (DTC) revenue surged 15% year-over-year in Q2 2025, fueled by strong subscriber growth in key markets and improved pricing power, according to Paramount Global's earnings release. This momentum accelerated into Wall Street's forecasts, which project DTC subscription revenue climbing 22.5% year-over-year to $1.64 billion in Q3 2025, far outpacing other segments and signaling the streaming business is becoming the dominant growth driver. This transition has dramatically improved profitability in the digital division, with DTC segment profits jumping from $26 million in Q2 2024 to $157 million in Q2 2025, evidence of significant scaling efficiency.

However, this streaming ascent comes alongside pronounced weakness in the legacy TV media business. Analysts expect Paramount Skydance's TV Media revenue to fall 8.4% year-over-year in Q3 2025 to $3.94 billion, with advertising revenue specifically projected to decline sharply by 15.1% to $1.42 billion. This steep erosion reflects ongoing advertiser pullback and viewership migration away from linear broadcast and cable networks, marking a structural shift in the advertising landscape that outweighs streaming growth in impacting total revenue composition.

Theatrical performance provided a significant, but likely transient, boost to overall results. The box office success of Mission: Impossible - The Final Reckoning, which grossed $592 million globally, drove an 84% year-over-year increase in theatrical revenue to $254 million in Q2 2025. While this blockbuster helped stabilize total company revenue, which grew just 1% year-over-year to $6.85 billion, this level of film performance is not sustainable quarter-to-quarter. The theatrical falsifier is clear: Paramount's ability to maintain robust revenue growth hinges on streaming subscriber gains and ARPU improvements, not reliance on occasional mega-blockbusters. Looking ahead, Wall Street expects modest top-line growth of 0.8% year-over-year in Q3 2025, but anticipates flat earnings per share at $0.49, reflecting the tension between strong streaming revenue growth and ongoing TV media decline. This valuation dynamic suggests investors are pricing in the streaming transition but remain cautious about the timing and magnitude of profitability improvements in the new Paramount Skydance structure.

The November 10 earnings report arrives at a critical juncture for Paramount Skydance, serving as the first major test of its post-merger strategy. Investors will scrutinize whether the Domestic debut of South Park and sustained performance of Tulsa King and Dexter: Resurrection-which drew over 3 million viewers within three days-are translating into meaningful subscriber momentum and revenue resilience despite ongoing linear TV declines. Management will also address the August 7 merger closure impact, particularly progress on the $2 billion synergy target and how integration costs are influencing profitability. Key forward-looking signals include any revised subscriber guidance and evidence of accelerating ARPU growth beyond the strong 16% streaming revenue rise seen in Q1 2025.

Subsequent validation hinges on subscriber trends and monetization. While Q2 saw a 1.3 million drop in Paramount+ subscribers due to a terminated international bundle, regional subscriber gains and pricing increases drove 23% YoY streaming revenue growth. Management must demonstrate that churn improvements and ARPU expansion-identified as primary profitability levers-can overcome seasonal dips and partnership losses. The direct-to-consumer division's profit surge from $26 million to $157 million year-over-year signals potential, but sustained margin expansion requires proving that streaming scalability offsets linear TV contraction.

Short-term profitability pressure remains a factor, with integration and restructuring costs weighing on results. However, the theatrical performance of Mission: Impossible - The Final Reckoning, which generated $592 million globally and lifted total revenue 1% YoY, underscores the synergy between content investment and revenue growth. The critical falsifier is whether linear affiliate revenue declines accelerate beyond current projections, threatening the $399 million operating income trajectory.

Looking beyond Q3, the company's bull case requires exceeding the 79 million Q1 subscriber base while maintaining a positive operating cash flow from streaming. The base case assumes subscriber stabilization around 77-78 million through pricing power and regional wins, while a bear scenario hinges on subscriber losses exceeding 5% sequentially and ARPU growth decelerating below 10% YoY. The co-CEO's statement that Paramount+ made the company "substantially better positioned to thrive in the streaming future" sets the long-term benchmark-if execution delivers, these milestones could validate the growth thesis and justify re-rating the stock.