Freedom Broker: Paramount under pressure over Warner Bros. acquisition

Freedom Broker analysts maintained a “Hold” rating on Paramount Skydance (PSKY) shares but cut the target price from $14 to $10. At the current share price of $9.27, the upside potential is about 7.9%. In the analysts’ view, strong streaming performance and improving profitability do not yet offset uncertainty around the deal with Warner Bros. Discovery (WBD), which could raise financing costs and lead to additional dilution for existing shareholders.

Paramount Skydance — a media holding betting on streaming

Paramount Skydance is a U.S. media company formed after the merger of Paramount Global and Skydance Media. The company develops the Paramount+ streaming platform, produces and licenses film and television content, and runs a TV business including CBS and cable networks.

EBITDA up 27%, but the outlook for the second half is weaker

In Q2 2026, Paramount Skydance revenue increased 1% year over year to $6.91 billion, beating the market forecast of $6.87 billion. Adjusted EBITDA rose 27% to $1.10 billion versus a consensus of $936 million. Profitability improved due to higher revenue at the streaming and digital DTC segment, better film production economics, and cost cuts in the TV Media segment. The company continues to reduce spending on linear content and implement an efficiency program.

The strongest momentum was in streaming. DTC revenue increased 9% to $2.5 billion, while adjusted EBITDA rose 44% to $366 million. Paramount+ streaming revenue increased 16% year over year, and subscribers grew by about 2 million over the quarter to 81.6 million. Audience growth was supported by the TV series “Dutton Ranch,” UFC events, the FIFA World Cup, and original content. 

Full-year guidance raised, but Q3 will pressure margins

Management maintained Paramount Skydance’s 2026 revenue guidance at around $30 billion but raised the adjusted EBITDA range from $3.8 billion to $3.8–3.9 billion. The EBITDA-to-free-cash-flow conversion expectation was also improved: the company now targets at least 10% versus the previous 5%, excluding about $800 million of transformation costs.

The year-end efficiency forecast was raised from $2.5 billion to more than $2.7 billion, with a total target above $3 billion.At the same time, analysts point to a weaker profit trajectory in the second half. For Q3, the company expects adjusted EBITDA in the $875–975 million range, with a midpoint of $925 million. This is below the market forecast of $1.02 billion. Margin could fall to 13.1% due to a seasonal rise in spending on sports and original content, primarily UFC.

The WBD deal remains the key risk for the stock

In Freedom Broker analysts’ view, the delay in closing the deal with Warner Bros. Discovery limits the potential for a re-rating of the shares. In July, a U.S. federal court temporarily blocked the companies’ merger following a lawsuit by California and 11 other states, as authorities saw the deal as potentially violating antitrust laws. The antitrust proceedings delay completion of the transaction, although Paramount Skydance management remains confident it will close.

The company has already received approvals or no-objection clearances in 65 jurisdictions, including the U.S. and the EU. However, hearings on the lawsuit by 12 states are set to begin on March 2, 2027. The parties agreed not to close the deal and not to begin integration until the earlier of five days after the court’s decision or June 1, 2027.

For Paramount Skydance, the delay has direct financial consequences. After September, costs on the short-term borrowing the corporation raised for the merger with Warner Bros. could amount to $8–9 million per month, and the ticking fee (waiting fee) for WBD shareholders is about $650 million per quarter. According to Freedom Broker, rising transaction costs and an increased share count raise the cost of the deal and create a risk of additional dilution for existing shareholders.

Freedom Broker analysts’ expectations

Freedom Broker experts take a moderately negative view of Paramount Skydance’s results. On the one hand, the company is showing a notable improvement in operating efficiency: Paramount+ is growing, EBITDA is increasing, Studios has returned to positive profitability, and TV Media has been able to materially expand margins even amid declining revenue.

On the other hand, a weaker profit trajectory in the second half and rising costs associated with the acquisition of WBD reduce the stock’s appeal. Freedom Broker raised its 2026 revenue forecast for Paramount Skydance from $29.98 billion to $30.02 billion, while the adjusted EBITDA estimate was virtually unchanged at $3.83 billion.

This is not an individual investment recommendation.