Comcast on Thursday beat Wall Street expectations for its first quarter. But the media conglomerate’s total revenue fell 0.6% to $29.89 billion and profits fell 12.5% to $3.86 billion as it shed 199,000 broadband subscribers due to heightened competition and 427,000 video customers from continued cord-cutting.
Also contributing to the decline was a 6% drop in domestic advertising revenue in its media business, from lower revenue at its linear networks; a 13% drop in theatrical revenue because of lower revenue from its releases in the quarter compared to the prior year period; and a 5.2% decline in theme parks revenue attributed to lower attendance and the impacts of the Hollywood wildfires on its domestic theme parks and $100 million in pre-opening costs for Epic Universe.
Meanwhile, its mobile business was a bright spot, adding 323,000 lines. Peacock also continued to make progress during the quarter, growing revenue 16% to $1.2 billion and adding 5 million paid subscribers for a total of 41 million, primarily driven by its bundle with Charter Communications. But the streaming service remains unprofitable, narrowing its loss to $215 million, compared to a loss of $639 million in the prior year period.
“While we don’t see any noteworthy evidence of economic challenges for the year thus far, the odds have increased that challenges may be approaching, but we are well positioned to handle whatever lies ahead,” Comcast President Mike Cavanagh told analysts on Thursday.
The latest quarterly results come as Comcast is preparing to spin off its cable network portfolio into a publicly traded, standalone company. The move is expected to be completed by the end of the year and will be tax-free to Comcast’s shareholders.
The entity, currently dubbed SpinCo, will house USA Network, CNBC, MSNBC, Oxygen, E!, SYFY and Golf Channel as well as digital assets Fandango, Rotten Tomatoes, GolfNow and SportsEngine, reaching 70 million U.S. households and generating $7 billion in annual revenue.
Comcast executives on Thursday offered few new details on the spin-off, including the timing of the move.
Here are quick-take results from Comcast’s earnings:
Net income: $3.86 billion, down 12.5% year over year. On an adjusted basis, net income fell 0.9% to $4.17 billion.
Earnings per share: 89 cents per share, down 7.7% year over year. On an adjusted basis, EPS came in at $1.09 cents per share, up 4.5% year over year, compared to 98 cents per share expected by analysts surveyed by Zacks Investment Research.
Revenue: $29.89 billion, down 0.6% year over year, compared to $29.68 billion expected by Zacks.
Comcast shares fell 4% during Thursday’s trading session following the results.
Comcast Continues to Bleed Broadband, Pay TV Subscribers
Comcast ended the quarter with a total of 51.4 million customers in its connectivity and platforms business, including 12.1 million video customers, 8.15 million wireless customers and 31.64 million broadband customers.
“In this intensely competitive environment, we are not winning in the marketplace in a way that is commensurate with the strength of the network and connectivity products,” Cavanagh said. “Dave [Watson] and his team have worked hard to understand the reasons for this disconnect, and have identified two primary causes, one is price transparency and predictability, and the other is the level of ease of doing business with us. The good news is that both are fixable, and we are already underway with execution plans to address these challenges.”
The company previously said it would focus on upgrading its broadband network and WiFi network capabilities to boost speeds for its customers, which would include incorporating artificial intelligence, as well as introduce new bundle packaging and pricing.
Despite the broadband subscriber losses, the segment’s revenue rose 1.7% to $6.56 billion. Wireless revenue climbed 15.6% to $1.12 billion. Video revenue fell 5.4% to $6.72 billion and advertising revenue for the residential connectivity and platforms segment fell 7.4% to $881 million. Overall, the connectivity and platforms segment’s revenue fell 0.7% to $20.14 billion and profit grew 1.5% to $8.34 billion.
Domestic Advertising Drags Down Media Business
While Peacock saw positive momentum during the quarter, the overall media segment, which comprises Peacock, grew revenue just 1.1% to $6.44 billion. The unit’s revenue was dragged down by a 6.8% decrease in domestic advertising revenue to $1.89 billion, primarily due to lower revenue at the company’s linear networks.
But profits for the media segment jumped 21.5% to $1 billion due to lower operating expenses from lower sports programming volume and costs at Peacock compared to the prior year period, offset by higher content costs at its entertainment linear networks and an increase in sports costs for its international networks.
Domestic distribution revenue grew 0.6% to $2.92 billion, reflecting higher revenue at Peacock, offset by the lower revenue at its networks. International networks revenue grew 13.9% to $1.16 billion, primarily due to increased revenue from the distribution of its sports networks.
Looking ahead, Cavanagh touted Peacock’s upcoming NBA games in the second half of the year as a key driver to help scale the streamer’s subscriber base and trim its losses over time. He also said the company remains open to considering streaming bundles and partnerships.
“While we have not yet seen any impacts from the current macroeconomic uncertainty, advertising is the category that has shown the most economic related cyclicality in our business historically,” Comcast chief financial officer Jason Armstrong added. “However, for the upfront and for the balance of the year, we feel well positioned in the market as we capitalize on the NBA launching in the fourth quarter, a healthy Peacock subscriber base and a strong content offering across entertainment and news.”
Studios Revenue Soars on Content Licensing, “Wicked” Digital Sales
The studios business saw revenue grow 3% to $2.83 billion, driven by a 3.5% increase in content licensing revenue to $2.17 billion and a 17.5% increase in “other” revenue to $366 million, primarily due to digital sales of “Wicked.”
But theatrical revenue dropped 13% to $286 million, primarily due to higher revenue from “Kung Fu Panda 4” and “Migration” in the prior year period, compared to releases in the current quarter, including “Dog Man,” as well as the carryover benefit of “Wicked” and “Nosferatu.” Looking ahead, Universal will release “How to Train Your Dragon” on June 13, followed by “Jurassic World: Rebirth” on July 2.
Overall, the segment saw profits grow 22.3% during the quarter, due to the higher revenue offsetting higher operating expenses. Programming and production expenses increased, mainly driven by higher costs associated with content licensing sales compared to the prior year period. Marketing and promotion expenses decreased due to the timing of spending on recent and upcoming theatrical film releases.
Epic Universe, Hollywood Wildfires Weigh on Theme Parks Business
Comcast’s theme parks business saw revenue tumble 5.2% to $1.88 billion in the first quarter, due to lower revenue at its domestic theme parks driven by lower attendance and the impact of the Hollywood wildfires. Profit for the segment fell 32% to $429 million due to the lower revenue and higher operating expenses, including around $100 million of pre-opening costs for Epic Universe, which will open in May.
“We have seen strong demand since launching Epic ticket sales in the fourth quarter of 2024 and the most recent reaction to early previews has been nothing short of phenomenal,” Cavanagh said. “Looking past these pre opening costs, underlying results in the quarter indicated stable trends in Orlando, giving us confidence that we are entering the Epic launch from a position of strength.”
He added that international parks performance remains strong, but cited a “softness” at Universal Hollywood due to the fires, adding it expects a “gradual” recovery.
In addition to Epic, the company will open Universal Horror Unleashed, its first permanent year-round horror entertainment experience in Las Vegas in August, as well as its first ever Universal Kids resort in Frisco, Texas, in 2026. It also plans to build its first Universal theme park and resort in the United Kingdom, with construction starting in 2026 and a grand opening scheduled for 2031.
