Paramount Skydance Targets $6bn Cost Cuts in Three Years

Paramount Skydance Corporation is targeting at least $6 billion in annual cost savings within three years, and it expects roughly $4 billion in one-time cash costs to get there — a costly haircut the company says it has already priced into its leverage outlook.

The target, laid out in a shareholder letter accompanying Q3 2026 results on November 10, is the headline number from the company's first earnings report since it completed its acquisition of Warner Bros in early October. Consolidated results from the merged entity will not appear until next quarter, so these figures describe Paramount Skydance on its own.

The quarter itself was modestly profitable: $7.03 billion (€6.2bn) in total revenue and $73 million in net earnings. That is a net margin of roughly one per cent — profitable, but barely, and achieved before the integration costs begin to bite.

Where is the growth coming from?

Paramount+, the SVoD platform, grew revenue 21 per cent, its fastest quarterly growth this year. ARPU rose approximately 14 per cent and subscribers climbed 6 per cent year-over-year to 82.2 million. The company confirmed plans to launch a bundled offering of HBO Max and Paramount+ in early 2027.

DTC revenue overall improved to 11 per cent year-over-year growth, reaching $2.5 billion. Studios revenue grew 23 per cent to $1.5 billion, and TV Media posted a 34 per cent adjusted EBITDA margin — even as TV Media revenue declined 7 per cent, reflecting what the company called continued structural pressures.

For Q4, the company expects continued strong DTC revenue growth and Skydance TV trends consistent with recent quarters. It also warned that improved Paramount film slate results will be "more than offset" by underperformance of the Warner Bros film slate — an early sign that not everything acquired is performing.

What do the co-CEOs promise?

Of the $6 billion in savings, 30 per cent is expected in the first year of dual operations. Co-CEOs David Ellison and Ynon Kreiz framed growth and debt paydown as simultaneous priorities.

"Growing our business and paying down debt are our top priorities, and we strongly believe we can achieve both simultaneously," they wrote. "We expect to reduce net leverage to 3.0x by the end of 2029, reaching investment grade credit metrics within approximately three years of closing. To get there, we expect to ramp our annual free cash flow to more than $10 billion in 2030."

The one-time costs are substantial: roughly $1.5 to $2 billion in 2027 alone, and roughly $4 billion across the transformation, with 60 to 70 per cent of that hitting 2027 and 2028. Until the leverage target is met, excess cash beyond reinvestment and the current dividend goes to debt repayment.

The letter promised more detail at an Investor Day in the first half of 2027. What it did not detail is where the cuts will land.

"There is still a lot to work through, but our vision is clear, and we are steadfast in our operational goals and financial commitments," the co-CEOs added.

What could go wrong?

Analyst Paolo Pescatore of PP Foresight called it "a solid quarter with improving streaming momentum, stronger studio performance and a return to profitability" — but he was blunt about the risks.

"Scale alone will not guarantee success against Netflix, Disney and other established platforms," he said. "The decision to stop reporting quarterly streaming subscriber numbers also raises questions about transparency. Integration will be hugely challenging. Delivering aggressive cost savings will inevitably mean redundancies, restructuring and difficult decisions, with the risk of undermining valuable creative assets."

He also flagged the balance sheet as the binding constraint: "The substantial debt burden leaves little room for error. Clearly, scale is no longer the problem, but the real test is making this sprawling media empire commercially sustainable."

The subscriber-reporting change is worth noting. A 21 per cent revenue quarter looks stronger when investors can no longer track the subscriber base quarter by quarter — and management has given no timeline for restoring that disclosure.

Pescatore's view on the HBO Max and Paramount+ bundle, due in early 2027, was more measured than promotional: it is "an important opportunity to strengthen its streaming offering, improve engagement and reduce churn," but traditional television, he noted, remains an important cash source despite its structural decline.

The plan now rests on execution: $6 billion in savings, $10 billion in free cash flow by 2030, leverage down to 3.0x by end-2029 — and an Investor Day in the first half of 2027 where the company says it will fill in what is still missing.