Skydance's first earnings since Paramount–Warner Bros. merger disappoint Wall Street, as layoffs hit its new games unit

Skydance Corporation, the media conglomerate formed by Paramount's acquisition of Warner Bros. Discovery, reported third-quarter financial results on November 9 that fell short of Wall Street's expectations, sending its shares down more than 2% in after-hours trading. The report, the company's first since the merger closed on October 6, arrived days after its newly combined video-game division confirmed layoffs affecting at least two dozen employees.

The results, detailed in a shareholder letter filed with the Securities and Exchange Commission, cover the quarter ended September 30 — a period that predates the Warner Bros. Discovery deal's closing and therefore does not yet include WBD's consolidated figures. TheWrap first reported that the muted reception reflected investor skepticism about whether co-chief executives David Ellison and Ynon Kreiz can deliver the savings and growth they have promised.

A mixed set of numbers

Total revenue reached $7 billion, up 5% from a year earlier, narrowly missing the roughly $7.04 billion analysts had forecast. GAAP net earnings attributable to the parent company came in at $73 million, or six cents a share — well below the 20 cents a share Wall Street had expected, according to TheWrap's earnings coverage. On an adjusted basis, which strips out merger-related and restructuring costs, the regulatory filing shows adjusted net earnings of $506 million, or 45 cents a share, and adjusted EBITDA of $1 billion, roughly flat with the prior year.

The segment detail showed a familiar pattern for the legacy Paramount business: streaming growing, traditional television shrinking. Direct-to-consumer revenue rose 11% to $2.5 billion, with Paramount+ revenue up 21% to $2.13 billion as the service added 600,000 subscribers, bringing its total to roughly 82.2 million. Studios revenue climbed 23% to $1.5 billion on stronger licensing. TV Media, the division housing Paramount's broadcast and cable networks, saw revenue fall 7% to $3 billion, with advertising revenue down 8% and affiliate fees down 5%, even as the segment still generated close to $1 billion in profit.

A merger still being digested

The quarter is a transitional one for a company still absorbing the largest media merger in years. Skydance's acquisition of Warner Bros. Discovery, valued near $110 billion, closed on October 6, with WBD shareholders paid $31.01666668 in cash per share and the combined entity beginning to trade on the New York Stock Exchange under the ticker SKYD. In the press release Paramount issued when the deal closed, Ellison, who serves as Skydance's chairman and chief executive, called it "a historic day, not just for Skydance but for our entire industry."

"Today is a historic day, not just for Skydance but for our entire industry." — David Ellison, Skydance chairman and CEO

That optimism is now being tested against execution. The shareholder letter reiterates a target of at least $6 billion in run-rate cost synergies within three years, net of reinvestment, with the savings broken out roughly as follows:

• At least $2.2 billion from corporate overhead and back-office consolidation
• At least $1.4 billion from technology integration
• At least $1.4 billion from procurement and vendor management
• At least $1 billion from marketing

Management expects roughly 30% of those savings realized within the first year and 70% within two years, but achieving them will itself cost an estimated $1.5 billion to $2 billion in 2027 and roughly $4 billion over the life of the program. That spending comes against a company carrying close to $80 billion in net debt, with a stated goal of reducing leverage to 3 times EBITDA by the end of 2029 and generating more than $10 billion in annual free cash flow by 2030.

Cuts reach the new games division

The cost-cutting push has already reached Skydance's video-game business. Days before the earnings report, the company confirmed layoffs inside Skydance Games, the unit formed by merging Paramount's games studio with Warner Bros. Games properties such as Rocksteady Studios, NetherRealm Studios, Avalanche Software and TT Games. Variety reported that the company had not disclosed a total headcount figure, while a lead engineer on the Paramount Games side, David Vera, said in a public post that at least 25 colleagues had been let go; outlets including Inven Global cited industry trackers suggesting the true number could be higher.

The roles cut spanned producers, writers, engineers, audio and level designers, and artists across 2D, 3D and visual-effects disciplines, which PC Gamer also covered. A Skydance spokesperson described the move as part of "reorganization and operational shifts" affecting a few areas of the business, saying the company had made "the difficult decision to scale down some of our projects." Vera said those affected were not let go for performance reasons, calling them "extremely worthy folks." Reports so far indicate the cuts have fallen on staff from the former Paramount Games Studio rather than the legacy Warner Bros. Games teams, though the company has not said which specific projects are being scaled back. The layoffs follow a voluntary buyout program Skydance opened company-wide in late October, alongside a new mandatory five-day return-to-office policy.

What comes next

Executives cautioned that the fourth quarter, which will be the first to include Warner Bros. Discovery's consolidated results, carries its own risks: the shareholder letter flagged that underperformance in Warner Bros.' theatrical slate could reduce profit by up to $200 million compared with prior expectations, even as stronger results from Paramount's own film slate partly offset that drag. Skydance said it would withhold a full 2027 financial outlook until it reports fourth-quarter results, but outlined priorities including continued double-digit growth in streaming revenue and the launch of a combined HBO Max–Paramount+ streaming bundle in early 2027. Whether those ambitions can be reconciled with an $80 billion debt load and a workforce still absorbing its second wave of post-merger cuts is likely to be the central question investors and employees alike will be watching when Skydance next reports.