Comcast Beats Forecasts as Peacock Profit Offsets Broadband Losses
Comcast topped third-quarter profit estimates as Peacock stayed profitable, but it lost 144,000 broadband customers amid stiff price competition.
Comcast, the Philadelphia-based cable and entertainment giant that owns NBCUniversal, beat Wall Street’s profit forecasts for the third quarter on Thursday. Strong results from its media business, including a second straight profitable quarter at the Peacock streaming service, made up for continued losses in its core broadband operation. The company lost 144,000 domestic broadband customers in the three months to September 30, more than analysts had expected.
What happened
In its earnings release, Comcast reported adjusted earnings of $1.07 per share, down 4% from a year earlier but above the consensus estimate of 98 cents, according to Reuters and Seeking Alpha. Revenue came in at $29.3 billion. That was 6.1% lower than a year earlier, largely because the company no longer owns some businesses. On a pro forma basis, which excludes the spun-off cable networks company Versant and the sold Sky operations in Germany, revenue grew 0.5%. Seeking Alpha, citing Bloomberg data, said analysts had expected $29.14 billion.
Net income attributable to Comcast rose 3.5% to $3.4 billion. Adjusted EBITDA, a measure of operating profit before interest, taxes, depreciation and amortization, fell 5.8% to $9.1 billion but still beat expectations. Free cash flow dropped 14.8% to $4.2 billion.
Brian Roberts and Mike Cavanagh, Comcast’s co-chief executives, said in the statement that the company was “taking decisive steps to strengthen our businesses.” According to Seeking Alpha, they also said the near-term connectivity results reflected investments made to compete in an “increasingly dynamic environment.”
Broadband under pressure
The weakest spot was the connectivity and platforms unit, which includes Comcast’s Xfinity internet, TV and mobile services. Its revenue fell 2.7% to $19.7 billion, and adjusted EBITDA slipped 4.4% to $7.6 billion.
The 144,000 broadband customers Comcast lost compare with 91,000 a year earlier. Analyst forecasts for the loss varied. Reuters cited a FactSet poll that expected a decline of 116,800, while Seeking Alpha put the consensus at about 133,000. Either way, the result came in worse than forecast. Reuters said price cuts by rivals such as AT&T and smaller fiber providers are making it harder for Comcast to keep subscribers without offering heavy discounts. The news agency also pointed to reports that Comcast is planning significant layoffs to restructure the connectivity business.
Other connectivity figures were mixed:
- Comcast lost 274,000 domestic video customers, more than the roughly 228,000 that analysts expected, according to Seeking Alpha.
- It added 368,000 domestic wireless lines, taking its total to 10.6 million, though that was below consensus.
- Business services adjusted EBITDA rose 1.7% to $1.5 billion.
Media and Peacock carry the quarter
The content and experiences segment, which includes NBCUniversal’s television, film and theme park businesses, grew revenue 6.5% to $10.5 billion, and its adjusted EBITDA jumped 29.3% to $1.8 billion.
Media revenue rose 13% to $5.4 billion. Comcast said $224 million of that came from FIFA World Cup soccer coverage, and Reuters also credited the reality show Love Island USA on Peacock. Media adjusted EBITDA more than tripled to $769 million from $247 million.
Peacock earned $261 million in adjusted EBITDA, compared with a $217 million loss a year earlier. That beat the roughly $184 million analysts expected, according to Seeking Alpha. Paid subscribers rose 17% to 48 million. However, Peacock’s $1.8 billion in revenue, up from $1.4 billion, fell slightly short of estimates.
The studios business also had a good quarter. Reuters said Universal’s film The Odyssey became the highest-grossing release in the studio’s history, helping lift the unit’s adjusted EBITDA by 18.6% to $402 million.
Theme parks soften
Theme parks were the weak spot on the entertainment side. Revenue fell 4.4% to $2.6 billion, missing the $2.71 billion LSEG analyst estimate cited by Reuters, and adjusted EBITDA dropped 17.1% to $780 million. Comcast cited lower admissions revenue and higher costs at its domestic parks. Reuters reported softer demand in Orlando and said geopolitical tensions continued to keep Chinese tourists away from Japan, home to Universal Studios Japan.
What comes next
Comcast is in the middle of a major corporate overhaul. It finished spinning off Versant, which holds most of its cable TV networks, on January 2, and sold its Sky business in Germany at the end of May. The company said its proposed separation of NBCUniversal and Sky into stand-alone companies remains on track, and Reuters said the media spinoff is targeted for completion by mid-2027.
Comcast paid $1.2 billion in dividends during the quarter. It suspended share buybacks starting in the third quarter and expects to keep them on hold until the separation is complete.
Investors reacted calmly. Seeking Alpha reported that the shares rose 0.6% in premarket trading on Thursday. The stock was down about 26% so far this year.
