Fox Corporation (FOX) Earnings

Management highlights

- Overall Financial Performance * Total company third quarter revenue hit $4 billion, with adjusted EBITDA growing 11% year-over-year to a record $954 million. * Net income attributable to stockholders was $166 million ($0.38 per share), compared to $346 million ($0.75 per share) in the prior year; adjusted EPS grew 20% to $1.32 from $1.10 year-over-year. * Quarterly free cash flow was $1.77 billion, in line with normal working capital seasonality for the second half of the fiscal year. Ended the quarter with $3.6 billion in cash and $6.6 billion in debt. * Cumulative share repurchases since 2019 total over $8.5 billion, approximately 36% of total outstanding shares, with $1.95 billion repurchased fiscal year-to-date 2026. - Core Brand Performance * FOX News achieved its highest third quarter advertising revenue ever, finishing as the most-watched cable network in total day and prime time. It saw year-over-year audience growth in April, ranking as the second most-watched network in weekday prime time across all U.S. television. FOX News Digital delivered double-digit year-over-year growth in YouTube and social media views, and added over 500 new premium advertising clients between fiscal 2025 and 2026 YTD, pushing national CPMs up over 45% with further pricing upside remaining. * FOX Sports delivered strong viewership growth: World Baseball Classic average ratings rose 150% versus 2023, MLB opening weekend ratings grew 45%, and IndyCar ratings grew 37% through quarter end. The 2025-2026 NFL season drew over 170 million total regular season viewers, with the NFC Championship game averaging over 46 million viewers. Fox acquired rights to 2 additional regular season NFL national games for the upcoming season. - Digital and Direct-to-Consumer * Tubi revenue grew 23% year-over-year, with total view time up 19%. It now has nearly 100 million monthly active users, over 220 creators and 17,000 creator-led episodes, with plans for further creator expansion to attract younger audiences and improve retention. Tubi achieved breakeven or better adjusted EBITDA for three consecutive quarters, including Q3 2026. * Fox One, the company's direct-to-consumer offering, has outperformed early expectations, with better-than-expected new subscriber additions and subscriber retention. Over half of Fox One third quarter viewership is news content, and the platform is expected to get a boost from the upcoming FIFA Men's World Cup. - Upcoming Events and Content * Fox will host its annual upfront presentation the same day as the earnings call, with management expecting a healthy 2026 upfront market. New upcoming entertainment programming includes *Baywatch* and *The Interrogator*. * The 2026 FIFA Men's World Cup, hosted in the U.S. this summer, will be the first World Cup on U.S. soil in over 30 years, with 104 total matches (the most ever on U.S. broadcast television). Tubi will simulcast opening matches and host a dedicated World Cup content hub.

Guidance

- Management reaffirmed expectations of delivering record full-year fiscal 2026 EBITDA, driven by core business momentum, the upcoming FIFA Men's World Cup, and 2026 midterm election political advertising. - Television segment distribution revenue is expected to be roughly flat for full fiscal 2026, before returning to growth in fiscal 2027. - Full-year fiscal 2026 net digital investment is expected to come in comfortably below the $290 million invested in fiscal 2025, with no expected major unexpected increases to the investment envelope for fiscal 2027. - Around one-third of total distribution revenue contracts are up for renewal in fiscal 2027, skewed towards the Television segment, and management feels confident about ongoing distribution revenue growth for both cable and television.

Segment performance

1. Cable Segment: Delivered 6% year-over-year revenue growth, with adjusted EBITDA growing 1% to $884 million. Distribution revenue grew 5%, as pricing gains outpaced stable net subscriber declines of under 6.5% (excluding positive Fox One contributions). Advertising revenue grew 5%, driven by national pricing strength at FOX News and World Baseball Classic viewership at FOX Sports. Content and other revenue increased 24% on higher sports sublicensing revenue. Expenses rose 13% primarily due to higher sports rights amortization. This segment contributed approximately 45% of total company revenue. 2. Television Segment: Reported $2.2 billion in quarterly revenue, representing ~55% of total company revenue. Advertising revenue declined 30% year-over-year, as the absence of 2025's Super Bowl LIX (which generated over $800 million in gross ad revenue last year) more than offset underlying growth from Tubi and an additional NFL Wild Card game this year. Distribution revenue fell 1%, in line with full-year expectations of flat results before returning to growth in fiscal 2027. Content and other revenue grew 2% on higher entertainment studio production revenue. Expenses fell 24% due to the absence of Super Bowl-related sports programming and production costs. Adjusted EBITDA reached $191 million, over 3x the prior year quarter level.

Risks & headwinds

- Traditional cable segment continues to face net subscriber declines, though declines have stabilized below 6.5% year-over-year and Fox One contributions are offsetting this trend in early stages. - Broadcast advertising revenue can be volatile year-over-year due to varying NFL post-season scheduling and the quadrennial rotation of the Super Bowl across rightsholders. - Potential NFL deal extension negotiations carry uncertainty, though management noted no substantive discussions have occurred yet, and any extension will only be pursued if it creates long-term shareholder value. - Forward-looking results are subject to general market risks that could cause actual outcomes to differ from management expectations, as outlined in the company's SEC filings.

Analyst Q&A

• Q: What details can you share on the newly acquired 2 additional NFL games, and are there tensions with the NFL around a potential deal extension? /

  A: The two new games are a regular season triple-header game in week 10 (the Munich overseas game, the first broadcast TV triple-header in history) and a Saturday game in week 15 of the upcoming season. Management stated there is no actual tension with the NFL, which has been a 30-year partner. While there is press speculation the NFL wants to renegotiate and extend current deals, there have been no substantive discussions yet. Fox is open to broadening the relationship, but only will do so in a disciplined way that creates long-term shareholder value.

• Q: Can you speak to the sustainability of 5% Cable segment distribution growth, and what contribution has Fox One made to this trend? /

  A: Subscriber declines have stabilized below 6.5% for multiple consecutive quarters, and this figure does not yet include Fox One subscriber additions, which management accounts for conservatively early in the rollout. Fox One has already meaningfully contributed to positive subscriber trends, with lower-than-expected churn to date. Pricing growth enacted a year ago is still flowing through, and the evolving cable ecosystem (including virtual MVPDs, direct-to-consumer offerings like Fox One, and genre bundles) benefits Fox's must-have news and sports brands. Management did not commit to permanent mid-single-digit growth, but feels very positive about the trajectory heading into fiscal 2027 renewals.

• Q: What are current national vs local advertising trends, and what is the expected financial impact of the 2026 World Cup across the portfolio? /

  A: Advertising growth is strong across all segments, including strengthening trends at local stations, with a healthy upfront market similar to last year: low available inventory, low cancellations, and healthy scatter pricing. Growing categories include pharmaceuticals, tech, and finance, plus a projected record $11 billion midterm political ad market, where Fox is already seeing record off-year political revenue from its battleground state local stations. Financially, the World Cup will be split 50/50 between Q4 fiscal 2026 and Q1 fiscal 2027. It is EBITDA accretive for the overall company, with most revenue and accretion coming from the broadcast side, while the cable segment sees less revenue and no EBITDA accretion. The event will drive new subscribers and engagement for Fox One and Tubi, without negatively impacting existing revenue streams.

• Q: Can you update on Fox One churn, subscriber trends from spring sports, and your sports betting investment strategy? /

  A: Fox One has exceeded all early expectations, with much lower churn than projected even through the slower spring and summer sports period. Spring sports like MLB and IndyCar have driven new sign-ups, and over half of current Fox One viewership is news content, highlighting the strength of that content for retention. Management still holds a 2.5% equity stake in Flutter and an 18.6% option to acquire a stake in FanDuel, with over 4 years to complete the exercise and licensing process, and remains bullish on the long-term FanDuel business opportunity.