News Corporation (NWS) Earnings

Management highlights

- Overall Company Performance * Delivered 13th consecutive quarter of year-over-year total segment EBITDA growth for continuing operations, with record fourth quarter profitability and the fastest quarterly growth in four years. * Transformation to a digital-first business is complete: 61% of fiscal 2026 full-year revenue is now digital, with three consecutive years of mid-teens profit growth for continuing operations. * Full-year fiscal 2026 free cash flow rose 42% year-over-year to $811 million, with 50% conversion from EBITDA, driven by EBITDA growth and working capital improvements. * Accelerated the share buyback program to $643 million in fiscal 2026, over four times the $150 million buyback in fiscal 2025; $184 million in shares were repurchased in the fourth quarter. Management believes News Corp stock is materially undervalued, and remains focused on driving shareholder value. * Completed structure streamlining via the announced divestitures of REA India and moving.com at realtor. - Product & Operational Highlights * Dow Jones: B2B products now account for over 50% of full-year segment profitability, putting the company on track to hit the target of $1 billion in segment EBITDA by fiscal 2030. Digital-only subscriptions grew 9% year-over-year to nearly 6.3 million, with the highest sequential net adds in over two years. Dow Jones posted its first full year of advertising growth in four years. * Digital Real Estate: realtor.com grew revenues for seven consecutive quarters, with at least 10% growth for the past three quarters, and grew ComScore visit share to 33% in Q4, narrowing the gap to market leader Zillow. REA Group completed the sale of its Indian operations in exchange for an increased stake in Aurum, and saw 11% growth in national new-buy listings and 11% growth in residential yields. * Book Publishing: Strong growth across frontlist new releases and backlist titles, outperforming broader industry trends, with double-digit growth in digital and audiobook revenue driven by partnerships with Spotify and Audible. * News Media: Launched a new San Francisco edition of the New York Post to complement the Los Angeles edition, expanding reach in California; rebranded Sky News Australia to News24 to expand editorial reach globally.

Guidance

- Dow Jones: Management expects continued strong revenue performance, with improved growth in Dow Jones Energy revenues in the first quarter of fiscal 2027, and continued margin expansion driven by disciplined reinvestment. Digital direct subscription ARPU growth is expected to accelerate further in fiscal 2027 following recent price increases for Wall Street Journal digital subscriptions. - Digital Real Estate Services: Australian residential new-buy listings declined 2% in July 2026. Management expects continued revenue improvements at realtor.com, but notes the shorter-term housing recovery may be impacted by rising mortgage rates. - Book Publishing: Management expects results to benefit from a strong frontlist release program and easier year-over-year comparisons relative to fiscal 2026. - News Media: Incremental costs related to the continued rollout of the California Post are expected, partially offset by new content licensing revenue; the first quarter of fiscal 2027 will face a difficult year-over-year comparison. - Free cash flow: Free cash flow growth remains a top priority for fiscal 2027; free cash flow generation is seasonally second-half weighted, as in prior years.

Segment performance

1. Dow Jones: Fourth quarter revenue was $644 million, up 7% year-over-year, contributing 27.7% of total quarterly revenue. Digital revenues accounted for 84% of the segment's total revenue. Segment EBITDA grew 20% year-over-year to $181 million, with a segment margin of 28.1% (up 310 basis points year-over-year). 2. Digital Real Estate Services: Fourth quarter revenue was $553 million, up 19% reported (10% adjusted), contributing 23.8% of total quarterly revenue. Segment EBITDA was $222 million, up 46% reported (33% adjusted year-over-year), contributing 52.5% of total quarterly segment EBITDA. REA Group revenue grew 21% reported (9% constant currency), while realtor.com revenue grew 13% to $167 million, with adjacent business lines representing 22% of realtor.com's segment revenue. 3. Book Publishing (HarperCollins): Fourth quarter revenue was $566 million, up 15% year-over-year, contributing 24.4% of total quarterly revenue. Segment EBITDA was $57 million, up 14% year-over-year. Digital revenues grew 12% year-over-year, with audiobook revenue growing 16%. 4. News Media: Fourth quarter revenue was $574 million, up 5% year-over-year (adjusted revenue flat), contributing 24.7% of total quarterly revenue. Segment EBITDA was $24 million, down $4 million year-over-year.

Risks & headwinds

- The ongoing conflict in the Middle East has negatively impacted near-term revenue growth at Dow Jones Energy, due to delayed new contract timing. - The broader U.S. housing market slowdown, driven by elevated mortgage rates, may constrain near-term growth for realtor.com, even as the business continues to gain market share. - Litigation against unlicensed AI platforms that scraped News Corp content remains ongoing, with uncertainty around resolution timelines and outcomes.

Analyst Q&A

• Q: With many publishers raising concerns that AI licensing deals hurt organic traffic and engagement, how confident is News Corp that its existing deals with OpenAI and Meta are net positive, and what is the strategy behind News Corp and REA share repurchases? /

  A: Management cannot disclose details of confidential AI deals, but notes significant additional deals are in the pipeline covering both general and sector-specific AI partners. News Corp is pursuing legal action against companies that scraped its content without permission, as well as their clients that use unlicensed content. For share repurchases, News Corp accelerated buybacks to over four times prior year levels to maximize total shareholder return, supported by a strong balance sheet and robust free cash flow.

• Q: What is driving HarperCollins' strong recent growth across physical and digital formats, and what usage trends are you seeing with digital platform partners? /

  A: Strong growth is driven by a talented editorial team that successfully cultivates high-quality, original content from new and established authors. Audiobook growth is particularly strong, fueled by expanded premium offerings via the Spotify partnership that have also driven increased innovation from competitor Audible. Management notes AI will further increase audiobook value by enabling more voice and production options, as well as more cost-effective multi-language text and audio translations.

• Q: With continued investor interest in further corporate simplification, are there additional structural changes coming, and how is advertising trending for Dow Jones and News Media early in fiscal 2027? /

  A: Management has already completed multiple simplification transactions, including the sale of Foxtel and News America Marketing, and retains optionality for future structural moves to maximize shareholder value. Early fiscal 2027 digital advertising trends at Dow Jones have been encouraging, and advertising represents a small share of overall revenue, so News Corp faces lower cyclical ad risk than many peer media companies.

• Q: Can you provide color on the margin profile of AI licensing deals, particularly for Dow Jones, and is the Meta deal already contributing to Q4 results? /

  A: Management cannot disclose confidential deal details, but confirms the Meta deal is now part of operations, with contributions to grow across successive quarters. Dow Jones margin expansion is primarily driven by a shift to higher-margin B2B products (which now make up over half of segment profitability) and disciplined cost management, where costs grew only 2% in the quarter. Additional AI licensing deals with other principled companies are expected to follow the benchmark set by OpenAI and Meta.