Skydance Corporation
SKYD is cheap on sales at 0.35x TTM revenue, but the stock still needs proof that raised FY26 EBITDA guidance can translate into durable earnings and cash flow after FY2025 EPS of -$0.56 and LTM EBITDA of -$4.0B.
SKYD sits in the awkward middle ground between a broken income statement and a plausible turnaround. The market is clearly responding to the first problem. The stock is down -41.3% from the $11.49 52-week high and trades at just 0.35x TTM sales and 0.88x TTM book. That valuation says investors do not trust the earnings profile, and the numbers justify that skepticism: FY2025 operating margin was -18.4%, FY2025 EPS was -$0.56, and LTM EBITDA was -$4.0B.
What keeps the stock from a Sell is that management is now showing enough operating progress to make the equity worth monitoring closely. Q2 revenue and EBITDA came in at or above the high end of prior guidance. Paramount+ added 2M subscribers. DTC revenue grew 9%. Studios revenue rose 16%, and Studios produced $36M EBITDA versus a prior-year loss. Most important, management raised FY26 adjusted EBITDA guidance to $3.8B-$3.9B and lifted free cash flow conversion to at least 10% while keeping the $30B revenue target unchanged. That combination suggests the current improvement is being driven more by cost takeout, integration, and mix than by aggressive revenue assumptions.
The problem is that this is still a trust exercise. Revenue guidance did not increase after Q2, which limits the argument that demand is inflecting sharply upward. Management also guided Paramount+ subscribers to be relatively flat q/q in Q3, and flagged content amortization pressure from sports and new originals. On top of that, the balance sheet is not light: total debt stood at $14.8B as of 2025-12-31, with debt/equity of 1.27. Against that backdrop, the market has every reason to demand proof that adjusted EBITDA gains can survive a tougher content cycle and actually flow to equity holders.
The case depends on three things. First, FY26 adjusted EBITDA has to land inside or above the $3.8B-$3.9B guide. Second, free cash flow conversion must meet the new 10% floor. Third, the promised $3B+ merger synergies and $2.7B run-rate efficiencies by year-end need to show up without stalling user growth. Until those boxes are checked, the discount valuation looks deserved, not obviously wrong.
Quant call (HOLD) diverges from analyst consensus (Buy: 4 buy / 1 hold / 2 sell) — resolve explicitly.
In the short run, the market is a voting machine, but in the long run, it is a weighing machine.
Forward earnings power is the whole debate here, because the trailing setup is distorted by FY2025 EPS of -$0.56 and LTM EBITDA of -$4.0B, while management is guiding to $3.8B-$3.9B of FY26 adjusted EBITDA on $30B of revenue. That makes trailing P/E unusable and puts the stock on a prove-it framework rather than a clean multiple framework, even if TTM P/S of 0.35 looks optically cheap. The moat is mixed today, with scale in streaming, studio content, and ad-supported video, but over 3-5 years AI likely cuts both ways: it can lower production, personalization, and ad-tech costs, yet it also lowers content discovery barriers and strengthens global platforms that already have bigger data and tech budgets. Regulation matters less than execution here; the real questions are whether the unified tech stack and $3B+ synergies create a stronger cross-platform asset by 2029, or whether flat sub trends and heavy content spend keep returns mediocre.
- FY26 guidance now calls for $3.8B-$3.9B adjusted EBITDA on $30B revenue, versus LTM EBITDA of -$4.0B.
- The stock trades at 0.35x TTM sales and 0.88x TTM book after falling -41.3% from its $11.49 52-week high.
- Balance-sheet leverage remains the gating item, with $14.8B total debt as of 2025-12-31 and debt/equity of 1.27.
- Management raised FY26 adjusted EBITDA guidance to $3.8B-$3.9B, and CFO Dennis Cinelli said, "Given this outperformance, we are raising our full year adjusted EBITDA outlook. We're putting a range on it from $3.8 billion to $3.9 billion."
- Free cash flow expectations improved materially, with FY26 conversion now at least 10%, up from 5%, while revenue guidance stayed at $30B, implying better cost discipline rather than easier assumptions.
- Q2 operating momentum was real in key growth areas: Paramount+ added 2M subscribers, DTC revenue grew 9%, Studios revenue grew 16%, and Studios posted $36M EBITDA versus a prior-year loss.
- The stock already reflects a lot of bad news, trading -41.3% below the $11.49 52-week high with a TTM P/S of 0.35, leaving room for upside if the EBITDA bridge holds.
- Reported profitability is still poor, with FY2025 operating margin of -18.4%, FY2025 net margin of -2.1%, and FY2025 EPS of -$0.56.
- The LTM base is weak enough that the guidance bridge needs faith: LTM EBITDA is -$4.0B, far below the FY26 adjusted EBITDA target of $3.8B-$3.9B.
- Revenue guidance did not move after Q2 outperformance, staying at $30B for FY26, which suggests limited near-term demand upside and puts more weight on cost actions.
- Q3 DTC growth may pause, as management said Paramount+ subscribers should be relatively flat q/q, while Q3 profitability faces content amortization pressure from sports and new originals.
| Metric | Value | Context |
|---|---|---|
| Price target | $6.75 | Ground-truth target, 0.0% vs current $6.75, Low confidence |
| Revenue | $29.2B FY2025 | +2.5% YoY, modest growth against a weak profit base |
| Revenue | $29.4B LTM | Close to FY base, with FY26 guidance at $30B |
| EPS | -$0.56 FY2025 | 133.3% YoY, still loss-making |
| Operating margin | -18.4% FY2025 | Collapsed from 5.5% in the prior FY |
| EBITDA | -$4.0B LTM | Large gap versus FY26 adjusted EBITDA guide of $3.8B-$3.9B |
| Valuation | 0.35x P/S TTM | Low sales multiple, but no peer average available |
| Valuation | 0.88x P/B TTM | Below book, reflecting low confidence in earnings quality |
| Balance sheet | $14.8B total debt as of 2025-12-31 | Leverage remains a central equity risk |
| Leverage | 1.27x debt/equity as of 2025-12-31 | Elevated for a business with negative reported margins |
| Free cash flow | $0.3B FY ended 2025-12-31 | Positive, but thin relative to debt load |
| 52-week position | $6.63-$11.49 | Current price is -41.3% vs high and -31.8% below the $9.90 200-day average |
The biggest risk is that the raised FY26 adjusted EBITDA target of $3.8B-$3.9B does not convert into lasting earnings and cash flow, leaving a business with FY2025 operating margin of -18.4% and $14.8B of debt still structurally over-earning on adjustments.
The next catalyst is the November 3, 2026 earnings report, especially whether Q3 adjusted EBITDA lands inside or above the $875M-$975M guide and whether Paramount+ can do better than the call for relatively flat q/q subscribers.
Raised FY26 EBITDA and FCF guidance while keeping revenue outlook unchanged.
Given this outperformance, we are raising our full year adjusted EBITDA outlook. We're putting a range on it from $3.8 billion to $3.9 billion.
We are increasing our free cash flow conversion to be at least 10% from previously 5%. This is while keeping our $30 billion of revenue outlook in place.
We expect revenue of $6.95 billion to $7.15 billion. This is growth from 4% to 7% year-on-year. Our adjusted EBITDA is $875 million to $975 million in guidance.
Overall revenue and adjusted EBITDA were at or above the high end of our prior guidance ranges. Revenue growth was led by DTC at 9%. Studios was up 16%.
As we talked about in prior letters, we expect DTC revenue to accelerate in the back half. This is driven by both subscription and advertising, both at Paramount+ and the reacceleration of Pluto as we relaunch that platform.
Rated HOLD, Low conviction. The valuation is cheap enough to keep bears from getting comfortable, especially after a -41.3% drawdown from the 52-week high, but the stock still lacks the clean earnings power needed for a stronger call. The November 3 report matters because management now has to prove that $3.8B-$3.9B of FY26 adjusted EBITDA and 10% free cash flow conversion are more than adjustment-led optics. A move to Buy would require sustained evidence that synergies, DTC growth, and cash conversion are closing the gap between adjusted EBITDA and reported profitability. A move to Sell would follow if Q3 or FY26 guidance slips while leverage remains elevated.
≣ Full research note tap to expand
Executive Summary
HOLD, Low conviction. SKYD rates a HOLD at Low conviction. The stock has already reset hard, now -41.3% from the $11.49 52-week high and -31.8% below the $9.90 200-day average, but that drawdown alone is not enough while reported margins remain deeply negative and revenue guidance stayed fixed at $30B for FY26. Raised adjusted EBITDA and free cash flow guidance matter, yet the investment case still depends on management proving that synergy gains become durable earnings power rather than a temporary bridge.
Investment Thesis
SKYD sits in the awkward middle ground between a broken income statement and a plausible turnaround. The market is clearly responding to the first problem. The stock is down -41.3% from the $11.49 52-week high and trades at just 0.35x TTM sales and 0.88x TTM book. That valuation says investors do not trust the earnings profile, and the numbers justify that skepticism: FY2025 operating margin was -18.4%, FY2025 EPS was -$0.56, and LTM EBITDA was -$4.0B.
What keeps the stock from a Sell is that management is now showing enough operating progress to make the equity worth monitoring closely. Q2 revenue and EBITDA came in at or above the high end of prior guidance. Paramount+ added 2M subscribers. DTC revenue grew 9%. Studios revenue rose 16%, and Studios produced $36M EBITDA versus a prior-year loss. Most important, management raised FY26 adjusted EBITDA guidance to $3.8B-$3.9B and lifted free cash flow conversion to at least 10% while keeping the $30B revenue target unchanged. That combination suggests the current improvement is being driven more by cost takeout, integration, and mix than by aggressive revenue assumptions.
The problem is that this is still a trust exercise. Revenue guidance did not increase after Q2, which limits the argument that demand is inflecting sharply upward. Management also guided Paramount+ subscribers to be relatively flat q/q in Q3, and flagged content amortization pressure from sports and new originals. On top of that, the balance sheet is not light: total debt stood at $14.8B as of 2025-12-31, with debt/equity of 1.27. Against that backdrop, the market has every reason to demand proof that adjusted EBITDA gains can survive a tougher content cycle and actually flow to equity holders.
The case depends on three things. First, FY26 adjusted EBITDA has to land inside or above the $3.8B-$3.9B guide. Second, free cash flow conversion must meet the new 10% floor. Third, the promised $3B+ merger synergies and $2.7B run-rate efficiencies by year-end need to show up without stalling user growth. Until those boxes are checked, the discount valuation looks deserved, not obviously wrong.
Key Metrics
| Metric | Value | Context |
|---|---|---|
| Price target | $6.75 | Ground-truth target, 0.0% vs current $6.75, Low confidence |
| Revenue | $29.2B FY2025 | +2.5% YoY, modest growth against a weak profit base |
| Revenue | $29.4B LTM | Close to FY base, with FY26 guidance at $30B |
| EPS | -$0.56 FY2025 | 133.3% YoY, still loss-making |
| Operating margin | -18.4% FY2025 | Collapsed from 5.5% in the prior FY |
| EBITDA | -$4.0B LTM | Large gap versus FY26 adjusted EBITDA guide of $3.8B-$3.9B |
| Valuation | 0.35x P/S TTM | Low sales multiple, but no peer average available |
| Valuation | 0.88x P/B TTM | Below book, reflecting low confidence in earnings quality |
| Balance sheet | $14.8B total debt as of 2025-12-31 | Leverage remains a central equity risk |
| Leverage | 1.27x debt/equity as of 2025-12-31 | Elevated for a business with negative reported margins |
| Free cash flow | $0.3B FY ended 2025-12-31 | Positive, but thin relative to debt load |
| 52-week position | $6.63-$11.49 | Current price is -41.3% vs high and -31.8% below the $9.90 200-day average |
Financial Strength
Financial strength is the weak point. The business did generate $0.3B of free cash flow in the FY ended 2025-12-31, and management now guides to FY26 free cash flow conversion of at least 10%, but that sits against $14.8B of debt and a 1.27 debt/equity ratio as of 2025-12-31. The current ratio of 1.26 suggests no immediate liquidity squeeze, yet the real issue is earnings quality: reported profitability is still negative even as adjusted EBITDA improves. Until the raised FY26 EBITDA guide starts showing up in cleaner operating margin and more meaningful free cash flow, the balance sheet limits upside.
Competitive Position
SKYD's competitive position comes from scale across premium content, direct-to-consumer distribution, and ad-supported video, not from a pristine moat. Q2 showed why the asset base still matters: Paramount+ added 2M subs, DTC revenue grew 9%, and Studios swung to $36M EBITDA. The issue is durability. Content and franchise value still matter, but streaming is brutally competitive, and AI will likely favor platforms with the best recommendation engines, ad targeting, and production tooling. The company can improve its position if the unified tech stack and Pluto relaunch translate into sustained ad growth and lower operating costs, but that edge is not yet proven.
Management & Guidance
Management's latest guidance was better than expected and is directionally credible, but not yet enough to command full trust. Two recent quarters beat EPS estimates by +54.8% and +19.3%, and Q2 results were at or above the high end of prior guidance. CFO Dennis Cinelli said, "We are increasing our free cash flow conversion to be at least 10% from previously 5%. This is while keeping our $30 billion of revenue outlook in place." That is a solid signal on cost discipline. At the same time, credibility is capped by the gap between adjusted and reported results, unchanged FY26 revenue guidance of $30B, and the warning that Q3 faces content amortization pressure while Paramount+ subscribers are expected to be relatively flat q/q.
Bull Case
- Management raised FY26 adjusted EBITDA guidance to $3.8B-$3.9B, and CFO Dennis Cinelli said, "Given this outperformance, we are raising our full year adjusted EBITDA outlook. We're putting a range on it from $3.8 billion to $3.9 billion."
- Free cash flow expectations improved materially, with FY26 conversion now at least 10%, up from 5%, while revenue guidance stayed at $30B, implying better cost discipline rather than easier assumptions.
- Q2 operating momentum was real in key growth areas: Paramount+ added 2M subscribers, DTC revenue grew 9%, Studios revenue grew 16%, and Studios posted $36M EBITDA versus a prior-year loss.
- The stock already reflects a lot of bad news, trading -41.3% below the $11.49 52-week high with a TTM P/S of 0.35, leaving room for upside if the EBITDA bridge holds.
Bear Case
- Reported profitability is still poor, with FY2025 operating margin of -18.4%, FY2025 net margin of -2.1%, and FY2025 EPS of -$0.56.
- The LTM base is weak enough that the guidance bridge needs faith: LTM EBITDA is -$4.0B, far below the FY26 adjusted EBITDA target of $3.8B-$3.9B.
- Revenue guidance did not move after Q2 outperformance, staying at $30B for FY26, which suggests limited near-term demand upside and puts more weight on cost actions.
- Q3 DTC growth may pause, as management said Paramount+ subscribers should be relatively flat q/q, while Q3 profitability faces content amortization pressure from sports and new originals.
Valuation & Price Target
Engine price target $6.75 (0% vs current), Low confidence.
- Quality-adjusted: $6.75 (20% weight)
The HOLD rating matches the quant baseline and the $6.75 price target, which implies 0.0% upside from the current $6.75. The case for upgrading is visible, namely a raised FY26 adjusted EBITDA guide of $3.8B-$3.9B, free cash flow conversion of at least 10%, and two straight EPS beats of +54.8% and +19.3%. The case for restraint is stronger today: FY2025 operating margin was -18.4%, LTM EBITDA was -$4.0B, revenue guidance stayed at $30B, and leverage remains meaningful at $14.8B of debt as of 2025-12-31. Sell-side consensus leans Buy, but that is low-signal context and not enough to override the still-unproven bridge from adjusted EBITDA improvement to durable earnings.
Risk Assessment
Risk score 34/100 (Low). The biggest risk is that the raised FY26 adjusted EBITDA target of $3.8B-$3.9B does not convert into lasting earnings and cash flow, leaving a business with FY2025 operating margin of -18.4% and $14.8B of debt still structurally over-earning on adjustments.
The Bottom Line
Rated HOLD, Low conviction. The valuation is cheap enough to keep bears from getting comfortable, especially after a -41.3% drawdown from the 52-week high, but the stock still lacks the clean earnings power needed for a stronger call. The November 3 report matters because management now has to prove that $3.8B-$3.9B of FY26 adjusted EBITDA and 10% free cash flow conversion are more than adjustment-led optics. A move to Buy would require sustained evidence that synergies, DTC growth, and cash conversion are closing the gap between adjusted EBITDA and reported profitability. A move to Sell would follow if Q3 or FY26 guidance slips while leverage remains elevated.
Go deeper in the app
Live charts, options analytics, the full earnings-call breakdown, price alerts, and every other stock — updated in real time.
Get Tickr