Fox profit falls 36% despite beating earnings estimates
Rising sports programming costs drive margin compression, sending shares lower
Fox Corporation shares fell more than 3 percent on Wednesday after the media company reported a 36 percent decline in quarterly profit, despite beating Wall Street's earnings expectations, as rising sports programming costs weighed on margins.
The company reported fiscal second-quarter net income of $247 million, down from $388 million in the same period a year earlier, according to its earnings release. Adjusted earnings per share of 82 cents comfortably outpaced analyst estimates of 49 cents, while revenue of $5.18 billion exceeded the consensus forecast of $5.05 billion.
The divergence between headline results and profitability highlights the mounting pressures facing traditional media companies as they invest heavily in sports content to retain audiences in an increasingly fragmented landscape. Adjusted EBITDA fell 11 percent year-over-year to $692 million, with the television segment particularly hard hit — EBITDA in that unit plunged 30 percent to $143 million.
"Increased expenses, mainly from higher sports programming rights amortization and production costs, along with increased digital content costs, largely offset revenue gains," the company said in its earnings announcement.
The broadcasting giant, which owns FOX News, FOX Sports, and the FOX broadcast network, has been aggressively pursuing sports rights to differentiate its offerings in the crowded media market. That strategy helped drive advertising revenue up 1 percent, supported by higher pricing in sports and news programming, continued growth at its free streaming service Tubi, and additional Major League Baseball postseason games.
However, those gains were partially offset by lower political advertising revenues and reduced ratings. The company returned $1.55 billion to shareholders through share repurchases during the quarter, a strategy that helped boost per-share earnings even as total profit declined.
Analysts maintain a generally positive outlook on the stock's long-term prospects, with an average 1-year price target of $75.85, according to pre-earnings analyst commentary. That target represents roughly 20 percent upside from Wednesday's trading levels, despite the post-earnings share price decline.
The company's dual-class share structure, with the Murdoch family controlling voting power through Class B shares, has been a point of discussion among governance advocates, though institutional investors have largely focused on the fundamental business challenges facing the traditional broadcasting model.
Fox's results reflect broader trends in the media industry, where companies are balancing the need to invest in expensive content — particularly live sports, which remains one of the few properties that can reliably draw large live audiences — against pressure to maintain profitability in an advertising market that remains volatile amid economic uncertainty.
With the stock trading at 14.7 times trailing earnings, investors will be watching whether Fox can stabilize margins in coming quarters while continuing to build its digital presence through Tubi and other streaming initiatives. The company's next major test will come in upcoming negotiations for sports rights renewals, where aggressive bidding could further pressure profitability if not offset by revenue growth.