10-Q: Fox Corp. Q3 2026 Earnings: Revenue and Net Income Decline

Fox Corporation reported a decrease in revenues and net income for the third quarter and first nine months of fiscal year 2026, primarily driven by lower advertising revenue and increased operating expenses.

Summary

• For the three months ended March 31, 2026, Fox Corporation's revenues decreased by 9% to $3.994 billion compared to the prior year period, largely due to a 24% drop in advertising revenue, partially offset by increases in distribution and content/other revenues.
• Operating expenses for the quarter decreased by 16% to $2.494 billion, mainly due to lower sports programming rights amortization and production costs related to the absence of Super Bowl LIX.
• Net income attributable to Fox Corporation stockholders for the quarter fell by 52% to $166 million, or $0.38 per diluted share, compared to $346 million, or $0.75 per diluted share, in the prior year.
• For the nine months ended March 31, 2026, revenues decreased by 1% to $12.914 billion, with advertising revenue down 6% and net income attributable to stockholders down 36% to $994 million, or $2.24 per diluted share.
• Segment EBITDA for Cable Network Programming increased by 1% to $884 million for the quarter, while Television Segment EBITDA saw a significant increase of 131% to $191 million, driven by lower operating expenses.
• The company repurchased approximately $1.9 billion of common stock during the nine months ended March 31, 2026, under its $12 billion stock repurchase program, with approximately $3.5 billion remaining authorization as of March 31, 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to significant declines in revenue and net income, driven by a sharp drop in advertising revenue and a substantial loss in non-operating income, despite some positive cost management and segment EBITDA improvements.

Positives

• Distribution revenue increased by 3% to $2.107 billion for the quarter and by 3% to $6.024 billion for the nine months, driven by higher average rates per subscriber.
• Content and other revenues increased by 12% to $331 million for the quarter and by 6% to $1.467 billion for the nine months, primarily due to higher sports sublicensing revenue.
• Operating expenses decreased by 16% to $2.494 billion for the three months and by 3% to $8.473 billion for the nine months, largely due to lower sports programming rights amortization and production costs.
• Television Segment EBITDA increased significantly by 131% to $191 million for the three months and by 15% to $733 million for the nine months, driven by substantial reductions in operating expenses.
• Cable Network Programming Segment EBITDA saw a modest increase of 1% to $884 million for the three months and a 4% increase to $2.371 billion for the nine months.
• The company maintained a strong liquidity position with approximately $3.6 billion in cash and cash equivalents and an unused $1.0 billion revolving credit facility.

Negatives

• Total revenues decreased by 9% to $3.994 billion for the three months and by 1% to $12.914 billion for the nine months.
• Advertising revenue saw a significant decline of 24% to $1.556 billion for the three months and a 6% decrease to $5.423 billion for the nine months, primarily due to the absence of Super Bowl LIX and lower ratings.
• Net income attributable to Fox Corporation stockholders decreased by 52% to $166 million for the three months and by 36% to $994 million for the nine months.
• Diluted earnings per share decreased to $0.38 for the three months and $2.24 for the nine months, down from $0.75 and $3.35, respectively, in the prior year periods.
• Non-operating other, net resulted in a significant loss of $499 million for the three months and $785 million for the nine months, compared to a gain of $156 million in the prior year nine-month period.
• Net cash provided by operating activities decreased by 39% to $1.103 billion for the nine months, primarily due to lower advertising receipts and higher sports programming payments.

Risks

• The company faces risks related to evolving technologies, distribution platforms, and changes in consumer behavior, impacting advertisers and MVPDs.
• Declines in advertising expenditures due to economic prospects, evolving technologies, and shifts in advertiser spending pose a risk.
• Further declines in the number of subscribers to MVPD services could negatively impact revenue.
• Failure to enter into or renew affiliation or carriage agreements on favorable terms could affect content distribution.
• The highly competitive nature of the industry and the popularity of content, especially sports, are ongoing risks.
• The company's ability to renew programming rights, particularly for sports, on favorable terms is a significant risk.
• Damage to the company's brands or reputation could adversely affect its business.
• The inability to realize anticipated benefits from acquisitions, investments, and strategic initiatives is a risk.
• Loss of key personnel, labor disputes, and unfavorable litigation outcomes are potential risks.
• The company is subject to risks associated with cybersecurity, content piracy, and compliance with privacy regulations.
• Changes in tax laws, regulations, and potential investigations or fines from governmental authorities present risks.
• The company faces risks related to the failure or destruction of critical infrastructure like satellites or transmitter facilities.
• Unfavorable litigation outcomes, such as the Smartmatic defamation case, could result in significant financial impact.
• The company is subject to joint and several liability for U.S. federal and state tax liabilities of former members of the 21CF consolidated group, though indemnified by Disney.

Future Outlook

The filing does not contain specific forward-looking guidance on future earnings or revenue. However, it outlines general forward-looking statements regarding future plans, strategies, objectives, new programming, economic conditions, and performance, subject to inherent risks and uncertainties.

Management Comments

• Management believes that Segment EBITDA is an appropriate measure for evaluating the operating performance of the Company's operating segments because it is the primary measure used by the Company's chief operating decision maker to monitor actual versus budget and prior fiscal year financial results, forecast future periods and perform competitive analyses to evaluate performance and allocate resources.
• Management believes that information about Adjusted EBITDA assists all users of the Company's Financial Statements by allowing them to evaluate changes in the operating results of the Company's portfolio of businesses separate from non-operational factors that affect Net income, thus providing insight into both operations and the other factors that affect reported results.
• The Company expects to continue to pay semi-annual dividends, although each dividend is subject to approval by the Company's Board of Directors.

Industry Context

StockSavvy.ai notes that Fox Corporation's performance in this quarter reflects broader industry trends in media and entertainment, particularly the ongoing shift in advertising revenue from traditional broadcast to digital platforms and the significant impact of major sporting events on advertising and programming costs. The decline in advertising revenue, exacerbated by the absence of a major event like the Super Bowl, is a common challenge for broadcasters. The increase in distribution revenue, however, suggests resilience in subscription-based models and retransmission fees.

Comparison to Industry Standards

• The decline in advertising revenue for the quarter (-24%) is significant, especially when compared to the overall market trends. While major sporting events like the Super Bowl are known to drive advertising spikes, their absence creates a substantial year-over-year comparison challenge. Competitors like Paramount Global and Warner Bros. Discovery also face similar pressures in their advertising segments.
• The increase in distribution revenue (3%) aligns with industry trends where carriage fees and subscriber rates are a more stable revenue stream compared to advertising, especially for established networks. Companies like Disney (ESPN) and Comcast (NBCUniversal) also rely heavily on this segment.
• The significant increase in Television Segment EBITDA (131%) is a positive outlier, driven by cost reductions that outpaced revenue declines. This suggests effective cost management in response to market conditions, a strategy also pursued by competitors to maintain profitability amidst revenue volatility.
• The substantial stock repurchase program ($1.9 billion in nine months) indicates management's confidence in the company's valuation and its commitment to returning capital to shareholders, a practice common among mature media companies seeking to enhance shareholder value.

Corporate Governance

Legal Proceedings

• The Company and its news businesses, including FOX News Media and FOX Television Stations, and their employees are subject to lawsuits alleging defamation or disparagement, including a $2.7 billion lawsuit filed by Smartmatic USA Corp. Summary judgment motions were argued in the Smartmatic case in December 2025, with a trial not expected until at least late 2026. The Company is unable to predict the outcome of this matter.
• Stockholders filed derivative lawsuits against certain directors and officers, alleging breaches of fiduciary duties related to the airing of allegations regarding election fraud. The amended complaint seeks damages and reforms to policies and procedures. The court denied a motion to dismiss, and discovery is ongoing.
• The Company is subject to regulatory and investigative inquiries related to allegations of sexual harassment and discrimination at its FOX News business. While many claims have been resolved, others are in litigation. Amounts paid or reserved are not material individually or in aggregate, and the Company does not anticipate a material adverse effect.
• The Company has a liability recorded for the U.K. Newspaper Matters Indemnity, related to phone hacking and other issues at News Corporation subsidiaries prior to the 21CF News Corporation Separation. The liability was approximately $25 million as of March 31, 2026.
• The Company is subject to tax audits by federal and state authorities and believes it has appropriately accrued for expected outcomes. The Company could be liable for U.S. federal and state tax liabilities of other members of the 21CF consolidated group, but is indemnified by Disney.

Stakeholder Impact

• Shareholders: The decrease in net income and EPS, coupled with significant stock repurchases, may impact shareholder value. The new stockholders agreement could affect voting power dynamics.
• Employees: Equity-based compensation costs are noted, and the company is defending against claims involving employees.
• Creditors: The company maintains a strong liquidity position and an unused credit facility, indicating continued access to capital.
• Suppliers: No specific impact mentioned, but programming rights payments are a significant use of cash.

Next Steps

• Continue to evaluate possible acquisitions and dispositions of certain businesses and assets.
• The company expects to continue to pay semi-annual dividends, subject to Board approval.

Key Dates

Recommendation

While the company shows some operational strengths in cost management and distribution revenue growth, the significant decline in overall revenue, net income, and EPS, largely due to a sharp drop in advertising revenue and a substantial non-operating loss, warrants a cautious approach. The ongoing legal proceedings and industry-wide challenges in advertising also present considerable risks. Therefore, a 'hold' recommendation is appropriate pending clearer signs of revenue recovery and resolution of legal matters.

Keywords

Fox Corporation, 10-Q, Quarterly Report, Financial Results, Revenue, Net Income, Advertising Revenue, Distribution Revenue, Segment EBITDA, Cable Network Programming, Television, Stock Repurchase, SEC Filing