10-Q: Fox Q1 2026: Revenue Growth Amidst Net Income Decline

Fox Corporation reported a 5% increase in total revenues to $3.74 billion for Q1 fiscal 2026, though net income attributable to stockholders decreased by 28% to $599 million, primarily due to investment losses.

Summary

• Total revenues increased by 5% to $3.738 billion for the three months ended September 30, 2025, compared to $3.564 billion in the prior year.
• Net income attributable to Fox Corporation stockholders decreased by 28% to $599 million ($1.32 diluted EPS) from $827 million ($1.78 diluted EPS) in the prior year.
• The decrease in net income was primarily due to a $358 million negative swing in non-operating other, net, driven by net losses on investments in equity securities (primarily Flutter Entertainment plc) of $122 million, compared to gains of $236 million in the prior year.
• Distribution revenue grew 3% to $1.915 billion, driven by higher average rates per subscriber and increased fees from FOX Network affiliated stations, partially offset by a lower average number of subscribers.
• Advertising revenue increased 6% to $1.412 billion, primarily due to digital growth led by the Tubi AVOD service, higher news pricing, and improved sports pricing and ratings, despite lower political advertising revenue due to the absence of the 2024 presidential and congressional elections.
• Content and other revenues rose 12% to $411 million, mainly from higher entertainment content and sports sublicensing revenue.
• Operating expenses increased 3% to $2.084 billion, largely due to higher entertainment programming rights amortization and digital content costs, partially offset by lower sports programming rights amortization and newsgathering costs.
• Selling, general and administrative expenses increased 17% to $589 million, driven by costs associated with the launch of FOX One and higher employee costs.
• Segment EBITDA increased 2% to $1.065 billion. Cable Network Programming Segment EBITDA rose 7% to $800 million, and Television Segment EBITDA increased 7% to $399 million. Corporate and Other Segment EBITDA decreased significantly by 86% to $(134) million due to FOX One launch costs.
• The Board authorized an additional $5 billion for the stock repurchase program, bringing the total authorization to $12 billion. Approximately $250 million of Class A Common Stock was repurchased during the quarter.
• A new stockholders agreement was entered into with LGC Holdco, LLC and certain Murdoch family trusts, limiting their collective voting power to 44% of Class B Common Stock.
• Cash and cash equivalents stood at $4.368 billion as of September 30, 2025.
• Net cash used in operating activities was $(130) million, compared to $158 million provided in the prior year, primarily due to lower political advertising receipts, higher programming payments, and higher tax payments.

Sentiment

Score: 4

Explanation: While revenue growth was solid across segments, the substantial decline in net income and operating cash flow, primarily due to investment losses and significant marketing expenses for the new FOX One streaming service, indicates a challenging quarter for profitability and cash generation. The increased stock repurchase authorization is a positive signal, but the underlying financial performance was weaker year-over-year.

Positives

• Total revenues increased by 5% to $3.738 billion.
• Advertising revenue grew 6% to $1.412 billion, driven by digital growth (Tubi AVOD), higher news pricing, and improved sports pricing and ratings.
• Distribution revenue increased 3% to $1.915 billion, benefiting from higher average rates per subscriber and increased fees from FOX Network affiliated stations.
• Content and other revenues saw a 12% increase to $411 million.
• Cable Network Programming Segment EBITDA increased by 7% to $800 million.
• Television Segment EBITDA increased by 7% to $399 million.
• The Board authorized an additional $5 billion for the stock repurchase program, increasing the total authorization to $12 billion, demonstrating confidence in the company's value.
• Repurchased approximately 4 million shares of Class A Common Stock for $250 million during the quarter.
• Maintained a strong cash position of $4.368 billion and an unused $1.0 billion revolving credit facility.

Negatives

• Net income attributable to Fox Corporation stockholders decreased by 28% to $599 million.
• Diluted EPS decreased to $1.32 from $1.78 in the prior year.
• Non-operating other, net, swung from a gain of $233 million to a loss of $125 million, primarily due to net losses on investments in equity securities (e.g., Flutter Entertainment plc).
• Operating expenses increased by 3% due to higher entertainment programming rights amortization and digital content costs.
• Selling, general and administrative expenses increased by 17% due to FOX One launch marketing costs and higher employee costs.
• Corporate and Other Segment EBITDA decreased significantly by 86% to $(134) million, primarily due to FOX One launch costs.
• Net cash used in operating activities was $(130) million, a significant decline from $158 million provided in the prior year, attributed to lower political advertising receipts, higher programming payments, and increased tax payments.
• Lower political advertising revenue due to the absence of the 2024 presidential and congressional elections.
• Decrease in the average number of subscribers for distribution revenue.

Risks

• Evolving technologies and distribution platforms, changes in consumer behavior, and related impacts on advertisers and MVPDs.
• Declines in advertising expenditures due to economic factors, evolving digital advertising market, major sports events, election cycles, and audience measurement inaccuracies.
• Further declines in the number of subscribers to MVPD services.
• Failure to enter into or renew favorable affiliation or carriage agreements.
• Highly competitive nature of the industry.
• Popularity of content, including special sports events and sports franchises, leagues, and teams.
• Inability to renew programming rights, especially sports programming rights, on favorable terms.
• Damage to brands or reputation.
• Inability to realize anticipated benefits of acquisitions, investments, and strategic initiatives.
• Loss of key personnel.
• Labor disputes, including those involving professional sports leagues.
• Lower than expected valuations associated with reporting units, indefinite-lived intangible assets, investments, or long-lived assets.
• Degradation, failure, or misuse of network and information systems leading to service disruption or data breaches.
• Content piracy and signal theft, and the ability to protect intellectual property rights.
• Failure to comply with privacy and personal data protection laws.
• Changes in tax, federal communications, or other laws and regulations.
• Impact of investigations or fines from governmental authorities (e.g., FCC).
• Failure or destruction of satellites or transmitter facilities.
• Unfavorable litigation outcomes or investigation results requiring significant payments or onerous operating procedures (e.g., Smartmatic defamation lawsuit, derivative lawsuits regarding election fraud allegations).
• Changes in GAAP or other applicable accounting standards.
• Ability to secure additional capital on acceptable terms.
• Joint and several liability for U.S. federal income and state tax liabilities of the 21CF consolidated group prior to the Transaction, despite indemnification by 21CF/Disney.

Future Outlook

The company expects to complete a $1.5 billion accelerated share repurchase transaction during the second half of fiscal 2026 and anticipates continuing to pay semi-annual dividends, subject to Board approval. A trial in the Smartmatic lawsuit is not expected to commence until early 2026 at the earliest. Future performance obligations of approximately $7.2 billion are expected to be recognized primarily over the next one to three years. Put rights for minority shareholders in an entertainment production company and a digital media company will become exercisable in fiscal 2027 and fiscal 2030, respectively.

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, the Chief Executive Officer, 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 continues to believe the Smartmatic and other pending lawsuits alleging defamation or disparagement are without merit and intends to defend against them vigorously, including through any appeals.
• The Company is unable to predict the final outcome of these matters and has determined that a loss in the Smartmatic case is neither probable nor reasonably estimable.
• The Company does not currently anticipate that the ultimate resolution of any such pending matters will have a material adverse effect on its business, financial condition, results of operations or cash flows.
• The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.
• The Company has evaluated, and expects to continue to evaluate, possible acquisitions and dispositions of certain businesses and assets. Such transactions may be material and may involve cash, the Company's securities or the assumption of additional indebtedness.

Industry Context

The company operates in a dynamic media landscape characterized by evolving technologies, distribution platforms (traditional and virtual MVPDs, AVOD, direct-to-consumer streaming like FOX One), and changing consumer behavior (seeking more control over content consumption). Digital growth, particularly from services like Tubi AVOD, is a key driver for advertising revenue, offsetting declines in traditional areas like political advertising in non-election years. The launch of FOX One indicates a strategic push into the direct-to-consumer subscription streaming market, aligning with broader industry trends of media companies building proprietary streaming platforms. The ongoing challenge of declining MVPD subscribers impacts distribution revenue, necessitating higher rates per subscriber and fees from affiliated stations to partially offset this trend. High costs associated with programming rights, especially sports, remain a significant operational expenditure in the competitive media industry.

Corporate Governance

Legal Proceedings

• FOX News business and certain current/former employees are subject to allegations of sexual harassment and discrimination. Many claims resolved, others contested. Regulatory and investigative inquiries received. Company does not anticipate a material adverse effect.
• A liability of approximately $30 million as of September 30, 2025, is recorded related to the U.K. Newspaper Matters Indemnity, covering civil claims and investigations from pre-2013 events at News Corporation subsidiaries.
• Smartmatic USA Corp. filed a lawsuit in February 2021 seeking $2.7 billion in damages for alleged defamation or disparagement. Motions for summary judgment filed, with a hearing scheduled for December 2, 2025. A trial is not expected until early 2026 at the earliest. The company believes the lawsuit is without merit and cannot estimate the amount of loss.
• Consolidated stockholder derivative lawsuits (In re Fox Corporation Deriv. Litig., C.A. No. 2023-0418 (Del.Ch.)) were filed against certain directors and officers, alleging breach of fiduciary duties related to airing election fraud allegations. The amended complaint seeks damages and policy reforms. A motion to dismiss was denied, and a motion for leave to move for summary judgment on director independence was granted. The company intends to vigorously defend.
• The company is regularly audited by federal and state tax authorities and has accrued for expected outcomes, not anticipating a material adverse effect. It is jointly and severally liable for certain U.S. federal and state tax liabilities of the 21CF consolidated group prior to the Transaction, with indemnification from 21CF/Disney.

Related Party Transactions

• A new stockholders agreement was entered into with LGC Holdco, LLC and certain Murdoch family trusts, which are related parties. This agreement governs voting power and share transfer rights among these entities and Murdoch family members.

Stakeholder Impact

• Shareholders are impacted by the 28% decrease in net income and diluted EPS, but also benefit from the increased stock repurchase authorization ($5 billion incremental, $12 billion total) and the ongoing semi-annual dividend ($0.28 per share). The new stockholders agreement impacts the voting power dynamics of Class B Common Stock.
• Employees are affected by higher employee costs, which contributed to increased selling, general and administrative expenses, and participate in equity-based compensation plans.
• Customers, including MVPDs, face higher average rates per subscriber. Advertisers benefit from digital growth (Tubi) but are affected by the absence of political advertising. New direct-to-consumer streaming service FOX One launched, incurring significant marketing costs.
• Creditors benefit from the company's stable credit rating (Moody's Baa2, S&P BBB) and an unused $1.0 billion revolving credit facility, indicating good liquidity.
• The legal system and regulatory bodies are involved in ongoing legal proceedings (Smartmatic, derivative lawsuits, FOX News allegations) and regulatory inquiries.

Next Steps

• Completion of $1.5 billion accelerated share repurchase transaction during the second half of fiscal 2026.
• Board of Directors to approve future semi-annual dividends.
• Hearing on motions for summary judgment in the Smartmatic case scheduled for December 2, 2025.
• Trial in the Smartmatic lawsuit not expected to commence until early 2026 at the earliest.
• Put right held by entertainment production company's minority shareholder becomes exercisable in fiscal 2027.
• Put right held by digital media company's minority shareholders becomes exercisable in fiscal 2030.
• Continue to evaluate possible acquisitions and dispositions of certain businesses and assets.

Key Dates

Recommendation

While Fox Corporation demonstrated solid revenue growth driven by digital expansion and strong performance in its core Cable Network Programming and Television segments, the significant decline in net income and operating cash flow is a concern. This decline is largely attributable to non-operating investment losses and substantial marketing expenses for the new FOX One streaming service, which are expected for a new product launch. The increased stock repurchase authorization signals management's confidence and provides shareholder value. However, the ongoing high-stakes legal proceedings (Smartmatic, derivative lawsuits) introduce considerable uncertainty and potential future liabilities. Given the mixed financial performance, strategic investments in streaming, and unresolved legal risks, a 'Hold' recommendation is appropriate as investors await clearer trends in profitability from new ventures and resolution of legal matters.

Keywords

FOX Corporation, 10-Q, Earnings, Media, Entertainment, News, Sports, Television, Cable Network Programming, Tubi, FOX One, Advertising Revenue, Distribution Revenue, Stock Repurchase, Murdoch Family, Flutter Entertainment, SEC Filing, Financial Results, Q1 2026