Paramount Skydance (PSKY) Earnings Transcript
Paramount Skydance (PSKY) Earnings Transcript
Motley Fool Transcribing, The Motley FoolWed, February 25, 2026 at 11:10 PM UTC
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Wednesday, February 25, 2026 at 4:45 p.m. ET
CALL PARTICIPANTS -
Chief Executive Officer — David Ellison
President — Jeffrey S. Shell
Chief Financial Officer — Dennis Giannelli
Strategic Adviser (former CFO) — Andrew Warren
Head of Investor Relations — Kevin Creighton
TAKEAWAYS -
Warner Brothers Discovery Bid -- Paramount Skydance Corporation (NASDAQ:PSKY) submitted a revised $31 per share all-cash offer for Warner Brothers Discovery (NASDAQ: WBD) this week and did not discuss further details on the call.
Revenue Guidance -- Management guided for $30 billion in revenue for the full year, a 4% increase driven primarily by the Direct-to-Consumer (DTC) segment.
DTC Growth -- Paramount Plus delivered more than 17% year-over-year streaming growth, with management emphasizing the platform as the primary driver of revenue acceleration into 2026.
Paramount Plus UFC Partnership -- UFC 324 reached approximately 7,000,000 households in the U.S. and Latin America, making it the platform’s largest exclusive live event to date and exceeding initial expectations.
Advertising Revenue -- DTC advertising revenue is expected to meaningfully recover in 2026, with ad demand for UFC noted as "strong" and the company investing in ad technology.
DTC Profitability -- Management anticipates DTC profitability to improve year over year through both revenue growth and investment management.
Adjusted EBITDA Guidance -- The company reaffirmed full-year adjusted EBITDA guidance of $3.8 billion, excluding $300 million in stock-based compensation, and highlighted improving profit year over year.
Synergy Target -- The company expects to realize over $33 billion in business-wide synergies, explicitly including new CUDA segment benefits.
Film Studio Slate Expansion -- The Studio segment will release 16 movies this year compared to eight inherited titles, targeting a new steady-state of over 15 movies annually.
Content Investment -- Content spending increased by $1.5 billion to support a scaled film slate, additional original series, and expanded sports rights.
Pluto TV Trends -- Paramount Plus grew 17% year over year, while non-Paramount Plus streaming (primarily Pluto TV) decreased 16% due to monetization headwinds, despite rising engagement metrics.
NFL Broadcasting Relationship -- Management described a nearly century-long relationship with the NFL, acknowledged upcoming renewal negotiations, and said, “we feel pretty confident we are going to be in business with the NFL for a long time.”
Credit and Free Cash Flow -- Management affirmed a commitment to reach investment grade metrics by 2027 and reported recent repayment of over $300 million in debt, while citing $800 million in restructuring charges impacting near-term free cash flow conversion (5% for the year, excluding restructuring).
Technology and AI -- The company stated a strategic goal to “become the most technologically capable media company,” plans to “10x the size of the headcount” devoted to AI, and positioned artificial intelligence as a tool for creators, not a content commoditizer.
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RISKS -
Studio segment expects a decline in theatrical revenue for the coming year due to a lower contribution from large event films, specifically noting, “we are comping last year, which was a big output in Mission: Impossible.”
TV Media segment will see revenue declines “Mostly in line with the industry headwinds around pay TV,” though management expects profitability to remain stable from cost controls and ad sales execution.
Non-Paramount Plus streaming (especially Pluto TV) faces ongoing monetization headwinds, with 16% year-over-year decline offsetting engagement gains and management citing underinvestment by previous owners.
Paramount Skydance Corporation (NASDAQ:PSKY) advanced its DTC-centered strategy with Paramount Plus delivering 17% streaming growth and UFC 324 marking a record exclusive event on the platform. Synergies exceeding $33 billion and a doubled film slate highlight rapid operational scaling, while content spend increased by $1.5 billion to reinforce both streaming and theatrical output. The Pluto TV business continues to lag peers in monetization despite rising engagement, and the company flagged both a near-term decline in TV Media segment revenues and a year-over-year drop in studio theatrical revenue as it cycles a strong prior release slate. Capital discipline remains central: $300 million in recent debt paid down, and investment grade credit metrics reaffirmed as a 2027 target, with free cash flow conversion at 5% for the year excluding restructuring.
The DTC revenue mix is expected to further strengthen in 2026, as management emphasized “healthy subscriber growth” and ARPU improvement from price increases outweighing the impact of exiting uneconomic bundled deals.
Original content investment accelerated, with 11 new series and 11 greenlit movies in the first six months under new management, while upcoming releases from core franchises (e.g. Sonic, A Quiet Place, Call of Duty) are expected to drive future gains but will not fully impact results until 2027 due to standard production timelines.
Paramount Plus engagement initiatives, such as Paramount One and expanded sports partnerships, were highlighted as instrumental to subscriber retention and “flywheel” effects across the content ecosystem.
Long-term vision was reinforced by statements that the current leadership team are “long-term owner-operators” focused on value creation through operational integration, content scaling, and technology leadership, including a 10x expansion of AI-focused engineering staff.
INDUSTRY GLOSSARY -
DTC (Direct-to-Consumer): Company-operated streaming platforms that deliver content directly to subscribers, bypassing traditional broadcast or cable intermediaries.
FAST (Free Ad-Supported Streaming Television): Digital streaming services providing audiences free access to TV channels and video on demand, monetized exclusively through advertising.
Pluto TV: Paramount’s global FAST service delivering both linear and on-demand content.
CUDA segment: Newly referenced business unit included in company synergy guidance; precise scope not detailed during the call.
Full Conference Call Transcript
David Ellison: Thanks, Kevin, and good afternoon, everyone. As you saw in our Q4 results, and in the most recent shareholder letter, we ended the fiscal year with a strong first full quarter under our leadership team, positive momentum heading into 2026. Meeting or exceeding guidance for the quarter that we laid out in our Q3 letter. It has been a productive six plus months since the launch of the new Paramount Skydance Corporation, and we are pleased with the progress made in a relatively short time. Our North Star priorities continue to guide everything we do, and we are confident we are on the right trajectory and are excited about the opportunities ahead.
Before we get to your questions, I did want to take a moment to acknowledge Andrew Warren's tenure as our interim CFO. Andrew is widely respected across our organization and the industry, and we are truly fortunate to have had his leadership during this important period. We are incredibly grateful for everything he has done to help position the company for success and appreciate his continued partnership as a strategic adviser. I also want to officially welcome Dennis Giannelli. Brings significant financial and operational experience having held senior roles at GE, Uber, and Scale AI, where he served most recently as CFO. Was also briefly a member of our board of directors before assuming his current role.
We are thrilled that he has joined our leadership team and look forward to you getting to know him better going forward. Finally, I will briefly address our proposal to acquire Warner Brothers Discovery. On Monday, we submitted a revised bid of $31 per share, all cash, and we look forward to continuing to engage with their leadership team and board. While we appreciate this is obviously something you all have questions about, we will not be commenting further during today's call. With that, I will turn it back over to Kevin for your questions.
Kevin Creighton: Alright. Thank you, David and Nadia. We will now open for questions.
Operator: Great. Thank you. When preparing to ask your question, please ensure to unmute yourself locally. We ask you please limit yourselves to one question. The first question goes to Peter Sapino of Wolfe Research. Peter, please go ahead.
Peter Sapino: Hi. Good morning. I wonder if you could comment on your initial experience as the home of UFC on your streaming service? And maybe tie those comments more broadly to your latest thinking on the viability of being something for everyone every day. I think that is your stated strategy in streaming, and obviously, it is an extremely tall competitive order. And I just wondered what you have learned in the last six months of owning the asset that makes you more or less confident in that objective. Thank you.
David Ellison: No, absolutely, and really appreciate the question. First, we could not be more thrilled about the way the UFC partnership has started. UFC 324 was really a phenomenal start for us. We reached approximately 7,000,000 households across the U.S. and Latin America, and it was also the platform's largest exclusive live event to date. We have also seen the advertising demand for UFC be strong, and overall, the partnership has really started ahead of expectations. In addition to that, we have really seen UFC fans engage with the vast others of our content offering. They are watching Landman. They are watching other series. So we are really seeing that flywheel work for us.
And we also are really seeing it work well with Zuffa Boxing. And we really believe in the theory of actually owning combat sports, having that entire category as a home on Paramount Plus, is something that has been working really well for us today. More broadly, we greenlit our 11 original series since we took over six months ago and are really seeing strong growth in our streaming service, up over 17% year to date on Paramount Plus. So from that standpoint, we are really seeing that momentum continue. Feel really good about the start of the partnership with UFC and Dana White. Is there anything we want to add on of the last six months in streaming?
Jeffrey S. Shell: Yes. So first of all, I would just add to the UFC comments that David just made that we are really at the very beginning of this partnership and we are going to experiment a lot. The beauty of having this sport exclusively and being the exclusive partners of the UFC is we can try a lot of stuff. Our upcoming fight on March 7 is going to be partially on CBS, and we look forward to lots of experimentation as we grow the brand. I think the first six months on streaming have gone really well. We have seen accelerating growth in Paramount Plus. Doing better and better every quarter.
The key now is to get ongoing engagement and the content that I am sure we are going to talk about later that we have coming is pretty exciting. From a financial perspective, the ad revenue has been much more promising than we expected, and the key now is driving that engagement and that usage because we can monetize it at Paramount Plus. And so we are feeling pretty good about the momentum we have at streaming so far.
Kevin Creighton: K. Nadia, next question, please. Thanks, Peter.
Operator: The next question goes to John Hodulik of UBS. John, please go ahead.
John Hodulik: Great. Thanks, guys. Jeff, maybe for you, a follow-up on comments on D2C. You guys guided to better profitability next year against some slightly higher subs. What are you seeing in terms of ARPU? There seem to be some moving parts with exiting the hard bundles, but some price increases. That translates to better revenue growth. And then on the cost side, just disaggregate in terms of that commentary on leading to better D2C results?
David Ellison: Yes. Thanks, John. I am going to actually pass over to Dennis for this one.
Dennis Giannelli: Yeah. Hi, John. Good to meet you, and I am excited to be here. So thanks, everybody. I think it is helpful for us to just frame our guidance overall, which a big part of that is DTC. As we put out, overall we expect revenue this year of $30 billion, up 4% year on year. DTC is going to be the driver of that. We expect DTC to continue to accelerate growth year on year. So growth will accelerate in 2026 versus 2025. The driver of that is a couple of things. We continue to see subscriber growth, what we are calling underlying healthy subscriber growth, again accelerate in 2026.
This will result in better ARPU from a mix shift as well as we realize the price increases in Q1. As we previously mentioned, and I am going to call this out, is we are making this deliberate decision to exit from uneconomic hard bundles, so you will see that in our subscriber growth this year. But if you take those underlying exits out, we will continue to see net adds grow year on year. And, just to give you a call out, those uneconomic hard bundles represented less than 2% of Paramount Plus revenue in 2025. So coupled with the subscriber growth, we also expect D2C ad revenue to grow this year.
We have been talking a lot about how we are investing in programming to drive better engagement. Better ad tech, as well as the team there that Jeff alluded to. So we expect to meaningfully recover DTC ad growth in the year. At the same time, back to your question how that comes together, we are investing in the business. We expect DTC profitability to improve year on year as we both grow revenue and manage our investments. You know, it is worth just taking a step back maybe and talking about the rest of the business. So DTC will be the growth driver.
But as we think about the rest of the portfolio we have, right, so in TV Media, we expect to see some declines in revenue. Mostly in line with the industry headwinds around pay TV. That we expect our advertising revenue to decline to be more moderate as we execute overall and better ad sales. We feel really good about the upfronts coming up this year. We also have tailwinds from political spending in 2026. One thing to call out, we do offset some impact from our sale at Telefe and Chilevisión. In TV Media overall, I just want to call out, we have been really impressed with the team.
Managing that business, while revenues will decline, we expect overall profitability in that business to be stable on both a profit dollars and a margin basis.
Andrew Warren: Then the other thing is the Studios. Right? So Studios, we do expect theatrical revenue to decline. I think we have been very clear overall that we are in a real rebuild phase of that business. As we execute that rebuild, we will see some of that come through in the 2026 slate, but mostly that will come through future years. And so even with theatrical revenue dropping down, we do expect better cost management as well as benefits from our licensing deals to drive Studio profitability up. So if you put this together, overall, we are reaffirming guidance for the year on both revenue as well as profit. Adjusted EBITDA outlook of $3.8 billion.
That excludes our $300 million of stock-based compensation. But it is improving year on year as driven by both the top line and as we realize our synergies. We put out there, we will expect to realize $33 billion plus of our synergies. This includes both across our entire business. So we expect profitability to improve in DTC and our new CUDA segment. Still margins in TV Media. And I think the last question probably is just what does it look like beyond 2026? And, without giving specific guidance, we just want to make sure we are here talking about how the team around the table, David on down, we are owner-operators.
We are investing for long-term value creation, and we expect that to show through the next many years.
Kevin Creighton: Thank you. Nadia, next question, please.
Operator: The next question goes to Steven Cahall of Wells Fargo. Steven, please go ahead.
Steven Cahall: Thank you. First, just wanted to ask if you have had any conversations yet with the NFL. It is a big topic for investors, especially with you and Fox having so many games on Sunday. And as you are thinking about where that could go in the future, I was wondering if there is any potential for the games on Paramount Plus, which I think are currently geofenced, to be available nationwide within that rather than only being on Sunday Ticket. So it seems like you have got some opportunities maybe as well as some risks with the NFL renewal. So I would love to know how you are thinking about that.
And then just on the outlook for 2026 and maybe 2027, if we think about free cash flow, I think you have said before that you are committed to investment grade with all three rating agencies. I think that implies that on a total basis, including restructuring, you would be free cash flow positive by next year. Just wondering if I am thinking about that one correctly. Thank you.
Jeffrey S. Shell: Thanks, Steve. I will take the first and then pass it over to Andrew for the second. So we have a great—you asked, have we talked to the NFL? We talk to the NFL daily. We have a great relationship with the NFL. We were the very first NFL broadcaster when we went back when it started, and it has been nearly a century of relationship. And during that century, this past year was our most watched year ever. Everything clicked this last year for us with the most viewership, the biggest watched game, biggest watched window, that 4:25 window nationally for CBS. So everything is really going well with the partnership, and we feel very good about them.
And I think they feel very good about us. So we are not particularly concerned. Obviously, it has been widely publicized that there is a renewal discussion coming up. And we do not talk about individual negotiations, but suffice it to say, we feel pretty confident we are going to be in business with the NFL for a long time. And we have properly accounted for what we expect to be whatever impact of that negotiation in our internal forecast going forward. Just one thing about the geofencing, let us talk about that for a second.
One of the unique things about our relationship with the NFL, and I would actually say it is probably similar to Fox's relationship with the NFL, is the anchor of their flywheel is really their reach. And the anchor of their reach is really the reach of both CBS and Fox on Sunday afternoons. So the way we get the NFL that reach, which has really helped contribute for both of our benefit to the success of the NFL, is by our vast array of both owned and operated stations, of which we have 28, and affiliates.
And so it is important that those games get regionalized and that we aggregate that viewership and maximize the viewership in each market for the best game, both for us and Fox. And that accrues to the benefit of the NFL and to us and really maximizes the reach on any given Sunday. So I do not think we are going to be doing anything with Paramount Plus that is any different, and I do not think that Fox is going to be doing anything different than we are doing on linear, which is to maximize that reach and that regionalization of that window, which I think works for all of us. Maybe pass it over to Andrew for the—
Andrew Warren: Sure. Thank you. Hi, Steven. Thanks for the second question. Let me take the investment grade part first, and, obviously, it is interrelated with free cash flow conversion. But as we told you in the last quarter, we are absolutely committed to getting to investment grade credit metrics. This is, of course, relative to our standalone position, and we expect to hit those in 2027.
With regard to free cash flow, I would just point out that notwithstanding the fact we paid down over $300 million of debt in the first quarter, and, in addition, have $800 million of restructuring charges, you take the restructuring charges out, we actually are getting 5% free cash flow conversion this year, which, of course, is not where we want to be. And as we accelerate that into 2027 and the out years, we expect to get back to industry norms and hopefully exceed that. That is certainly part of our strategic plan. So I would say there is no real change from that and what we talked about in November.
Kevin Creighton: Alright. Great. Thank you. Thanks, Steve. Nadia, next question, please.
Operator: The next question goes to Robert Fishman of MoffettNathanson. Robert, please go ahead.
Robert Fishman: Thank you. Good afternoon, everyone. As you think about your growth ahead, can you talk about how critical to creating long-term shareholder value it is to reinvigorate and build upon your core franchises and IP? And if you can comment how Warner Brothers and HBO IP would help accelerate that growth over the next three to five years, either for a standalone Paramount Plus or a combined platform with HBO Max? And then on a related note, just how do we think about overall content spending, again either standalone or with Warner Brothers, especially factoring in the sports and the long-term strategy to grow that profit and cash flow. Thank you.
Kevin Creighton: Yeah. Thanks, Robert, for the question. We will not be answering anything related to Warner as David mentioned in his opening remarks. Just a reminder for everyone else on the line. But we will go ahead and you know, how do we think about sort of franchise and long-term value, as we mentioned in the letter?
David Ellison: Yeah. No. Absolutely, sir. I will speak to that and, you know, look, as the largest shareholder of the Class B's, we really approach everything through the lens of how do we create long-term basically shareholder value, which really means we are long-term investors. We are long-term owner-operators, and we really have a long-term horizon in terms of how we are approaching this. If you step back across all of our businesses, we are actually really pleased about the investments that we are making really going back to our North Star priorities. We have talked about streaming. I will start in the Studio segment. You know, as Dennis said, we inherited a slate that has underperformed.
We are going to see significant improvement in the profitability of the film slate this year. But I think if you really look at how we are doubling down on our franchises and really reinvigorating them and reinvesting in them, which is something that, you know, we did in partnership when we were—obviously, I ran Skydance. And, to date, in the little over six months that we have been here, we are going to release 16 movies this year versus the eight films that we inherited. And we are really going to be at a steady state of over 15 movies per year. We have greenlit 11 movies basically since we have been here in the first six months.
Including films like A Quiet Place and Sonic, which is really us doubling down on our franchises. Taylor Sheridan and Pete Berg are hard at work at Call of Duty, which we are really excited about. And, you know, we have Scream opening this weekend. When, you know, again, going to Paramount Plus, in addition to the investments that we have made in the UFC and sports, we have actually greenlit 11 original series on top of the incredible slate that we are fortunate enough to step into. And we are also investing significantly in the improved product experience on both P+ and Pluto.
So consumers are going to continue to get more incredible content they love and an overall better user experience, which we think will really position ourselves well for growth into the future. And then when you step back and look at our linear, really anchored by CBS, you know, we had eight of the top 10 shows on broadcast, the number one show in Tracker, the number one news show in Sheriff County, the number one news program in 60 Minutes, and so we really are seeing strong demand for our content across our portfolios. And we are only seeing that accelerate going forward.
So, you know, it has been six months, but we really do feel good about the work that team has really done to date, and you can expect that to accelerate into the future quickly.
Kevin Creighton: How do we think about the content spend for Paramount overall?
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David Ellison: Yeah. So overall content spend, I am sorry. I am not sure where that—So we talked about we have increased our content spend as we announced last quarter by $1.5 billion, which is really going towards all the things that I talked about, which is really scaling our film slate, scaling our original series, investing more into sports. We do believe that will create long-term shareholder value. You know, it is a priority for us to make sure that we can win with the content space, make sure that we are the most technologically capable media company and really have the appropriate operational efficiencies across the company.
That is what really drives all the decisions here, and I think we are off to a really strong start in the first six months.
Operator: Thank you, David.
Kevin Creighton: Nadia, next question, please.
Operator: The next question goes to Rick Prentiss of Raymond James. Rick, please go ahead.
Rick Prentiss: Hi. Good afternoon. A question—in the letter you talk about leveraging your IP across the ecosystem. And give us some concrete examples of what you hope to achieve going across film, television, streaming, live experiences, publishing, consumer products. And how we might see that. And if you were to benchmark yourself against the peer group, how do you think you are doing as far as monetizing that IP?
David Ellison: So it is a great question, and I will point to a couple things. One, I will use Teenage Mutant Ninja Turtles as the most recent example of really—you know, we are obviously, we have two films that we are making in the Turtles landscape. We have series, and we also have consumer products. Huge compliment to Josh who came to us from Mattel, who in the first month of being at Paramount, created the most significant consumer products partnership in the history of the company. Over 5x what had been done to date, which I think is a great example in this quarter of really how we are maximizing our IP across the flywheel that we have created.
And one of the other things, we take a step back, I think that we are really proud of is really the Paramount One initiative that we have launched really as a marketing platform. The UFC is one of the first things that we ran through that, where we really activated all of our linear channels, our direct-to-consumer platforms, and really the entire ecosystem to deliver billions of impressions, which really helped drive that launch of UFC 324, which again came in ahead of our expectations. You know, and really helped us create the largest live event in the history of Paramount Plus.
And you are going to see us activating that Paramount One ecosystem across a lot of our tentpole franchises going forward. Across our series launches, as we really integrate this business to operate as one company. And we are seeing that work incredibly well in the first couple of months, and I just have to really give a tremendous amount of credit to the team that have really been breaking down silos and operating as one business. And the results are incredibly promising. We are still in the beginning, six months in, but we are really excited about the trajectory.
Operator: Great.
Kevin Creighton: Thanks. Nadia, we will go ahead and jump to the next question, please.
Operator: The next question goes to Kutgun Maral of Evercore ISI. Kutgun, please go ahead.
Kutgun Maral: Great. Thanks for taking the questions. A few on AI, if I could. First, GenAI is clearly progressing quickly and dramatically. Short form clips do not threaten the core of your studios today, but feature-length personalized stories could become feasible. So how are you positioning the company for that evolution? Do you expect content creation to become commoditized, or do brands and IP become more valuable in this world? And at a high level with AI, maybe you could talk about your guiding principles on licensing and any guardrails. And finally, one of your peers recently outlined a path to bring curated AI-generated short clips into a streaming service.
Do you see a future where AI-enabled short form user generated or prompted content lives inside Paramount Plus? Thanks.
David Ellison: So it is a great question. And first, I will kind of step back to where I really say, it is one of our core goals is to become the most technologically capable media company. And there is no question that AI is going to be a significant transformation across our industry and others. But I want to say that, first and foremost, we are really a home for storytellers, and we are a content company first. And so we really view artificial intelligence as an unbelievable tool for artists that will be a significant unlock on creativity.
With that said, we are also big believers that when you really go back to 1992 when, I believe it was James Cameron and Digital Domain, when they basically did away with opticals and actually started getting into digital composites, was really the beginning of the software-based CPU pipelines that we have all been iterating off of for several decades. And I think there is no question that we are at one of those inflection points where model-driven GPU pipelines are going to get deployed across the business, but again, we really view that as a tool for artists to be able to unlock creativity.
When you look at some of the things we are doing internally in terms of how we are investing, when you look at the engineers that we have at the company currently, you can expect us to 10x the size of the headcount that we are investing towards this, and really want to be in a position where we can be a leader in the industry in terms of how this transformation is shaped. To your question about do I think it will be commoditized? The answer is no. I do not think there is anything that is going to replace artists. I do not think there is anything that is going to replace the creativity of original storytelling.
I would actually point towards—you look at the value of intellectual property, whether it was Sora on their launch or whether it was C-Dance, and I think you saw us defend our IP against both those things. But the fact that there was so much engagement around the characters and intellectual property that audiences love, I think speaks to the value of that intellectual property. And we are in a unique position to be able to take advantage of that. There is nothing I am really in a position that I can fully elaborate on further.
But, again, I think when you look at the power of IP enabled by AI, it is going to be something that is a tailwind for us as a company, and we are excited to help be key drivers of that innovation.
Kevin Creighton: Alright. Thanks for the question, Kutgun. Nadia, we can go ahead and jump to the next question, please.
Operator: The next question goes to Michael Morris of Guggenheim. Michael, please go ahead.
Michael Morris: Thank you. Good afternoon, guys. I wanted to ask about the Studio first. Dennis, I think you mentioned an expected decline in theatrical revenue in 2026. I am hoping you can reconcile that with the significant increase that you are expecting in the number of titles being released. And as you think about that decline, does that pertain to the Studio business overall? Or is it only the theatrical component and you expect growth in licensing? Then if I could, just on the Pluto headwinds that you cited, the trend there seems to be well below the CTV industry overall.
Is this a business that you expect to turn around as a growth driver, or is this maybe not core to the future as you see it?
Dennis Giannelli: Thanks, Michael. Yeah. Let me take the first part and then hand over to David. So on the Studio business overall, we will see growth overall on the Studio business on a revenue basis. And that will be driven primarily by the licensing and also by combining Skydance into that segment. What I was talking about is theatrical. Right? So in theatrical, we are increasing the number of films but we are comping last year, which was a big output in Mission: Impossible. So that will drive the theatrical decline year on year in 2026.
And then the second part of your question, as we think about Pluto, I mean, I think what you will see is in the DTC segment, in Q4, we grew 10% year on year. Paramount Plus was up 17%. Non-Paramount Plus was down 16%. As we call out, that is primarily driven by Pluto, and it is primarily driven by the monetization of Pluto. I think we should call out is actually Pluto engagement is up. So monthly active users, the engagement of those users is actually up. And so what we are facing is a monetization headwind we are addressing. And we address that in our guidance.
I think it is worth passing over to David to talk overall about how we think about Pluto and our FAST strategy.
David Ellison: And I want to expand on what Dennis said on the Studio side. So you know, again, we stepped into last year a film slate that had underperformed. We have scaled from eight movies to 16 releases this year, and it is going to be significantly more profitable. But when you really think about getting our core franchises back online, you do not really see that start to occur until 2027. Just because of what the life cycle is of making a tentpole. It is two years from beginning to release at the earliest. So I would look at—we are making significant improvements in profitability across our film slate this year.
And then 2027, when you start seeing films like A Quiet Place and Sonic, Call of Duty, several of our other franchises that will be releasing in 2027, 2028, and beyond, you will see our box office numbers increase. You will see profitability increase. But there is a two-year life cycle minimum to those big event films. And I actually think the team has done an exceptional job putting us in a good position for this year for the level of growth that we are going to have across our theatrical slate. Then you will see that accelerate significantly into 2027. As Dennis said, really looking at Pluto, stepping back, I am a big believer in the FAST space.
And I think when you really look at globally, FAST is something that is only going to grow in importance. And when you look at the signs that are also really encouraging on Pluto, we are seeing engagement grow. The headwind we are facing is really monetization. And we are doing several things to correct that. And while Pluto has always been a leader in the FAST space, it is a profitable platform. It was, from our perspective, underinvested in by the previous owners and managers, both from a content standpoint as well as from a product standpoint. You know, and we have also brought in new leadership to help us on the advertising side.
We have new leadership on the D2C side that are really working really well hand in hand to make sure that we improve the product and improve the monetization. You know, really our overall streaming convergence that we talked about on our last earnings call where we had really three separate stacks that were running on multiple clouds all independent of one another. That convergence will be done in the coming quarters. And you will see continued product improvement to both Pluto and P+ and with that, we will see the monetization curve correct and we will really start seeing better monetization, better growth, and more in line with peers with expectations to be above.
Kevin Creighton: Thank you, David. Alright. Nadia, we will go ahead and turn it back over to you, please.
Operator: Great. Thank you. The final question goes to Brian Forbes of Deutsche Bank. Please go ahead.
Brian Forbes: Hi, good afternoon. Thanks for taking the question. First on UFC, I know you had cited 7,000,000 MAUs. I was curious as to whether you can give us some color on the number of unique viewers that you had, just given that you have 79,000,000 subs. I am trying to understand what the percentage of those subscribers overall is that are engaging with UFC at some level. And then secondly, I was wondering if you could talk about what you have been seeing since you completed the acquisition, both in churn and CAC, how are those trending? How much opportunity do you see for improvement in both of those key metrics over the next one or two years?
And how critical is it to improve either or both of those to the long-term economic success of the streaming business? Thank you.
David Ellison: Yeah. No. Absolutely. So look, I want to reiterate, we are incredibly happy with the way our partnership with the UFC has started. You know, when it goes to the 7,000,000 households across the U.S. and Latin America, that was above our expectation. And, again, it is the largest exclusive sporting event that we have had in Paramount Plus history. And we are seeing that momentum continue. In terms of churn, we are seeing that trend in the right direction. But I still think there are areas for us to be able to continue to improve, which is why you are seeing us invest the way that we are both in content as well as in the product.
We know as 79,000,000 global subscribers, there is a lot of opportunity for growth ahead of us. And, when you look at the investments that we are making, again, in the first six months, greenlighting 11 original series, as well as the work that Dane Glasgow and his team are doing to significantly improve the product, I think you will see us improve in all of those metrics going forward. And, obviously, we believe those investments will significantly yield long-term shareholder value. So we are pleased about the work to date, but you are only going to see that improve going forward in the future.
Jeffrey S. Shell: No. I just think what I would say is there is a seasonality aspect to the business too. So churn is something that we traditionally saw at Paramount Plus really spike up in the summer after the Masters and come back down with the NFL. So the things we have talked about today that David has talked about—both the UFC and its year-round programming combined with the increased movie slate, which then pays dividends as it goes to Paramount Plus year-round—I think that is going to have a significant impact to churn in addition to the other factors that David just talked about.
Dennis Giannelli: And, Brian, just jumping in. One thing to correct. The stat is 7,000,000 households that engaged in UFC 324.
Kevin Creighton: Great. Thank you, team, and thank you all for joining the call today. We appreciate it. Feel free to reach out if you have any questions.
Operator: Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
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