Paramount Global (PARA) stock sank more 8% in afternoon trading on Tuesday after CEO Bob Bakish warned a weakening advertising market will likely impact fourth quarter earnings.
"We do now see the fourth quarter coming in a bit below the third quarter," Bakish said at a UBS conference in New York City, revising previous guidance that the fourth quarter would be in line with Q3 results.
"As we have navigated leading into this point, we had looked for some improvement in certain sectors. We haven't seen that," Bakish said. The executive added the ad slowdown has hurt its free ad-supported video streaming service, Pluto TV, while foreign exchange challenges have also pressured the company's bottom line.
Paramount reported weak third-quarter earnings last month that missed on both the top and bottom lines. Advertising revenue declined 2% in the quarter, while profits suffered as a result of greater investments in content, marketing, and international expansion.
Still, Bakish struck an optimistic tone when it comes to the future: "While challenging, advertising is cyclical. I've managed through a number of these cycles as recently as through the beginning of the decade. This too is a cycle. This too will turn."
Despite macroeconomic concerns, Bakish doubled down on the future of Paramount+, revealing the company plans to spend $6 billion on streaming content in 2024 after spending $2 billion in 2021.
"We love the performance of our content engine, and we're very comfortable with our investment plan. We see it paying dividends in the performance of our platforms," Bakish said.
"It really all starts and, I could argue, ends with content," Bakish said during Tuesday's conference, teasing that Paramount will announce more franchise-focused offerings in 2023.
'Building a real business'
Paramount+ boasts 46 million paying users after the Q3 net addition of 4.6 million. Some 1.9 million subscribers were removed following the launch of SkyShowtime, which replaced the streaming service in the Nordics.
Overall, the company has nabbed nearly 67 million subscribers across its direct-to-consumer services with Pluto TV reporting 72 million monthly active users.
Bakish, who previously told Yahoo Finance streaming prices will go up, confirmed future price increases during the company's Q3 earnings call, although no timeline was offered.
Still, Wall Street remains stuck on long-term concerns over streaming losses, which are expected to reach $1.8 billion in 2022 and rise further in 2023. Paramount shares are down roughly 44% since the start of the year.
"We've always built this with an eye of building a real business and profitability in mind — we look to continue to make headway on that in 2023," Bakish said on Tuesday. Bakish revealed streaming losses are still on track to peak by next year, noting subscriber churn remains low amid high growth prospects.
"We knew from Day One that we needed to turn this into a business, and we've focused on creating a business with TV media-like margins. We believe that our multi-platform asset portfolio is a real advantage here," Bakish said.
"We've only had Paramount+ running for 18 months, unlike some people who have run it for over a decade. It takes a little while, but we are very focused on streaming profitability and building a financially compelling business here. We are very much tracking in that direction."
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at email@example.com