Comcast Corps.’s second quarter revenue managed to top Wall Street expectations, yet a lack of growth from broadband customers and Peacock subscribers pushed the company’s stock down in pre-market trading.
The cable giant reported second-quarter revenue of $30 billion and an adjusted earnings per share of $1.01, a rise of 20.2% year over year as a result of a record quarter for the conglomerate in cable and a big quarter from its theme parks. However, NBCUniversal streaming service Peacock saw its paid subscribers stay relatively flat at just 13 million and operated at a loss of $467 million.
These numbers are in the ballpark of analyst expectations via Yahoo Finance, which projected an average estimate of $29.7 billion in revenue and 92 cents EPS. However, Comcast shares slumped nearly 6% to $41.01 in pre-market trading, well below its 52-week high of $61.80. That stock market dip may partially be due to the fact that Comcast failed to add quarterly broadband customers for the first time ever.
“Consumer behavior has begun to return to pre-pandemic patterns,” Comcast Chief Executive Brian Roberts said on the company’s earnings call as to why growth has stalled in certain sectors.
Specifically in the media division and NBCUniversal, revenue rose 18.7% year over year and hit $9.4 billion for the second quarter year over year. Adjusted EBITDA climbed 19.5% to $1.9 billion.
The film division also had a strong start to the summer, with studios revenue increasing 33.3% to $3 billion year over year. “Jurassic World Dominion” was the big winner for the quarter, which has made $920 million worldwide thus far, as well as solid performance from Q2 films like “The Bad Guys” and “The Black Phone.”
That doesn’t even include the $640 million grossed worldwide for “Minions: The Rise of Gru,” which opened this month and will be lumped into the third quarter earnings, or the grosses for Jordan Peele’s new film “Nope,” which opened last week. On the horizon, Universal also has “Halloween Ends” in October, Steven Spielberg’s “The Fabelmans” in November, and “Puss in Boots: The Last Wish” arriving in December.
Peacock in Q1 reported a loss of $456 million, but still was able to add four million new paid subscribers to bring the streamer’s total to 13 million while overall active users hit 28 million. Those subscriber numbers didn’t budge in Q2, and it operated at a $467 million loss and monthly active users dipped to 27 million.
Notably, the company revealed that it will no longer report earnings for Xumo, the over-the-top internet TV service Comcast owns, within the cable segment. Outside observers have long seen an overlap between Xumo and Peacock’s basic tier, which utilize many of the same free ad-supported streaming TV service elements.
On the earnings call, Comcast executives credited earlier premium video on demand (PVOD) and streaming access to Universal films as a consistent driver of audience attention. They also teased the importance of NBCU reclaiming the rights to its Hulu assets this fall for Peacock. However, the company expects Peacock’s EBITDA losses to be higher in the second half, particularly in the fourth quarter, and amount to approximately $2.5 billion for the year.
“We think we picked the right business strategy,” NBCU CEO Jeff Shell said of Peacock’s dual-revenue ad-supported structure. “Everyone moving in that direction is a validation of that decision.” Shell also added that Peacock is uniquely positioned to serve ads for the upcoming midterm elections.
Comcast leadership is hoping the arrival of some its recent theatrical hits will help attract new subs once they arrive on the service. But the big Peacock draw on the horizon is the return of the NFL’s “Sunday Night Football,” which is simulcast between NBC and the streamer, as well as The World Cup, which begins November 21. Live sports remain a high-demand audience attraction for both linear television and streaming.
The theme parks division reported its highest adjusted earnings on record for a second quarter, in part because of COVID closures still affecting several parks this time last year. Specifically, theme parks revenue increased 64.8% to $1.8 billion in the second quarter of 2022, and adjusted earnings increased $411 million to $632 million, a record level for any second quarter. The Universal Beijing Resort has been closed for the majority of Q2 following renewed COVID-19 breakouts in the city, yet Comcast executives expressed confidence in parks moving forward and an expectation of attendance growth despite a looming recession.
Still, the increased competition for high-speed broadband internet — which includes T-Mobile and Verizon — is stifling the growth of Comcast’s primary product, which has added more than 3 million customers since March 2020 and 800,000 in the last 12 months. Subscriber additions have declined from the prior year in three consecutive quarters. Roberts pointed to increased activity in the market, reversal of pandemic trends and growing competition as to why growth has stalled, but remained positive overall. Overall, Comcast’s broadband customer base stands at 32 million.
“We achieved our highest adjusted EBITDA margin on record even amid a unique and evolving macroeconomic environment that is temporarily putting pressure on the volume of our new customer connects,” said Roberts in a statement.
Ad sales dipped 1.3% year-over-year when NBC held the rights to broadcast National Hockey League games. Last year, the NHL moved its broadcast deals to Disney (ESPN, ABC) and Turner Sports (TBS, TNT). Typically, ad sales across media decline in recessions and the looming threat of an economic downturn has all of Hollywood on edge.
Overall, Comcast generated $3.2 billion in free cash flow this quarter. Cable Communications contributed the most quarterly revenue of any Comcast division with $16.6 billion, up 3.7% year-over-year. Media generated the second-most quarterly revenue with $5.3 billion, followed by Sky ($4.5 billion), Studios ($3 billion), and Theme Parks ($1.8 billion).
“I think we are in a fabulous place,” Roberts said. “We have unprecedented cash flow and scale.”