Comcast surpassed first-quarter earnings projections, driven by robust broadband revenue, despite a slowdown in customer growth plaguing the industry. In a comparison with analysts' estimates surveyed by LSEG, the numbers revealed a mixed bag:
Net income inched up by 0.6% to $3.86 billion, or 97 cents per share, from $3.83 billion, or 91 cents per share, a year earlier. Adjusted EBITDA dipped slightly by 0.6% to approximately $9.4 billion. However, revenue witnessed a modest uptick of 1.2% to $30.06 billion compared to the previous year's same period.
The surge in revenue was fueled by the domestic broadband segment, buoyed by rate hikes, despite shedding 65,000 customers during the quarter. Nevertheless, Comcast's stock experienced a 6% downturn on Thursday, reflective of broader trends in the cable broadband industry.
Factors contributing to the sluggish growth include a decline in new home internet connections, attributed to a slowdown in real estate transactions due to higher interest rates. Moreover, cable providers face intensified competition from wireless giants like T-Mobile and Verizon in the home broadband arena.
Mike Cavanagh, Comcast's president, highlighted the "extremely competitive" landscape, particularly for price-sensitive consumers. In response, the company announced the launch of NOW, a low-cost prepaid internet and phone plan, aiming to cater to budget-conscious customers. This initiative complements Comcast's existing Internet Essentials program for low-income households.
However, executives anticipate continued challenges, especially with the anticipated conclusion of the federal government's Affordable Connectivity Program in April. This program offers a $30 discount on broadband services to eligible low-income households.
On the wireless front, Comcast witnessed a notable 21% surge in customers during the quarter, totaling 6.9 million lines. Conversely, the company lost 487,000 cable TV customers as cord-cutting trends persist in favor of streaming services.
Additionally, Comcast's theme parks segment faced headwinds, with adjusted EBITDA declining by 3.9% to $632 million. Higher operating expenses, including increased marketing and promotional costs, coupled with adverse foreign currency effects, contributed to this downturn.
Thursday's disclosures shed light on various aspects of Comcast's performance, unveiling both challenges and triumphs across its diverse portfolio:
Mike Cavanagh highlighted Orlando theme park attendance, acknowledging the transient pressure between attraction launches. Despite short-term fluctuations, the company remains bullish on long-term park growth prospects. However, increased competition, particularly from cruises, posed additional hurdles, as noted by Comcast CFO Jason Armstrong.
Earnings in the media sector, encompassing NBCUniversal and studios, experienced a downturn, albeit amid bright spots. Consolidating under a unified segment, these businesses collectively saw a 1.1% revenue uptick to $10.37 billion. Universal Pictures' robust film slate, featuring acclaimed titles like "Oppenheimer" and "The Holdovers," alongside the highly anticipated "Wicked" adaptation, garnered praise.
Peacock emerged as a pivotal asset, bolstered by exclusive offerings such as "Oppenheimer," which became the most-watched movie in Peacock's history upon its streaming debut. The platform added three million paid subscribers, reaching a total of 34 million. Notably, the exclusive National Football League Wild Card game on Peacock surpassed expectations, driving subscriber acquisition and retention.
Cavanagh emphasized Peacock's evolving content strategy, highlighting the blend of sports and entertainment. Despite its reputation for live sports coverage, subscribers predominantly engage with nonsports programming like the original series "Ted" and Universal film collection. Peacock's revenue surged by 54% to $1.1 billion, buoyed by domestic distribution growth and a robust content library.
While domestic advertising stagnated, the uptick in domestic distribution revenue, fueled by Peacock's expansion, offset the industry-wide advertising softness. Media companies continue to navigate prolonged challenges in the advertising market, prompting a strategic shift towards diversified revenue streams.
The Peacock segment faced setbacks, contributing to the overall segment's losses despite revenue growth. Comcast reported an adjusted EBITDA loss of $639 million attributable to Peacock during the quarter. However, this marked an improvement from the $704 million loss recorded in the corresponding period last year. Executives anticipate a narrowing of Peacock losses in the coming quarters, following a peak in 2023.
The upcoming Olympics in Paris present an opportunity for Peacock's growth trajectory. With extended coverage across both its broadcast network NBC and Peacock, Comcast anticipates record-breaking advertising revenue for the Olympics. This strategic alignment underscores the company's commitment to leveraging synergies across its platforms to drive performance.
Disclosure: Comcast serves as the parent company of NBCUniversal and CNBC, entities integral to its media and broadcasting operations.
In conclusion, Comcast's recent disclosures reveal a mixed performance across its various segments. While challenges persist, particularly evident in Peacock's losses, there are signs of improvement and strategic foresight. The company's resilience amidst evolving market dynamics underscores its commitment to navigating uncertainties while capitalizing on growth opportunities. With the forthcoming Olympics expected to bolster Peacock's trajectory and drive advertising revenue to unprecedented heights, Comcast remains poised to weather challenges and pursue its strategic objectives in the media landscape.
