News Corporation (NWSA) Q3 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary reveals strong financial performance, with revenue and EBITDA growth across key segments, margin expansion, and robust digital sales. The Q&A section highlights positive developments in AI partnerships and potential growth in risk and compliance. Despite some lack of detail, the overall sentiment is positive, driven by strong metrics and optimistic guidance. The absence of negative factors like declining margins or new offerings supports a favorable outlook, indicating a likely stock price increase of 2% to 8%.

Key Financial Performance

Total Revenue $2.2 billion, up 9% year-over-year. The increase reflects positive trends from the first half and strong performance in key sectors like Dow Jones, Digital Real Estate Services, and Book Publishing.

Total Segment EBITDA $343 million, up 18% year-over-year. Margin expanded from 14.4% to 15.7%. Growth driven by operational efficiency and strong performance in core pillars.

Net Income from Continuing Operations Increased 13% year-over-year. Reflects ongoing transformation and profitability growth.

Dow Jones Revenue $619 million, up 8% year-over-year. Growth driven by Risk and Compliance (up 19%) and Energy business (up 12%). Margin expanded by 70 basis points to 23.7%.

Digital Real Estate Services EBITDA $155 million, up 25% year-over-year. Margin widened from 30.5% to 32.8%. Growth driven by pricing, contract upgrades, and geographic mix.

Realtor.com Revenue $148 million, up 10% year-over-year. Growth driven by higher lead volume, improved yields, and increased annual contract values.

REA Revenue Grew 20%, supported by favorable currency fluctuations and a 14% increase in yield.

Book Publishing Revenue $555 million, up 8% year-over-year. EBITDA rose 14%, with margins expanding from 12.5% to 13.2%. Growth driven by higher digital sales (e-books up 17%, audiobooks up 7%).

News Media Revenue $538 million, up 5% year-over-year. Profit declined due to investments in new projects like the California Post.

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Operating Highlights

AI Partnerships: News Corp has partnered with Meta and OpenAI, and is negotiating further deals with other companies to leverage its content for AI applications. This includes a $1.5 billion settlement with Anthropic, expected to positively impact revenue and profitability.

Digital Real Estate Services: Realtor.com partnered with OpenAI to enhance user experience for sellers, buyers, and realtors. The platform has shown strong engagement metrics compared to competitors.

Book Publishing: HarperCollins reported strong demand for digital sales, with e-books up 17% and audiobooks up 7%. New releases and adaptations, such as the Game Changer series, are driving growth.

California Post Launch: News Corp launched the California Post, which has shown promising early engagement and attracted attention from readers and advertisers.

Dow Jones Expansion: Dow Jones reported an 8% revenue increase, driven by growth in Risk and Compliance (19%) and energy business (12%). The company aims to reach $1 billion in annual segment EBITDA within five years.

Digital Real Estate Growth: REA revenues grew 20%, supported by pricing and geographic mix. Realtor.com revenues rose 10%, with strong demand for premium programs and growth adjacencies like rentals and new homes.

Operational Efficiency: News Corp achieved a 130 basis point margin expansion to 15.7%, driven by disciplined strategic diversification and operational efficiency.

Share Buyback Program: The company repurchased $193 million in shares during Q3, bringing fiscal year-to-date repurchases to $459 million, supported by strong free cash flow.

AI Strategy: News Corp is positioning itself as an AI inputs company, leveraging its extensive content archives and contemporary data for AI applications.

Content Protection: The company is actively pursuing legal action against firms scraping and reselling its content without authorization.

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Risk or Challenges

Interest Rates and Economic Uncertainty: High interest rates and economic uncertainty, exacerbated by the Middle East conflict, could impact market conditions and consumer behavior, potentially affecting revenue and profitability.

AI Content Scraping: Illicit scraping and resale of proprietary content by digital firms pose risks to intellectual property and revenue streams. The company plans to address this issue through legal and strategic measures.

Housing Market Challenges: The U.S. housing market faces challenges due to high mortgage rates and historically low existing home sales, which could impact the performance of realtor.com and related businesses.

Print Revenue Decline: Continued declines in print revenue, particularly in the News Media segment, could affect overall profitability despite digital growth.

Supply Chain and Cyclical Issues: Potential supply chain disruptions and cyclical economic issues could impact operations and financial performance, particularly in the Book Publishing and News Media segments.

Incremental Costs for New Projects: Investment in new projects, such as the California Post, has led to increased costs, which may weigh on short-term profitability.

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Guidance & Outlook

Dow Jones Revenue and EBITDA Growth: Dow Jones is expected to reach $1 billion in annual segment EBITDA within the next 5 years, driven by growth in Risk and Compliance and Dow Jones Energy. Revenue performance and margins are expected to remain strong.

Digital Real Estate Services Outlook: Realtor.com revenues rose 10% and is expected to benefit from market recovery when mortgage rates decline. Australian residential new buy listings for April rose 19%, and REA expects lower operating cost growth.

Book Publishing Segment: HarperCollins trends remain favorable, with expectations of benefiting from a stronger frontlist program and continued growth in digital sales (e-books and audiobooks).

News Media Segment: Incremental costs are expected due to the rollout of the California Post, but new content licensing revenues should provide benefits.

AI and Content Licensing: News Corp expects to benefit from partnerships with AI companies like Meta and OpenAI, as well as proceeds from a $1.5 billion settlement with Anthropic starting later this calendar year.

Free Cash Flow and Capital Expenditures: Strong free cash flow growth is expected for the fiscal year despite moderately higher capital expenditures.

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Shareholder Return Plan

Enhanced Buyback Program: The company has continued to execute its enhanced buyback program at an accelerated rate due to the belief that the current share price does not reflect the intrinsic value of the company or its prospects.

Share Repurchases in Q3: In the third quarter, the company repurchased $193 million in shares, up from $172 million in the second quarter, bringing fiscal year-to-date repurchases to $459 million.

Funding for Share Repurchases: Share repurchases in fiscal 2026 are benefiting from the approximately $380 million repayment of Foxtel shareholder loans and robust free cash flow.

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Key Q&A

Q:How is Dow Jones Energy balancing investment in new energy benchmarks versus return profile, and can you quantify the required investments?

A:Robert Thomson explained that they carefully balance investment and returns. The Professional Information business accounted for about 40% of revenues in Q3 and a larger percentage of EBITDA due to its high margins. Dow Jones Energy saw a 12% revenue increase, but specific investment figures were not provided.

Q:How is Realtor performing amid high mortgage rates, and what is the potential uplift from a better macro environment?

A:Robert Thomson highlighted that Realtor's core real estate revenues rose by 15%, representing 77% of total revenues. The team has targeted higher premium homes and expanded into adjacencies like seller, new homes, and rentals. Lavanya Chandrashekar added that revenue per existing home sales is 20% higher than in 2022, positioning Realtor to benefit from a market recovery.

Q:Are there areas in risk and compliance and energy offerings where clients are asking for more products, and are there opportunities for organic or inorganic growth?

A:Robert Thomson mentioned product extensions are possible, and the team is vigilant in leveraging opportunities. Lavanya Chandrashekar noted the risk and compliance market is $3.7 billion, growing at 11%-13%. Recent acquisitions like Dragonfly and Oxford Analytica have been impactful, and there is room for growth internationally and with financial institutions.

Q:What is the potential revenue from AI partnerships, and how do they compare to existing contracts with Meta and OpenAI?

A:Robert Thomson stated they cannot disclose specific details but emphasized the importance of partnerships with Meta and OpenAI. They are in advanced negotiations with other companies and expect substantial deals with horizontal AI companies and meaningful agreements with verticals. The financial impact will be visible in future accounts.

Q:What are the internal benefits and cost savings from using AI, and can they be quantified?

A:Lavanya Chandrashekar outlined benefits in product improvement, efficiency, and new revenue streams. AI is used for coding, product development, translation, audiobook creation, and conversational search. While specific cost savings were not quantified, AI is helping to drive efficiency and effectiveness across operations.

Q:What drove the reduction in losses in the 'Other' division, and is it sustainable?

A:Lavanya Chandrashekar explained that reduced expenses, particularly in stock compensation calculations, drove the reduction. For the full year, the 'Other' segment is expected to be similar to or slightly lower than the prior year.

Q:What is the earnings profile for the News Media segment, including the impact of the California Post and News U.K.?

A:Robert Thomson noted a 5% revenue increase in the News Media segment, but EBITDA declined due to tougher trading conditions and California Post launch costs. Lavanya Chandrashekar highlighted cost efficiencies in News U.K. and Australia, with further benefits expected from content licensing revenues and disciplined investment in the California Post.

Q:Review of Unclear Management Responses

A:Management avoided providing specific investment figures for Dow Jones Energy and did not disclose precise revenue details from AI partnerships with Meta and OpenAI, citing confidentiality.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

NWSA Transcript

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The earnings call summary shows strong digital growth across segments, increased EBITDA, and profitability improvements, despite some advertising revenue declines. Management's optimism in the Q&A regarding digital subscription growth and HarperCollins' performance further supports a positive outlook. However, lack of clarity on AI revenue and advertising softness slightly temper enthusiasm. Overall, the positive trajectory in digital offerings and operational efficiency suggests a positive stock price movement over the next two weeks.

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NWSA Report

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