Comcast beat first-quarter earnings expectations on Thursday as broadband boosted revenue even as the company and its competitors saw sluggish customer growth.
Here are Comcast’s results compared to estimates from analysts surveyed by LSEG:
- Earnings per share: Adjusted $1.04 vs. expected 99 cents
- Income: $30.06 billion against the expected $29.81 billion
For the quarter ended March 31, net income rose 0.6% to $3.86 billion, or 97 cents per share, compared with $3.83 billion, or 91 cents per share, a year earlier. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 0.6% to about $9.4 billion.
The company’s revenue increased 1.2% to $30.06 billion compared to the same period last year. Revenues from the domestic broadband customer segment added to that growth as rates rose, even though Comcast lost 65,000 customers in the quarter.
Comcast shares were down about 6% on Thursday.
The fight for broadband internet
The number of novel customers from broadband Internet service providers has fallen in recent quarters, which has weighed on share prices.
The slowdown in home buying and selling due to high interest rates has led to a decline in novel home internet connections. Cable providers have also felt increased competition for home broadband from wireless companies such as TMobile AND Verizon.
Mike Cavanagh, Comcast’s CEO, said on Thursday’s earnings call that the market is “extremely competitive,” especially for “cost-conscious customers.”
Earlier this month, Comcast announced it would launch NOW, a prepaid and monthly program of low-cost internet and phone plans. The plan aims to provide fixed wireless options at low costs.
The plan complements Comcast’s long-term internet option for low-income customers, called Internet Essentials.
Company executives don’t expect any improvement in the near future, especially with the expected end in April of the government’s Affordable Connectivity Program (ACP), which offers a $30 discount on broadband service to qualifying low-income households.
Comcast’s wireless division saw a 21% boost in customers this quarter, to a total of 6.9 million lines. The company lost 487,000 cable customers during the quarter as consumers continued to abandon cable in favor of streaming.
Warm movies, chilly theme parks
A billboard promoting the film “Oppenheimer” in Times Square in Fresh York City, July 29, 2023.
Adam Jeffery | CNBC
The company’s theme park adjusted EBITDA declined 3.9% to $632 million in the quarter due to increases in operating expenses, such as higher marketing and promotional costs, as well as the negative impact of foreign currency.
On Thursday, Cavanagh noted that Orlando theme park attendance was “feeling some pressure” in the last quarter as the company is in the process of rolling out novel attractions. He added that the company is confident in the long-term growth and future opportunities for its parks.
Increased competition, especially from cruise lines, has also taken a toll on theme parks, Comcast Chief Financial Officer Jason Armstrong said in an interview Thursday.
Profits for its media operations, which include NBCUniversal, and studios have similarly fallen. All three companies now fall under the same segment, which saw combined revenue growth of 1.1% to $10.37 billion.
Still, Comcast executives praised the strength of Universal Pictures’ output, from recent Oscar winners “Oppenheimer” and “The Holdovers” to upcoming, highly anticipated films such as the adaptation of the Broadway hit “Wicked.”
Peacock, which executives also highlighted as a brilliant spot and boost for NBCUniversal, also benefits from its film lineup.
Being the exclusive home of “Oppenheimer” when it first premiered on the streaming service earlier this year turned out to be a victory for the platform. Comcast said it was the most-watched video in Peacock history.
The service added three million paid subscribers during the quarter, bringing its total customer count to 34 million. The exclusive National Football League Wild Card game on Peacock helped attract and then retain more customers than expected, executives said in an interview Thursday.
“It’s been 3.5 years and we’re at a place where we’re really seeing the power of our approach,” Cavanagh said Thursday, pointing to the power of combining sports and entertainment.
While Peacock is known for its wide range of live sports coverage, including the NFL and Premier League, Cavanagh said subscribers spend 90% of their time on non-sports programming, such as the Peacock original “Ted” and the Universal movie collection. He added that the company expects Peacock to gain “real pricing power” over time.
The streamer’s revenue increased 54% to $1.1 billion compared to the same period last year. While domestic advertising was flat in the quarter, the company saw growth in domestic distribution revenue, driven by growth at Peacock. Media companies are struggling with a longer-than-expected cushioned advertising market.
Peacock’s losses weighed on the segment and offset higher revenues. During the quarter, the company reported an adjusted EBITDA loss of $639 million related to Peacock. However, this result improved compared to the adjusted EBITDA loss of $704 million in the same period last year.
Peacock’s losses are said to peak in 2023, and executives expect them to narrow in the coming quarters. The Paris Summer Olympics should also spur growth in the streaming service.
With more hours of the Olympics on its NBC broadcast network in addition to Peacock, the company is on track to generate its largest-ever Olympics advertising revenue.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
