Skydance Shares Drop After Q3 Results as $87 Billion Debt Burden Rattles Investors

Skydance Corporation shares declined sharply on Tuesday, dropping between 8.2% and 9.5% to trade around the $7.87 to $7.99 range. The retreat erased an 8.6% gain from the previous session following its quarterly financial release. The stock, which traded as low as $7.75 during Tuesday's session, is now down 35% in 2026. Trading activity was roughly 60% below typical levels, with volume reaching between 5.8 million and 7.8 million shares compared to an average volume near 14.6 million.

For the third quarter ended September 30, Skydance delivered adjusted earnings of $0.45 per share, surpassing consensus expectations, which ranged from 13 cents according to FactSet to $0.18 according to MarketBeat. Revenue rose 5% from a year earlier to $7.03 billion, narrowly trailing expectations that sat between $7.04 billion and $7.07 billion. Net income reached $73 million, while adjusted EBITDA came in at $1 billion. Because the Warner Bros. merger closed after the quarter ended on October 6, Warner's financial metrics were not included in the results.

Investor sentiment soured over the company's financial obligations following the Warner acquisition. Skydance carries $87 billion in gross debt set against only $10 billion in cash reserves. The entertainment firm expects to burn cash in 2026 before pivoting to generate $10 billion in positive cash flow by 2030. To address costs, leadership plans to extract over $6 billion in annual savings across three years by streamlining operations and technology while decreasing management layers. Meanwhile, the company intends to maintain more than $30 billion in yearly content investments. A sluggish Warner film slate could also trim fourth-quarter profits by up to $200 million.

In streaming, Paramount+ revenue advanced 21% in the quarter. Chief Executive David Ellison outlined plans to bundle Paramount+ with HBO Max in early 2027, targeting a full platform convergence in approximately one year. Film production operations, including Warner Bros., Paramount, New Line, and Skydance, will now function under a unified leadership setup. Additionally, Skydance appointed former Marvel Studios executive Jeremy Latcham as chief of DC Studios starting December 1, replacing departing executives James Gunn and Peter Safran.

Brokerages provided mixed reactions to the company's outlook. Wells Fargo raised its price target from $7 to $8 while maintaining an underweight stance. Citizens JMP trimmed its target from $14 to $13 while maintaining an outperform rating. Bank of America analyst Jessica Reif Ehrlich reiterated an underperform rating with a $9 target, noting that the integration would require significant time. According to MarketBeat, Skydance holds an overall consensus rating of Hold, with average price targets reported between $6.42 and $6.72.