Fox Corporation (FOXA) Q2 2026 earnings review
Ad Revenue Defies Gravity, But Sports Costs Sack Profits
Fox Corporation delivered a mixed Q2. The top line showed resilience: Total Revenue grew 2% to $5.18B, and Advertising revenue managed to grow 1% despite lapping a heavy political advertising quarter from the prior year—a significant feat driven by Tubi and sports pricing. However, the cost of generating that revenue spiked. Adjusted EBITDA fell 11% to $692M, and Net Income dropped 36% as higher sports programming amortization (NFL, MLB) and digital marketing costs weighed heavily on margins. While the buyback machine is running hot ($1.55B repurchased in Q2), the deteriorating cash flow profile and margin compression in the Television segment raise immediate concerns.
🐂 Bull Case
Advertising revenue grew 1% YoY despite a massive headwind from lower political ad spend compared to the prior year. Growth was driven by Tubi, higher sports pricing, and news, proving the core ad engine can grow even when cyclical political dollars fade.
Management is aggressively buying the dip. Fox repurchased ~$1.55 billion in Class A and B stock in Q2 alone, depleting a significant portion of its authorization (now $3.6B remaining). This offers strong downside protection for shares.
🐻 Bear Case
The Television segment is bleeding efficiency. While revenue was effectively flat (-1%), Segment EBITDA collapsed 30% ($143M vs $205M). Higher sports rights amortization and production costs are severely impacting operating leverage.
Operating Cash Flow for the six months ended Dec 31 swung to a usage of $799M, compared to a usage of $204M in the prior year. This $595M deterioration suggests working capital and sports payments are draining liquidity faster than income is being generated.
⚖️ Verdict: ⚪
Neutral. The revenue story is surprisingly durable given the political comps, and Tubi is clearly gaining traction. However, the double-digit decline in EBITDA and the sharp contraction in Television margins indicate that the cost of content is currently outpacing its monetization. Aggressive buybacks support the stock, but operational efficiency needs to stabilize.
Key Themes
Television Segment Profitability Reverses
Reversing. The Television segment, usually a growth engine, hit a wall. Revenue dipped 1% to $2.94B, but EBITDA plunged 30% to $143M. This 680-basis point margin compression (to 4.9% from 6.9%) was driven by rising sports rights amortization and digital content costs. This breaks the trend of EBITDA growth seen in FY25.
Cable Network Strength
Stable/Accelerating. Unlike the Television segment, Cable Network Programming remains a fortress. Revenue rose 5% to $2.28B and EBITDA rose 5% to $687M. Distribution revenues increased 5% as contractual price hikes successfully offset net subscriber declines. This segment remains the cash cow stabilizing the broader volatility.
Tubi & Digital Growth
Accelerating. Management explicitly cited 'continued digital growth led by the Tubi AVOD service' as a primary driver for overcoming the political ad revenue deficit. Tubi is validating the strategy of shifting ad inventory from linear to digital, though it is currently contributing to higher expense lines.
Cash Burn Acceleration
Reversing. The cash flow profile has deteriorated significantly. For the six months ended Dec 31, Net Cash Used in Operating Activities was $799M, nearly 4x the $204M burn in the prior year period. The balance sheet cash position has dropped from $5.35B in June to $2.02B in December (partially due to buybacks, but largely operations/working capital).
Share Repurchases
Accelerating. Fox is aggressively returning capital. In Q2 alone, they repurchased $750M of Class A and $800M of Class B stock. Year-to-date (6 months), they have deployed $1.8B into buybacks compared to just $500M in the prior year period. This suggests management views the stock as undervalued despite the earnings dip.
Other KPIs
Decelerating. Revenue growth slowed to +2% YoY, down from +5% in Q1 and +20% in the prior year period (which benefited from peak political spend). However, growth is still positive, driven by Cable Network distribution fees (+5%).
Decelerating. Down significantly (-39%) from $373M in the prior year. The decline is steeper than the EBITDA decline, exacerbated by a higher effective tax rate and 'Other, net' non-operating expenses.
Reversing. After growing 2% in Q1, EBITDA turned negative YoY (-11%). The drop was driven entirely by the Television segment and Corporate expenses, while Cable held up well.
Guidance
Stable. The company continues to execute on its buyback program aggressively, with significant capacity remaining despite the $1.55B spend this quarter.
Stable. Payable March 2026. Consistent with previous payout levels, offering a steady yield component.
Key Questions
Sports Rights Cost Trajectory
Sports programming amortization spiked this quarter, crushing Television margins. Is this a new baseline for expenses given the current rights cycle, or was Q2 an anomaly due to specific MLB/NFL timing?
Operating Cash Flow Burn
YTD Operating Cash Flow usage quadrupled to nearly $800M. While Q2 is seasonally weak for cash, the YoY deterioration is stark. What specific working capital shifts or payment timings caused this, and when does it reverse?
Tubi Profitability Inflection
Tubi is driving top-line growth but contributing to 'higher digital content costs' and marketing spend. When do these investments cross the inflection point to become accretive to EBITDA?