Starz (STRZ) Q3 2026 earnings review
Starz streaming sales grow again, but net debt climbs
Starz, the adult-focused streaming and cable network, returned to revenue growth while higher show spending cut profit from last quarter. Streaming sales rose 2% from a year ago and operating profit excluding one-offs more than doubled on lower content write-downs. Chief executive Jeffrey Hirsch kept all 2026 and 2027 targets unchanged, which by our math requires streaming growth to reach 5% in the fourth quarter.
| Streaming (OTT) revenue | $226.6M +1.7% from a year ago |
|---|---|
| Adjusted OIBDA (operating profit excluding one-offs) | $44.2M $21.8M a year ago |
| Net corporate debt | $600.7M $565.5M last quarter |
| Full-year 2026 outlook | Unchanged $100–120M unlevered free cash flow |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because the return to streaming growth and positive cash flow balanced a step-down in quarterly profit and higher debt. The good news is that nine-month unlevered free cash flow reached $85 million, putting the full-year cash plan within reach. One caution: the company borrowed another $62 million on its term loan, lifting net debt to $601 million.
The question now is whether Starz can hold a 20% operating margin while airing a full schedule of new shows. Either owned originals keep content costs near the second quarter's low level, or show amortization stays above 43% of sales and caps profit. Content amortization in the first half of 2027 will decide it.
🐂 Bull Case
Streaming Revenue Returned to Growth
"Our portfolio approach to programming is driving a more durable revenue base, and we are just beginning to unlock the financial upside of increased ownership," chief executive Jeffrey Hirsch said. Over-the-top (OTT) revenue, which comes from digital streaming subscriptions, is the company's main growth engine. After shrinking in the first quarter and sitting nearly flat in the second, streaming sales grew from both last quarter and a year ago.
- Streaming (OTT) revenue: $226.6 million, up 1.7% from a year ago and up 2.4% from last quarter
- Traditional television (linear) and other revenue: $95.8 million, down 2.3% from a year ago but up 10.6% from last quarter
- Total revenue: $322.4 million, up 0.5% from a year ago and up 4.7% from last quarter
This upturn matters because Starz stopped reporting subscriber numbers this year and raised its monthly app price in April. Growing streaming revenue alongside a bounce in traditional television and licensing sales allowed total revenue to grow from a year ago for the first time since the separation from Lionsgate. However, nine-month streaming revenue is still down 1.6% from last year, so the fourth quarter must do the heavy lifting.
What to watch: fourth-quarter streaming revenue. By our math, Starz needs at least $220.7 million in fourth-quarter streaming sales, or 5.0% growth from a year ago, to hit its full-year growth target.
Lower Content Costs Doubled Operating Profit
Starz tracks its profit using Adjusted OIBDA, which is operating income before depreciation, amortization, stock-based pay, and restructuring charges. Over the past year, the entertainment network cancelled expensive output deals and wrote off older shows to lower its ongoing cost structure. That cleanup paid off compared with last year, as operating profit excluding one-offs more than doubled to $44.2 million from $21.8 million a year ago.
Two expense lines drove the 6.9 percentage point jump in the Adjusted OIBDA margin. Programming amortization, the non-cash cost of spreading show budgets over their viewing life, fell by 5.0 percentage points of revenue to 43.9%. Advertising and marketing costs also dropped by 1.4 percentage points of revenue to 23.0%, which easily covered a 0.7 percentage point rise in general and administrative overhead.
What to watch: fourth-quarter programming amortization as a share of revenue. Holding that cost near 44% of sales would allow Starz to reach the $52.1 million of fourth-quarter profit implied by the full-year outlook.
Nine-Month Cash Flow Supports the Full-Year Target
Following its split from Lionsgate, Starz promised to align cash payments for new shows with its broadcast schedule and generate $100 million to $120 million in unlevered free cash flow (operating cash flow minus capital spending, before interest and tax payments) in 2026. In the third quarter, the broadcaster generated $18.8 million in unlevered free cash flow, a sharp reversal from the $21.6 million cash burn a year ago.
Cash paid for programming content totaled $174.4 million in the quarter, including $4.2 million for content restructuring, down from $181.6 million in the second quarter. Across the first nine months of 2026, unlevered free cash flow reached $84.8 million, and equity free cash flow (after interest and taxes) was $13.1 million for the quarter. Because nine-month cash generation is already near the $100 million floor, the full-year plan looks achievable.
What to watch: fourth-quarter cash paid for programming content. Keeping nine-month content spending ($469.4 million so far) under the $650 million full-year cap will determine whether unlevered free cash flow reaches the $110 million middle of the range.
Positives this quarter didn't test
Several core drivers from earlier quarters received no new figures in the third-quarter release.
- Owned original series economics: Fightland premiered in July with Sky as a co-commission partner, but the release gave no viewership or international licensing revenue figures; commentary on the conference call will provide the first read.
- Pricing power and subscriber retention: the April price increase to $11.99 lifted streaming revenue, but without subscriber counts or churn numbers, investors must wait for call remarks on customer retention.
🐻 Bear Case
Higher Content Spending Cut Profit From Last Quarter
Hirsch highlighted that third-quarter Adjusted OIBDA more than doubled from a year ago and reaffirmed the target of a 20% Adjusted OIBDA margin by the second half of 2027. Last quarter, Starz nearly reached that goal early when its margin hit 19.5% on unusually low content amortization. In the third quarter, however, profit fell 26.2% from the second quarter, and the margin dropped 5.7 percentage points to 13.7%.
The drop happened because programming amortization jumped from $114.1 million in the second quarter to $141.5 million in the third, taking 6.8 percentage points more of revenue. Advertising and marketing expenses also rose from $70.3 million to $74.2 million as the network promoted its summer slate. This swing shows that the second-quarter margin near 20% came from a lighter release schedule rather than a permanent cost reset.
What to watch: Adjusted OIBDA margin in the first half of 2027 as more Starz-owned shows air. If programming amortization stays above 43% of sales, the network will struggle to hold a 20% margin without cutting marketing.
New Term Loan Borrowings Lifted Net Debt
Reducing debt is one of Starz's four financial priorities. Its trailing twelve-month leverage ratio (net corporate debt divided by trailing Adjusted OIBDA) ticked down from 2.9x in the second quarter to 2.8x in the third. That improvement came entirely from replacing last year's weak third-quarter profit in the trailing twelve-month total, which rose from $195.2 million to $217.6 million, while actual debt on the balance sheet went up.
- Term Loan A facility: $362.4 million, up $62.4 million from $300.0 million in the second quarter
- Total gross debt: $687.5 million, up from $625.1 million across the prior four quarters
- Net corporate debt: $600.7 million, up 6.2% from $565.5 million last quarter despite $86.8 million in cash
- Revolving credit facility: undrawn capacity increased to $183.0 million from $150.0 million
What to watch: fourth-quarter net corporate debt. By our math, hitting the 2.7x year-end leverage target on mid-single-digit profit growth requires net debt to fall by about $22 million to roughly $578 million.
Risks this quarter didn't answer
Three standing risks from prior quarters could not be tested from the earnings release alone.
- Universal Pay 2 movie replacement: Starz exited its Universal output deal in April to buy cheaper library films, and only future quarters will show if library titles keep movie viewers from cancelling.
- Dependence on bundling partners: large streaming platforms sell over two-thirds of Starz bundles, and the release provides no split between direct app sign-ups and partner bundle additions.
- Acquisition risk on traditional television networks: Hirsch previously expressed interest in buying linear networks, and the expanded $183.0 million credit line and larger term loan keep deal risk alive.
👓 Other Themes
Accounting Revisions Created a One-Time Cost Credit
Starz recorded an $8.3 million net credit in its restructuring and other expense line after booking $290.3 million of charges in the first half. The company "updated its estimate of the termination liability based on revised assumptions, including expected theatrical performance for certain underlying films", creating an $11.1 million credit on the April movie deal exit. It also booked $3.6 million in content recoveries from "revisions of estimated license fees for certain programming agreements", partly offset by $4.4 million in severance for "a reduction in our workforce due to cost-saving initiatives and the continued decline in traditional linear services".
💲 Other KPIs
Deferred revenue — cash customers have paid for subscriptions or licensing not yet delivered — rose 10.7% from last quarter and 42.4% from a year ago. It has climbed in each of the last four quarters from $41.5 million a year ago, supporting management's push into multi-month and annual subscription plans.
The net value of shows and movies on the balance sheet fell 3.4% from last quarter and 18.7% from a year ago. It has shrunk every quarter since March 2025 ($1,096.3 million) as the network wrote off older titles and exited the post-pay-one movie deal, setting up lower future amortization.
Weighted average diluted shares rose 3.0% from 16.7 million a year ago and 2.4% from 16.8 million in the second quarter. Stock option exercises and equity award vesting lifted the share count, as the entertainment group did not repurchase any shares.
🔮 Guidance
Unchanged. The plan still calls for full-year streaming revenue to beat 2025's $879.7 million total. Because streaming sales were $659.0 million across the first nine months, by our math the outlook requires at least $220.7 million in the fourth quarter, or 5.0% growth from a year ago, up from 1.7% in the third quarter.
Unchanged. After raising the target from low-single-digit growth in August, Starz kept its forecast for roughly 5% profit growth over 2025's $204.0 million. By our math, that leaves about $52.1 million for the fourth quarter, up from $44.2 million this quarter but down 6.1% from $55.5 million in the fourth quarter of 2025.
Unchanged. The company formalized last quarter's qualitative wording into a $100 million to $120 million range. With $84.8 million generated in the first nine months, by our math the $110 million middle of the range leaves $25.2 million for the fourth quarter, compared with a $6.6 million outflow a year ago.
Unchanged. The broadcaster still plans to finish 2026 with net corporate debt at 2.7 times trailing twelve-month Adjusted OIBDA, down from 2.8x in the third quarter and 2.9x at the end of 2025. Reaching 2.7x requires fourth-quarter cash flow to pay down a portion of the third quarter's $600.7 million net debt.
Unchanged. Management kept its target to reach a 20% operating profit margin excluding one-offs in the second half of 2027, which it pulled forward by a year in May. The third-quarter margin of 13.7% sits 6.3 percentage points below that goal.
❓ Key Questions
Why did Starz borrow $62 million more on its term loan?
The Term Loan A balance rose from $300.0 million to $362.4 million and the undrawn revolving credit line expanded from $150.0 million to $183.0 million, even though the company generated positive free cash flow and held $86.8 million in cash.
What drove the fourth-quarter jump in traditional TV and other sales?
Linear and other revenue rose 10.6% from the second quarter to $95.8 million after falling all year. Investors need to know how much came from one-time international licensing deliveries versus recurring Canadian licensing fees.
How did the April price hike affect streaming subscriber churn?
Starz stopped disclosing subscriber counts in the first quarter. Because streaming revenue grew 2.4% from last quarter after the price increase to $11.99, only subscriber or churn figures can show whether customer volume shrank.
Why did expected box office change the movie termination fee?
Starz reversed $11.1 million of its second-quarter contract termination charge because of updated box office assumptions for underlying films. Knowing whether lower box office reduced the exit penalty would clarify how much liability remains.