Skydance Maps $6 Billion in Cuts, Faces $80 Billion Debt Test

By Elena Vasquez

Skydance told investors on Monday exactly how it plans to deliver $6 billion in cost synergies by 2029. The savings will come from corporate overhead, real estate, marketing, technology and vendor management. The company aims to realize 30% of the synergies in year one of the combined PSKY-WBD entity.

MoffettNathanson is not convinced the arithmetic works.

"In theory, savings in these areas should get the company to its synergy targets without dipping into its $30+ billion of content spending, allowing it to pay down debt without sacrificing growth. However, as we've seen with other media M&A, it is a lot harder to see these cost savings translate into real upside to EBITDA and cash flows likely forcing the company to limit its content spend growth in the future," the firm wrote in a research note.

What do the one-time costs mean for cash flow?

The restructuring is not free. Skydance expects $4 billion of one-time cash costs to achieve the synergies. Between $1.5 billion and $2 billion of that bill arrives next year.

"These costs will continue to weigh on the company's ability to generate cash, with 2027 free cash flow expected to come in at or above breakeven, making it more difficult for SKYD to accelerate any debt paydown in the near term," MoffettNathanson added.

The balance sheet sets the stakes. Skydance carries $80 billion of debt, equal to net leverage of 7X (debt measured against earnings before interest, taxes, depreciation and amortization). Chairman and Co-CEO David Ellison has set a target of 3X by the end of 2029. The breakeven free cash flow forecast in 2027 means debt reduction will depend heavily on hitting synergy milestones on schedule.

Why does the streaming bundle look more promising?

MoffettNathanson took a warmer view of the plan to bundle Paramount+ and HBO Max in early 2027. The firm called it "the right direction for unifying two subscale streaming services into a single scaled global player."

The direct-to-consumer revenue trajectory is a separate question. Ellison declined to share a pricing strategy for the bundled services, and the analysts flagged unresolved questions about how the streamers may cannibalize pay TV subscribers.

The operating signals are nonetheless positive:

• Skydance expects "strong" DTC revenue growth in 4Q26.
• Paramount+ revenue grew 21% in the third quarter.
• Combined DTC revenue for the merged company grew 15%.

Skydance did not disclose WBD's stand-alone third-quarter numbers.

The market rendered its own verdict on the plan. The programmer's stock closed down nearly 8% on Tuesday. That reaction suggests investors share MoffettNathanson's core concern: declared synergies are one thing, realized cash flow is another, and the gap between them will decide whether Ellison hits his 3X leverage target on time.