Lionsgate (LION) Q1 Revenue Falls 16%

Key Points

• Revenue for Q1 FY2026 (GAAP) was $555.9 million, falling 16% short of analyst estimates.

• Adjusted diluted EPS (Non-GAAP) for Q1 FY2026 was $(0.32), beating non-GAAP EPS estimates.

• Television Production segment revenue surpassed Motion Picture segment revenue for the first time, Television Production segment revenue increased 20% year-over-year.

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Lionsgate Studios (NYSE:LION), a leading independent film and television studio, reported its Q1 FY2026 earnings on August 7, 2025. The quarter marked the company's first period as an independent studio following its separation from Starz. The most notable news from the earnings release was the sharp revenue miss, with $555.9 million reported compared to an analyst estimate of $662.2 million. At the same time, the company's adjusted diluted earnings per share (EPS) came in at a loss of $(0.32). The television segment surpassed the film business in revenue for the first time, highlighting a strategic shift. Overall, the quarter reflected both transitional headwinds and areas of operational progress as Lionsgate realigns its business for future growth.

Source: Analyst estimates for the quarter provided by FactSet.

Company Overview and Strategic Focus

Lionsgate Studios (NYSE:LION) specializes in creating, producing, and distributing films and television content globally. Its business centers around two major segments: motion picture production and television production. A defining feature of the company is its large content library, which contains over 20,000 titles, contributing steady income through licensing and distribution.

In recent years, Lionsgate has sharpened its focus on leveraging its content library and adapting to new distribution models. With the strategic separation from Starz now complete, Lionsgate is refocusing on content production, aiming to bolster revenues through streaming, digital channels, and direct licensing. Success factors for the business include maintaining its competitive position in content acquisition, adapting to changing viewing habits, and managing intellectual property risks.

Quarter Highlights and Segment Performance

Lionsgate saw mixed results across its business lines. Total revenue increased 21.6% compared to the prior year's quarter, but this GAAP revenue figure fell well below analyst expectations. The revenue miss was largely due to a drop in Motion Picture segment performance, which saw a 23.5% decline. The lack of major new wide theatrical releases and a tough comparison to a strong film slate last year were the key reasons for this fall-off. Motion Picture segment profit was also sharply lower, dropping from $85.2 million in Q1 FY2025 to just $2.4 million. Management directly attributed the shortfall in the Motion Picture segment to "a difficult comparison with the prior year, which benefited from strong carryover profits from fiscal 2024 films."

In contrast, the Television Production segment reported notable gains, with revenue rising 20% to $288.5 million. Segment profit for television surged nearly 150%, climbing from $10.7 million to $26.0 million. This was driven by an increase in episodic deliveries, higher margin from new series, and lower general and administrative (G&A) expenses. Revenue and segment profit growth were driven by increased episodic deliveries, with segment profit also benefiting from higher-margin new series and lower G&A. The company's television strategy relies on new and recurring scripted series, using assets acquired with the eOne deal and partnerships across platforms.

The company continued to monetize its content library, setting a new record with $989 million in trailing 12-month library revenue, a 12% increase from the prior-year quarter.

On the expense side, total expenses (GAAP) rose to $536.5 million, up from $509.4 million in Q1 FY2025. However, G&A costs (GAAP) dropped significantly, from $95.9 million in Q1 FY2025 to $70.2 million. Restructuring and other expenses were also sharply lower, with only $4.8 million recorded, compared to $27.7 million in Q1 FY2025 when the company faced larger integration and write-down costs. Cash flow from operations (GAAP) improved to a negative $109.1 million versus a negative $215.3 million in Q1 FY2025. Adjusted free cash flow, while still negative, decreased versus last year. The cash burn is typical for the company's front-loaded production cycle, with positive cash generation expected later in the fiscal year.

Business Model and Key Areas to Watch

Lionsgate's core business revolves around its film and television production segments. The Motion Picture division develops and produces movies for theatrical and digital release, while the Television Production group creates scripted and unscripted series for traditional broadcasters and streaming platforms. Libraries of acquired and produced content underpin Lionsgate's recurring revenue, helping to offset any volatility in the timing of new releases. Growth in library monetization continues to be a key objective for the company and a primary buffer against variable film and TV slates.

The transition away from Starz as an internal customer means Lionsgate now operates as a standalone content supplier, selling to a broader range of distribution partners. This strategic move is intended to simplify operations, increase focus, and align management incentives with core content creation and monetization. Lionsgate's ability to forge relationships with new streaming partners and adapt to audience preferences for digital-first releases is critical for its long-term growth.

Outlook and Forward-Looking Statements

Management described FY2026 as a "transition year," with major theatrical releases and television series deliveries weighted toward the back half of the fiscal year. The company expects the film pipeline to replenish, with three major film "tentpoles"—meaning big-budget, high-profile movies—currently planned for the next fiscal year. The release of the Michael Jackson biopic will likely move out of fiscal 2026 and be included in the fiscal 2027 slate. The timing of these projects should lead to more back-loaded revenue and cash flow, with upside potential for stronger results in FY2027.

No explicit full-year guidance for either revenue or earnings was provided. Management did, however, reiterate its plan to reduce leverage from around 5.5 times trailing twelve-month adjusted OIBDA at the Starz separation (May 2025), with a target range of 3.0 to 3.5 times. Investors should watch for the pace of library revenue growth, television production deliveries, and the impact of big franchise film releases as the year unfolds.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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