Lionsgate Studios Corp. (LION) Income Statement

The top-line trajectory is highly erratic, driven by the timing of theatrical releases and TV deliveries. The 47.7% sequential rebound in 2026Q2, following a -42.3% plunge in 2025Q3, indicates a release calendar gap rather than a secular decline. However, the 1-year growth rate remains negative, and the raised guidance for fiscal 2027 implies management expects a durable recovery, but investors should monitor whether this is backed by a robust pipeline.

The gross margin is structurally constrained by the studio model's high variable costs, including film amortization and participations. The 42.9% gross margin in 2026Q1 was an outlier, driven by a strong content mix, but the 36.0% in 2026Q2 is more representative. Without a shift toward higher-margin library licensing, gross margin expansion appears limited, and any spike in production costs could compress it further.

SG&A has remained sticky, ranging from $124.9M to $255.6M, even as revenue fluctuated. In 2026Q2, SG&A of $124.9M was the lowest in the period, but operating margin still contracted to 3.3% due to lower gross profit. This suggests that LION lacks operating leverage in downturns, and any margin recovery will depend on revenue scaling faster than overhead, which has not yet materialized.

The cost structure is dominated by content amortization, which is a non-cash expense but reflects the upfront investment in productions. The 2025Q1 gross margin of 28.1% was particularly weak, likely due to underperforming titles, while 2026Q1's 42.9% shows the potential for high margins when content resonates. Management's discipline in greenlighting projects is critical, as a string of flops could permanently elevate the cost floor.

2025Q3 appears to be the operational low point, with revenue down 42.3% YoY and a net loss of -$113.5M. Since then, revenue has rebounded in 2025Q4 and 2026Q1, and management raised guidance, suggesting the trough is behind. However, the negative net margin in 2026Q2 indicates that profitability has not fully recovered, and the lasting impact of this trough is a strained balance sheet and a need for sustained margin recovery.