Paramount Skydance Corporation Class B Common Stock (PSKY) Cash Flow Statement

The reported OCF/NI ratio of 7.78 in 2026Q2 appears to be a statistical artifact of a modest net income of $41 million against $319 million in operating cash flow, with $364 million in D&A and a $533 million working capital inflow providing the bridge. In contrast, 2025Q4 showed a negative OCF/NI of -0.09, as a $573 million net loss was only partially offset by $335 million in D&A and a massive $5.2 billion working capital outflow. This volatility indicates that cash generation is heavily influenced by non-cash items and timing, rather than sustainable earnings conversion, and investors should monitor the sustainability of these adjustments.

The most recent quarter's FCF of $258 million on a 3.7% margin appears to be a positive outlier, but the preceding quarter's $96 million and the 2025Q4's $71 million illustrate the inconsistency. Over the past ten quarters, cumulative FCF is roughly $1.2 billion against cumulative net losses of over $6 billion, suggesting that reported losses are not fully translating into cash burn, but the thin margins imply that the company is not yet generating sufficient cash to fund its strategic ambitions. This trajectory appears to be a function of heavy content investment and merger-related costs, and investors should monitor whether the raised guidance can convert into sustained FCF improvement.

With capex-to-revenue ratios between 0.2% and 1.4%, the company appears to be a low-capital-intensity business, but this is misleading given the media industry's reliance on content investment. The $61 million capex in 2026Q2 is dwarfed by the $364 million in D&A, suggesting that the asset base is largely intangible and amortized rather than replaced through traditional capex. This implies that the real capital burden is in content production, which is reflected in operating costs and working capital swings, and investors should adjust for content spend to assess the true cash flow profile.

The alternating positive and negative working capital adjustments suggest that PSKY's cash flow is heavily influenced by the timing of content production payments and licensing receipts, rather than operational efficiency. The $13.8 billion outflow in 2024Q4 appears to be an anomaly, possibly related to merger-related payments or a change in content liability recognition, and it dwarfs the company's typical quarterly cash generation. This volatility complicates the interpretation of quarterly cash flow and suggests that investors should focus on longer-term trends rather than single-period figures.

Dividend payments have been steady, ranging from $34 million to $64 million per quarter, suggesting a commitment to returning cash to shareholders despite negative net income. The absence of buybacks indicates that management is not repurchasing shares, possibly due to cash constraints or a focus on integration. The $2.8 billion acquisition outflow in 2026Q2 and the $2.8 billion inflow in 2026Q1 appear to be related to the Skydance merger, and these swings highlight the significant capital deployment associated with the transaction. Investors should monitor whether these investments generate the expected returns and whether dividends remain sustainable given the negative margins.

The divergence between net income and operating cash flow is stark, with cumulative OCF of $1.7 billion against cumulative net losses of $6.1 billion, implying that the reported losses are largely non-cash in nature, such as impairments and amortization. This suggests that the company's cash-generating ability is stronger than the income statement suggests, but the thin FCF margins and volatile working capital indicate that the cash flow is not yet robust. The cumulative gap of $7.8 billion between net income and OCF warrants further investigation into the sustainability of these non-cash adjustments and whether they will reverse in the future.