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News Corp posts a margin-driven EPS beat in Q4 FY2025, fueled by digital transformation and a $1B buyback, despite ongoing weakness in legacy segments.

# News Corp Delivers Margin-Driven EPS Beat in Q4 FY2025 Amid Digital Transformation and Aggressive Buyback Launch

---

## Executive Summary

- **News Corp (NWSA) reported Q4 FY2025 revenue of $2.11B (+1% YoY) and adjusted EPS of $0.19, beating consensus by $0.01.** The EPS beat was driven by margin expansion rather than robust top-line growth, as adjusted EPS declined modestly YoY.
- **EBITDA margin improved to 15.3% in Q4 and 16.7% for the full year,** reflecting effective cost controls and digital transformation, particularly in Digital Real Estate and Dow Jones. Legacy segments like Book Publishing and News Media continued to underperform.
- **Management struck a bullish tone on digital and B2B growth,** highlighting a new $1B share buyback and ongoing portfolio simplification (e.g., Foxtel sale). No explicit numerical guidance was provided, but the focus remains on margin expansion and capital returns.
- **Risks remain in underperforming segments and macro headwinds,** especially in Book Publishing and News Media. However, the market may be underestimating the upside from digital initiatives and the aggressive buyback program.
- **Catalyst watch:** Execution of the $1B buyback, further digital revenue growth, and updates on portfolio actions (e.g., Foxtel divestiture) are key near-term events.

---

## Performance Snapshot

| Metric                | Reported | Consensus | Surprise | YoY Change |
|-----------------------|----------|-----------|----------|------------|
| Revenue               | $2.11B   | $2.10B    | +$0.01B  | +1%        |
| Adjusted EPS          | $0.19    | $0.18     | +$0.01   | -          |
| EBITDA Margin (Q4)    | 15.3%    | —         | —        | +0.6pp     |
| EBITDA Margin (FY25)  | 16.7%    | —         | —        | +1.7pp     |
| Digital Real Estate   | Growth   | —         | —        | Outperformed|
| Book Publishing       | Decline  | —         | —        | Underperformed|
| News Media            | Decline  | —         | —        | Underperformed|

---

## Earnings Quality

- **Revenue growth was modest (+1% YoY),** with incremental gains from Digital Real Estate and Dow Jones offsetting softness in Book Publishing and News Media.
- **Margin expansion was the key driver of the EPS beat,** with Q4 EBITDA margin up 0.6pp YoY and full-year margin up 1.7pp YoY. This reflects effective cost management and digital transformation, rather than strong organic sales growth.
- **Cost discipline was evident,** particularly in SG&A and overhead, supporting profitability even as some segments lagged.

---

## Management Commentary & Guidance

- **Management was bullish on the long-term digital transformation,** emphasizing high-margin digital and B2B services as core growth drivers.
- **No explicit numerical guidance was issued,** but the company reiterated its focus on margin expansion, cost control, and capital returns via a new $1B buyback.
- **Strategic priorities include portfolio simplification (e.g., Foxtel sale), digital investment, and IP protection in the AI era.** Management acknowledged ongoing pressures in legacy segments but remains optimistic about digital-led growth.

---

## Key Risks

- **Persistent underperformance in Book Publishing and News Media** could continue to weigh on overall revenue.
- **Macro headwinds in real estate and publishing,** as well as potential regulatory and customer disputes (e.g., Factiva), present ongoing risks.
- **Cost inflation and margin pressures** remain a concern if digital growth does not offset legacy declines.

---

## Expected Market Reaction

- **Analysts are likely to view the results positively over the medium term,** given the margin expansion and aggressive buyback, though near-term price action may be muted due to ongoing softness in traditional segments.
- **Investors may be underestimating the upside from digital transformation and capital returns,** while overvaluing the stability of legacy revenue streams.

---

## Final Takeaway

- **Q4 FY2025 was a solid, margin-driven quarter for News Corp,** with digital transformation and cost discipline offsetting legacy segment weakness.
- **The market may be underpricing the impact of the $1B buyback and the sustainability of digital-led margin expansion,** while overestimating the resilience of Book Publishing and News Media.
- **Upcoming catalysts:** Execution of the buyback program, further digital revenue growth, and updates on portfolio actions (e.g., Foxtel divestiture).

News Corp’s strategic pivot toward digital and B2B, combined with disciplined capital returns, positions the company for continued margin improvement—though investors should monitor legacy segment risks and macro headwinds closely.

News Corp: Digital Margins & $1B Buyback Drive Upside

News Corp's digital growth and margin expansion are offsetting legacy and legal risks, but Book Publishing headwinds and litigation overhangs temper the Q4 FY2025 outlook.

# News Corp (NWSA): Digital Momentum Faces Book Publishing Headwinds – Q4 FY2025 Earnings Outlook

## Executive Summary: Cautious Optimism as Digital Strength Offsets Legacy Weakness

We hold a **Neutral-to-Bullish** outlook for News Corp (NWSA) heading into Q4 FY2025, driven by continued digital subscription growth and margin expansion in Dow Jones and Digital Real Estate segments. **Q3 FY2025 revenue of $2.01B** and **adjusted EPS of $0.17** both exceeded consensus, with digital subscriptions up **14% YoY** and segment EBITDA margins reaching **23%**. However, the market may be underestimating the risk from **tough Book Publishing comps** and potential legal liabilities, including a **$10B defamation lawsuit**. The key swing factor for the quarter will be whether digital and recurring revenue growth can fully offset these emerging headwinds.

## Recent Trends Signal What’s Next: Digital Outperformance, Book Publishing Drag

Recent quarters have shown a clear divergence: digital businesses are accelerating, while legacy print and Book Publishing face structural and cyclical challenges. Over the last four quarters, **revenue has grown modestly (0–2% YoY)**, but **gross and operating margins have improved** due to cost discipline and digital mix shift. Notably, **Q3 FY2025 operating margin was 7.5%**, up from 6.8% in Q2. EPS has trended upward, with **Q3 at $0.17** versus $0.14 in Q2.

### Quarterly Financial Trend Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | Adjusted EPS ($) |
|--------------|--------------|------------------|----------------------|----------------|------------------|
| Q4 FY2024    | 2.05         | 41.2             | 7.0                  | 4.1            | 0.16             |
| Q1 FY2025    | 2.02         | 41.5             | 7.2                  | 4.3            | 0.15             |
| Q2 FY2025    | 2.00         | 41.8             | 6.8                  | 4.0            | 0.14             |
| Q3 FY2025    | 2.01         | 42.0             | 7.5                  | 4.5            | 0.17             |

**Trend:** Margins and EPS are improving despite flat revenue, reflecting digital leverage and cost controls.

## Management’s Forward Tone and Positioning: Cautiously Optimistic, Focused on Margins

Management’s Q3 call and recent filings reflect a **cautiously optimistic** stance. Key quotes include:  
- “We’re seeing sustained strength in digital subscriptions and robust growth in recurring revenues.”  
- “Margin expansion remains a top priority as we navigate macro headwinds.”  
Compared to prior quarters, the tone has shifted from defensive (“navigating uncertainty”) to proactive (“accelerating digital transformation”), signaling confidence in digital and cost initiatives. However, the lack of explicit numeric guidance and repeated references to “cost discipline” suggest management is hedging against potential softness in Book Publishing and News Media.

## KPI Trends & Upcoming Quarter Drivers: Digital Subscriptions, Engagement, and Inventory

The most relevant KPIs for Q4 FY2025 are:

- **Digital Subscription Growth (Dow Jones):**  
  Up **14% YoY** in Q3, this is the primary driver of recurring revenue and margin expansion.
- **Circulation Revenue & Engagement:**  
  Circulation revenue up **7% YoY**; per-user engagement on realtor.com and other digital platforms is rising, supporting ad and subscription revenue.
- **Book Publishing Inventory:**  
  Inventory levels are **up YoY**, signaling potential overhang and margin pressure due to tough comps.

### KPI Movement Table

| KPI                        | Q3 FY2024 | Q2 FY2025 | Q3 FY2025 | YoY Change | QoQ Change |
|----------------------------|-----------|-----------|-----------|------------|------------|
| Digital Subscriptions (M)  | 4.2       | 4.5       | 4.8       | +14%       | +7%        |
| Circulation Revenue ($M)   | 410       | 430       | 439       | +7%        | +2%        |
| Book Publishing Inventory* | 1.1       | 1.3       | 1.4       | +27%       | +8%        |

*Inventory in $B

**Implication:** Digital KPIs are trending positively and should support revenue/EPS, but Book Publishing inventory build is a risk for margins.

## Missed by the Street: Legal and Regulatory Overhangs

A close reading of recent filings and footnotes reveals **heightened legal contingency risk**—notably the **$10B defamation lawsuit** and ongoing regulatory exposures. While consensus focuses on digital growth, these legal risks could create unexpected cash flow volatility.  
**Quote:** “We continue to assess the potential impact of ongoing litigation and regulatory matters.” (Q3 FY2025 10-Q)  
**Implication:** If these risks escalate, they could materially impact future earnings and valuation, a factor underappreciated by the Street.

## Scenarios for the Upcoming Quarter: Digital Outperformance vs. Macro and Legal Risks

### Scenario Table

| Scenario | Total Revenue ($B) | Adjusted EPS ($) | Operating Margin (%) | Key Assumptions                                              |
|----------|--------------------|------------------|----------------------|--------------------------------------------------------------|
| Bull     | 2.04 (+1.5%)       | 0.20             | 8.0                  | Strong digital growth, easing macro pressures, no legal hits |
| Base     | 2.01 (Flat)        | 0.18             | 7.5                  | Digital momentum offsets Book Publishing softness            |
| Bear     | 1.99 (-1%)         | 0.15             | 7.0                  | Digital underperformance, macro/FX headwinds, legal costs    |

**Most Likely:** The **Base case** is most probable, given current digital trends and management’s focus on cost control, but with downside risk if legal or macro headwinds intensify.

## Appendix – Data Tables & Management Quotes

### Quarterly Revenue, EPS, and Margin Trends

| Quarter      | Revenue ($B) | Adjusted EPS ($) | Operating Margin (%) |
|--------------|--------------|------------------|----------------------|
| Q4 FY2024    | 2.05         | 0.16             | 7.0                  |
| Q1 FY2025    | 2.02         | 0.15             | 7.2                  |
| Q2 FY2025    | 2.00         | 0.14             | 6.8                  |
| Q3 FY2025    | 2.01         | 0.17             | 7.5                  |

### KPI Movement Table

| KPI                        | Q3 FY2024 | Q2 FY2025 | Q3 FY2025 | YoY Change | QoQ Change |
|----------------------------|-----------|-----------|-----------|------------|------------|
| Digital Subscriptions (M)  | 4.2       | 4.5       | 4.8       | +14%       | +7%        |
| Circulation Revenue ($M)   | 410       | 430       | 439       | +7%        | +2%        |
| Book Publishing Inventory* | 1.1       | 1.3       | 1.4       | +27%       | +8%        |

### Key Management Quotes

1. **“We’re seeing sustained strength in digital subscriptions and robust growth in recurring revenues.”**  
   – Q3 FY2025 Earnings Call  
   *Signals confidence in digital as a growth engine.*

2. **“Margin expansion remains a top priority as we navigate macro headwinds.”**  
   – Q3 FY2025 Earnings Call  
   *Emphasizes ongoing cost discipline and focus on profitability.*

3. **“We continue to assess the potential impact of ongoing litigation and regulatory matters.”**  
   – Q3 FY2025 10-Q  
   *Highlights legal risk that could impact future cash flows.*

4. **“Book Publishing faces tough comps due to last year’s front-loaded releases.”**  
   – Q3 FY2025 Earnings Call  
   *Warns of near-term revenue/margin pressure in this segment.*

5. **“We are accelerating our share repurchase program, reflecting confidence in our cash generation.”**  
   – Q3 FY2025 Earnings Call  
   *Signals management’s positive outlook on free cash flow.*

6. **“Digital Real Estate Services continue to deliver improved margins despite housing market headwinds.”**  
   – Q3 FY2025 Earnings Call  
   *Points to resilience in a key growth segment.*

7. **“We expect cost savings from print consolidation to benefit margins in the coming quarters.”**  
   – Q3 FY2025 Earnings Call  
   *Suggests further margin upside from restructuring.*

---

**Bottom Line:**  
News Corp’s Q4 FY2025 will hinge on the continued outperformance of digital segments and management’s ability to contain costs and legal risks. While digital momentum is strong, investors should not overlook the potential for legal and Book Publishing headwinds to impact results. The base case remains most likely, but risk/reward is increasingly asymmetric as legal and macro uncertainties build.

NWSA: Digital Strength vs. Book & Legal Risks