COMCAST CORP Q2 2025 earnings call

Thank you, Operator, and welcome, everyone. Joining us on today's call are Brian Roberts, Mike Cavanagh, Jason Armstrong, and Dave Watson. I will now refer you to slide two of the presentation accompanying this call, which can also be found on our Investor Relations website and which contains our safe harbor disclaimer. This conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, during this call, we will refer to certain non-GAAP financial measures. Please see our 8-K and trending schedule issued earlier this morning for the reconciliations of these non-GAAP financial measures to GAAP. With that, I'll turn the call over to Mike.

Good morning, everyone, and thanks for joining us. Before I hand it to Jason, I want to talk about three things that are particularly significant this quarter related to several of the strategic priorities of the company. First is our broadband business, where we continue to roll out our new go-to-market strategy in a highly competitive environment. Second is our theme parks, where we successfully opened Epic Universe in Orlando, one of the largest and most ambitious projects in our history. Third is our media segment, where our extraordinary mix of live events, sports, and entertainment across NBC and Peacock led to a record-breaking upfront as we continue to execute on our strategy of running NBCUniversal's linear and streaming assets as one holistic media business. Let me start with broadband.

We've taken a hard look at what it takes to compete and win, and we start with great confidence that our products and network are marketplace leaders. That includes our AI-powered entertainment OS, the most intelligent Wi-Fi network in the country, and a mobile service delivering the fastest speeds in our footprint. We're proud that we've re-energized a culture that drives innovation, one that continues to set our products and services apart. Building on that foundation, we took several important steps this quarter to strengthen our position. Our goal for all the actions we've taken is to build a loyal customer base that churns less and values our services more by, one, delivering simple, predictable, and transparent pricing, and two, making it easier than ever to do business with us. Specifically, we've realigned our pricing strategy around seven main elements.

First, we've moved from local offers to a consistent national pricing structure. Second, we simplified our broadband offering with four flagship speed tiers. Third, everything is included. All packages come with unlimited data and our advanced gateways, which deliver the fastest, most reliable Wi-Fi experience, enable the connection of hundreds of devices, provide low-lag internet for gaming and streaming, and feature advanced Wi-Fi controls and cybersecurity protection. Fourth, we've lowered everyday pricing. Fifth, we introduced both one-year and five-year price guarantees without contracts to give customers more choice and certainty. Sixth, we're including a free Xfinity Mobile line for one year for all new and existing customers. We introduced our premium unlimited mobile plan, which includes 4K Ultra HD streaming, expanded mobile hotspot usage, and device upgrades. In addition to pricing changes, we focused on making it easier to do business with us.

We are incredibly focused on reducing friction across all of our channels: dot com, phone, chat, and our app, and making every customer interaction an excellent and personalized experience. For instance, we recently improved our digital buy flow by removing five steps, making the purchase process faster and easier, which has already driven more than a 20% improvement in purchase conversion rates. We also recently upgraded the operating system that manages our customer interactions to Google's AI platform, which will significantly improve our digital experience and route customers quickly to the support they need, providing our teams with full visibility into each customer interaction. Together, these changes we are making in pricing transparency and ease of doing business are starting to drive the results and customer behavior we are aiming for.

Customers are responding to the simplicity and power of these changes with roughly half of our eligible new customer connects choosing our five-year price guarantee this quarter. We also posted a 20% increase in the percentage of new customers taking gig-plus speeds, which lifted our overall speed tier mix and helped drive higher connect RPU. We are also seeing stabilization in voluntary churn and overall connect activity in broadband. Momentum is building in wireless as well. Our free line offer and solid uptake in our new premium unlimited plans helped drive our best quarter ever with 378,000 new lines added, bringing Xfinity Mobile to 14% penetration of our residential broadband base and still leaving us with plenty of room to run. Before we leave broadband, I want to highlight a recent deal on the Comcast business side that strengthens our go-to-market approach for that customer base.

Just last week, we announced a new MVNO agreement with T-Mobile in partnership with Charter. This new agreement pairs our industry-leading broadband and Wi-Fi with T-Mobile's 5G network to expand our mobile product offer to business customers as a fully integrated solution. We are pleased to work with T-Mobile in this initiative and continue to value our strong partnership with Verizon. The net of this is, while it's still early days, we like what we are seeing in our broadband business, giving us confidence in the changes we've made and what's still ahead. We're executing on a connectivity strategy that fully plays to our strengths in broadband, Wi-Fi, and convergence, leveraging the largest gig-speed broadband and mobile converged footprint in the country that serves both residential and business customer segments and a best-in-class in-home experience through our advanced Xfinity Wi-Fi gateway.

With our go-to-market strategy in place and execution improving, we're well-positioned to lead in convergence. Turning to Parks, we are extremely proud of the successful opening of Epic Universe in May. We're pleased with the early results as Epic is already driving higher per-cap spending and attendance across the entirety of Universal Orlando Resort with strong food and merchandise sales and minimal impact on attendance at Universal Studios Florida and Islands of Adventure. Epic is the most technologically advanced park we've ever built, and we are getting high praise for the innovative attractions, immersive environments, three new on-site hotels, and our strong food and merchandise offering. As expected, our near-term focus is on expanding ride-throughput to reduce early attendance constraints. Epic is trending in line with our expectations and well on its way to transforming Universal Orlando into a true week-long destination.

Beyond Orlando, we're executing against a strong pipeline of new opportunities to serve more guests. Universal Horror Unleashed opens in Las Vegas next month, and we're developing a second year-round horror experience in Chicago, tapping into one of the country's top tourist markets. In addition, in Texas, our Universal Kids Resort is moving towards a 2026 opening, and we're continuing the planning process for our new park outside of London slated to open in 2031. These projects reflect our long-term strategy to expand reach, enter new markets, and broaden the appeal of our parks portfolio. Turning to media, our world-class combination of entertainment content and live sports and events continues to drive results across NBC and Peacock. We just closed our most successful upfront ever with record total sales and our largest sports commitments to date.

Peacock was a standout of more than 20% year-over-year and representing over a third of NBCUniversal's total volume. Our upfront results reflect our unparalleled 2026 lineup of tentpole events, starting with the Milan-Cortina Olympics, Super Bowl 60, and the NBA All-Star Game in February, the FIFA World Cup on Telemundo in June, and the elections and Bravocon in November, along with a robust slate of entertainment and sports content throughout the year. We also expect to build on the momentum we are seeing in our entertainment content. Love Island USA, which appeared exclusively on Peacock, was the top streaming reality series for the entirety of its season seven run. It attracted a significant number of first-time subscribers, and importantly, two-thirds of those new paying customers went on to engage with additional content, driving a lift in overall consumption across the platform.

Peacock continues to differentiate itself with one of the most robust live sports offerings of any streamer, and that position will only strengthen with the addition of NBA coverage this fall. In fact, in 2026, Peacock will stream more live sports hours than any other streaming entertainment service. Add to that pay-one films from our top-performing studios, original series, next-day NBC and Bravo content, news, and a full entertainment library, and Peacock continues to deliver significant value. To better reflect this premium content, we recently announced a $3 price increase rolling out in July for new subscribers and in late August for existing ones.

The impact of this price increase, combined with the strong upfront results I just discussed, helped position us in the fourth quarter as we launch the NBA and take on higher sports programming expenses, particularly in the first year of the NBA contract when we absorbed the full impact of adding these new rights. To wrap up, across the company, we're executing with focus, simplifying how we operate, and leaning into areas where we have real competitive advantages. We're doing it while maintaining a strong balance sheet and returning meaningful capital to shareholders. We feel great about the momentum we're building and confident in our ability to create long-term value. With that, I'll turn it over to Jason.

Thanks, Mike, and good morning, everyone. Let me start with a high-level overview of our consolidated results before getting into more detail on our businesses. Consolidated revenue increased 2%, benefiting from our core six growth drivers, three of which are organized under connectivity, including broadband, wireless, and business services, and three of which are in content and experiences, including parks, streaming, and studios. Collectively, these businesses represent nearly 60% of our total revenue and grew at a high single-digit rate this quarter.

As you fast forward a couple of years between continued investment in sustaining strong growth in these businesses and actions we are taking on other areas, including our announced spin-off of our linear cable networks into Versant and a recently announced sale of another one of our businesses, our exposure to these growth areas will be closer to 70% of our total revenue, which is fundamental to our path to re-accelerating total company revenue growth. EBITDA grew 1% this quarter. Adjusted EPS grew 3% to $1.25, and we generated $4.5 billion of free cash flow while returning $2.9 billion to shareholders, including $1.7 billion in share repurchases. Now turning to our businesses, starting with connectivity and platforms. Beginning with broadband, the competitive environment remains intense as we had previewed, and when combined with the typical negative seasonality in the second quarter, it resulted in 226,000 subscriber losses.

As Mike described, we are encouraged by the early reaction to our new go-to-market initiatives as we started to see some early signs of stabilization in both connect activity and voluntary churn. Notably, during the quarter, we saw roughly half of our eligible new customer connects select our five-year price guarantee, opting to pay more upfront for longer-term consistency. In addition, we've seen a 20% increase in the share of new connects choosing our premium gig-plus speeds. This contributed to broadband RPU growth in the quarter of 3.5%. Looking ahead, we continue to expect healthy broadband RPU growth over the balance of the year, although the rollout of our new everyday pricing structure at the end of the second quarter is expected to moderate RPU growth in the near term as we begin transitioning customers to more consistent and predictable pricing.

This includes the continued offer of a free wireless line for a year to both new and existing broadband customers. Convergence revenue sustained healthy growth as well, up 3.7% in the quarter, supported by high teens growth in wireless revenue. Fueled by the strength of our Xfinity Mobile product and compelling go-to-market initiatives, including our promotion offering a free mobile line and our recently introduced premium unlimited plan, we accelerated net line additions to 378,000 in the quarter, a new high-water mark for wireless net additions for our company. Our wireless lines have now reached 8.5 million and penetration of 14% of our residential broadband customer base, a rate that demonstrates both our success in entrenching our product as a competitive offering in the wireless industry, but also that highlights the tremendous runway we have ahead.

We are pleased with the results in the quarter and expect continued acceleration in the pace of net additions in the coming quarters. Turning to business services, revenue increased 6% and EBITDA grew nearly 5%. Our results this quarter include the acquisition of Nitel, which closed in early April. Nitel contributed a few hundred basis points to revenue growth and about 100 basis points to EBITDA growth, and we expect a similar positive impact for the next few quarters until we anniversary this deal next year. Our strong performance continues to reflect the same framework we've seen for the last several quarters, including solid growth in SMB and even stronger growth at our enterprise solutions business. At SMB, despite increased competitive intensity, we continue to generate healthy revenue growth by driving higher adoption of our suite of advanced services, including cybersecurity and Comcast Business Mobile.

In our enterprise solutions business, we continue to see strong momentum. This growing segment of our customer base has more complex needs ranging from cybersecurity to multi-location connectivity, and they value integrated solutions and service reliability. These are areas where we continue to invest and lead. Connectivity remains the core of our business, and we continue to see a meaningful shift in advanced solutions. Three years ago, for every dollar of connectivity sold, we sold $0.20 of advanced solutions. Today, that figure has grown to approximately $0.50, underscoring the increasing value we're delivering to customers and reinforcing our competitive position. Putting all of this together, EBITDA was flat in the quarter, consistent with comments we made last quarter that our new go-to-market strategy would impact our ability to grow EBITDA this year.

We still believe that to be true as our investment and our operational pivot will ramp over the remaining quarters of 2025. On the other side of this, these actions will position us well for long-term convergence revenue growth with a more durable customer base on market-based rate plans with long-term price stability and a discounted wireless offering with broader exposure across our base, giving us a large revenue and profit pool to unlock over time. In content and experiences, there are several key items I'd like to highlight. At Parks, revenue increased 19% this quarter, driven by the successful opening of Epic Universe on May 22nd, while EBITDA growth was limited to 4% due to soft opening costs at the new park. As Mike mentioned, we're really happy with the consumer response, and we're pleased with how Epic is contributing to the overall Universal Orlando guest experience and performance.

We expect Epic to continue to scale over the course of the year with higher attendance and per caps, as well as significantly improved operating leverage. More broadly, performance at our international parks remains strong. However, we do continue to experience pressure in Hollywood, and we think it will be a couple more quarters until we lap that. Turning to studios, we saw strong performance from the successful theatrical launch of How to Train Your Dragon on June 13th, which has grossed over $600 million in worldwide box office year to date, driving this franchise past the $2 billion mark. This success was followed by the July 2nd opening of Jurassic World: Rebirth, which is the seventh installment of our $6 billion franchise and has already surpassed $700 million in worldwide box office this month.

While the benefit of Jurassic's theatrical performance will land in the third quarter, the investment to launch two of our three tentpole releases back to back impacted our second quarter results and profitability. In addition to Jurassic, we look forward to several more releases in the third quarter, including The Bad Guys 2, Nobody 2, Downton Abbey: The Grand Finale, Him, and Gabby's Dollhouse: The Movie. In media, total advertising revenue was down 7%, in part due to the volume and timing of sports content as well as tough political comparisons. Excluding this, advertising was down low single digits. As a reminder, for us, the second quarter has historically lacked tentpole sports, so we've been more susceptible to fluctuations in general entertainment ratings. We look forward to that changing next year with the launch of the NBA.

Looking ahead to the third quarter, we will have a tough comparison to the very successful Paris Olympics, but feel well positioned over the next year given our strong lineup of content, including the NBA premiering in the fourth quarter and the Winter Olympics and Super Bowl 60 in the first quarter of 2026, all of which contributed to record upfront results that Mike Cavanagh highlighted earlier. Our overall media results this quarter were driven by the continued meaningful progress we are making in our pivot to streaming. Peacock delivered double-digit revenue growth and a nearly $250 million year-over-year improvement in EBITDA losses, which landed $100 million this quarter. Despite second quarter being a seasonally light sports quarter, we held paid subscribers steady at 41 million, driven in part by the wildly popular new season of Love Island USA.

Before wrapping up on capital allocation, let me start by spending a minute on the impact of the corporate tax provisions in the recently enacted tax legislation. The legislation restores 100% bonus depreciation, reinstating full expensing for property acquired and placed in service after January 19th of this year, and restores immediate deductibility for domestic R&D expenses. How does this impact us? We are a leader in U.S. infrastructure investment. We're a leader in domestic content production, and we're a leader in the domestic experiences category. In fact, we have the nation's largest broadband network and are extending our network by adding 1.2 million passings a year. We've just debuted the largest and most sophisticated theme park built in the U.S. in decades.

We are leaders in entertainment programming and production with our film studio consistently ranked number one or number two in worldwide box office, and we are number two in domestic sports programming and the home to many of the top sports in the U.S., like the NFL, the Olympics, the FIFA World Cup, golf, and we'll soon add the NBA. As a result of all of that, there are several things in the legislation that benefit us, and we estimate, on average, roughly $1 billion in annual cash tax benefit for the next several years, with much of the benefit relating to infrastructure investments.

Thanks, Jason. Operator, let's open the call for Q&A, please.