Executive Summary / Key Takeaways

• News Corporation is undergoing a significant strategic transformation, shedding non-core assets like Foxtel to concentrate investment on three high-growth, digitally-focused pillars: Dow Jones, Digital Real Estate Services (REA Group and Realtor.com), and Book Publishing (HarperCollins).
• This realignment, coupled with rigorous cost discipline and digital expansion, is driving improved profitability and a stronger balance sheet, evidenced by robust Q3 and nine-month fiscal 2025 results and credit rating upgrades to investment grade.
• Dow Jones, particularly its Professional Information Business (Risk & Compliance, Energy), is a key profit engine with strong recurring revenues, benefiting from strategic acquisitions and a focus on high-value data and analytics, while consumer circulation is growing through digital subscriptions and dynamic pricing.
• Digital Real Estate Services, led by REA Group's strong performance in Australia and strategic investments in Realtor.com's technology and adjacent revenue streams, is poised for growth, particularly as the U.S. housing market shows signs of potential recovery.
• Ongoing efforts to monetize intellectual property through partnerships like OpenAI and defend against unauthorized AI use, alongside disciplined capital allocation via buybacks and dividends, underscore management's focus on enhancing shareholder value amidst evolving industry dynamics and macroeconomic uncertainty.

The Transformed Landscape of News Corporation

News Corporation (NASDAQ:NWS) stands at a pivotal juncture, having strategically reshaped its portfolio to sharpen its focus on core growth engines. Once a sprawling media conglomerate, the company has embarked on a deliberate transformation over the past decade, shifting away from traditional, advertising-dependent models towards a more digitally-centric, recurring revenue base. This evolution culminated recently in the significant divestiture of the Foxtel Group, allowing NWS to concentrate its capital and operational efforts on three key pillars: Dow Jones, Digital Real Estate Services, and Book Publishing. This strategic pivot is not merely a structural change; it represents a fundamental reorientation aimed at unlocking greater value for shareholders by emphasizing businesses with higher growth potential, stronger margins, and reduced capital intensity.

Within this evolving landscape, NWS operates across diverse, yet interconnected, markets. Dow Jones competes in the global news and business information sector, facing rivals ranging from traditional financial news outlets to large tech platforms and specialized data providers. Digital Real Estate Services operates in the competitive online property markets of Australia and the United States, vying with established portals and emerging proptech companies. Book Publishing competes in the global consumer book market against major publishers and independent houses. The News Media segment, while no longer a primary growth pillar, continues to operate in highly competitive news markets, grappling with digital disruption and changing advertising dynamics.

A foundational element of NWS's strategy and competitive positioning lies in its technological capabilities and intellectual property. Across its segments, technology serves as a critical differentiator. At Dow Jones, proprietary databases and data analytics tools underpin the high-margin Professional Information Business, providing clients with essential data for risk management, compliance, and market analysis. While precise, directly comparable performance metrics for all competitor data platforms are not publicly detailed, NWS's focus on curated, high-integrity data from trusted sources like The Wall Street Journal offers a distinct advantage in accuracy and reliability, which is paramount for B2B clients navigating complex regulatory environments. Recent acquisitions like Oxford Analytica and Dragonfly Intelligence are aimed at enhancing these data sets and analytical capabilities, with the stated goal of providing deeper geopolitical and security intelligence to meet growing demand. Similarly, the acquisition of A2i Systems targets the application of AI-powered technology to optimize fuel pricing strategies within Dow Jones Energy, aiming to complement existing pricing solutions and improve efficiency for clients.

In Digital Real Estate, platforms like Realtor.com and REA Group (REA.AX) leverage technology for property search, advertising, and related services. Realtor.com is actively investing in its technology stack and product offerings, including features like dynamic mapping and a visual-based keyword search, with the strategic intent to enhance the user experience and drive higher-quality engagement. While competitors like Zillow (ZG) and Redfin (RDFN) also invest heavily in technology, Realtor.com aims to differentiate through its focus on agent-consumer connections and the integration of adjacent services (seller, new homes, rentals). The partnership with Zillow for rentals is a notable example of leveraging technology and market reach through collaboration. REA Group maintains a strong audience lead in Australia, which management attributes in part to its platform's capabilities and user engagement metrics, suggesting a technological edge in that market.

Furthermore, NWS is actively engaging with the disruptive potential of Artificial Intelligence. The landmark partnership with OpenAI is a strategic move to monetize NWS's valuable content archives and ongoing journalism, ensuring its trusted information is featured in new AI products like OpenAI's operator. This collaboration aims to explore new distribution channels and develop contemporary ways for consumers to access news. Simultaneously, NWS is taking legal action against other AI companies, such as Perplexity, that it believes are misusing its intellectual property, asserting the critical value and integrity of its journalism in the age of AI. This dual approach – partnering with responsible AI developers while challenging unauthorized use – is central to NWS's strategy to protect and monetize its intellectual property in a rapidly evolving digital landscape. The company explicitly expects new revenue from its OpenAI partnership to be reflected in the Dow Jones and News Media segments in fiscal 2025.

Performance Reflecting Strategic Focus

News Corporation's recent financial performance underscores the impact of its strategic transformation and operational execution. For the three months ended March 31, 2025, net income from continuing operations surged 67% to $107 million compared to $64 million in the prior year period. For the nine months ended March 31, 2025, net income from continuing operations increased an impressive 80% to $562 million, up from $312 million in the corresponding period of fiscal 2024. Total revenues saw a modest 1% increase to $2.009 billion in the third quarter, impacted by foreign currency headwinds, but grew 3% to $6.343 billion for the nine-month period. This revenue growth, coupled with disciplined cost management, drove a 12% increase in Total Segment EBITDA to $290 million in the third quarter and a 17% increase to $1.093 billion for the nine months. The overall margin expanded from 13% to 14.4% in the third quarter.

The strength of the core pillars was particularly evident. Dow Jones, the largest segment contributor to revenue and EBITDA, saw revenues increase 6% in Q3 and 4% for the nine months. This growth was primarily fueled by a 7% increase in circulation and subscription revenues in Q3 and 6% for the nine months. Digital-only subscriptions continue to be a key driver, growing 9% year-over-year in Q3 and contributing to a 14% increase in digital circulation revenue in the quarter – the fastest growth rate in almost three years. Management highlighted the successful conversion of customers from introductory promotions to higher pricing as a factor in improving digital ARPU. The Professional Information Business remained robust, with Risk & Compliance and Dow Jones Energy posting double-digit revenue growth (11% and 10% respectively in Q3), driven by price increases, new customers, and new products. While advertising revenue was flat in Q3, it declined 4% for the nine months, primarily due to lower print advertising. Dow Jones Segment EBITDA increased 12% in Q3 and 8% for the nine months, with the margin expanding to 23% in Q3, reflecting the revenue growth and cost discipline. The higher-margin PIB business now accounts for a majority of Dow Jones' profit, a significant shift since its resegmentation.

Digital Real Estate Services also delivered strong results, with revenues up 5% in Q3 and 10% for the nine months. Segment EBITDA surged 19% in Q3 and 20% for the nine months, with the margin improving to 30.5% in Q3. This performance was largely driven by REA Group, which saw revenues increase 6% in Q3 (11% constant currency) and 15% for the nine months, benefiting from a 15% increase in residential yield in Q3, increased depth penetration, and growth in REA India and Financial Services. Realtor.com's revenue increased 2% in Q3 and 1% for the nine months, marking sequential improvement despite the challenging U.S. housing market. Growth in adjacent revenue streams like seller, new homes, and rentals (including the Zillow partnership) offset declines in traditional lead generation, representing 22% of Realtor.com's revenue in Q3.

Book Publishing revenues increased 2% in Q3 and 5% for the nine months, including the impact of a German publisher acquisition. Segment EBITDA rose 3% in Q3 and 16% for the nine months. Performance was supported by strong Christian publishing sales, UK sales, and digital growth. Digital sales, representing 25% of consumer revenues in Q3, were driven by audiobook growth, including contributions from the Spotify (SPOT) partnership. Backlist sales remained a significant and growing portion of consumer revenues (65% in Q3).

The News Media segment's revenues decreased 8% in Q3 and 5% for the nine months, primarily due to lower advertising and the transfer of printing contracts. However, Segment EBITDA increased 22% in Q3 and 24% for the nine months, demonstrating the impact of cost savings initiatives (printing joint venture, lower Talk costs, News Australia restructuring) and initial revenues from AI partnerships like OpenAI.

Financially, the sale of Foxtel, which closed on April 2, 2025, significantly strengthened the balance sheet. The transaction resulted in the transfer of $724 million of Foxtel debt and the repayment of AUD592 million in shareholder loans to News Corp.

This, combined with strong free cash flow generation ($539 million for the nine months ended March 31, 2025, up from $475 million), contributed to credit rating upgrades to investment grade from Moody's (MCO) and S&P (SPGI). This improved financial position enhances NWS's optionality for capital allocation, including the ongoing $1 billion share repurchase program (approximately $345 million remaining as of March 31, 2025) and semi-annual dividend payments ($0.10 per share declared in Feb 2025).

Outlook and Challenges

Management's outlook for the remainder of fiscal 2025 and beyond reflects confidence in the core pillars while acknowledging ongoing market uncertainties. For Dow Jones, the focus remains on B2B growth through upselling, new products, and strategic investments. Circulation revenue growth is expected to improve, particularly in the second half, driven by the step-up pricing strategy for digital subscriptions. While expenses are expected to be modestly higher due to B2B investments, cost efficiencies remain a focus. The impact of the Factiva dispute is anticipated to lessen.

In Digital Real Estate, the outlook for Realtor.com is cautiously optimistic, contingent on a potential recovery in the U.S. housing market driven by expected interest rate cuts. Growth from adjacent services (seller, new homes, rentals) is expected to continue. Investment in technology and a new advertising campaign are planned for the fourth quarter to position the business for a rebound. REA Group's performance will depend on Australian listing volumes and yield increases, building on recent price implementations.

Book Publishing expects further, albeit more modest, profit improvements, facing difficult comparisons in the fourth quarter due to prior year phasing and title releases. News Media is expected to benefit from ongoing cost initiatives and AI partnership revenues, but the advertising market is anticipated to remain volatile and challenging, compounded by foreign exchange headwinds. Other segment costs are projected to be higher due to ongoing AI-related and legal expenses. Capital expenditures in fiscal 2025 are expected to be moderately higher than fiscal 2024, primarily due to digital reinvestment in the growth pillars.

Despite the positive momentum, NWS faces several risks. Macroeconomic uncertainty, including potential impacts from trade policy and inflation, could negatively affect customer and consumer spending, particularly impacting advertising and real estate markets. The U.S. housing market remains sensitive to interest rate fluctuations, directly influencing Realtor.com's performance. The News Media segment continues to navigate secular declines in print and volatility in digital advertising, exacerbated by platform algorithm changes. Legal proceedings, including the U.K. Newspaper Matters and new litigation related to AI content usage, pose potential financial and reputational risks. Regulatory changes, such as the implementation of global minimum tax rules, could also impact financial results, although management currently expects the impact to be immaterial. The success of the strategic transformation hinges on the effective execution of digital growth initiatives, successful integration of acquisitions, and the ability to adapt to rapidly evolving technological and competitive landscapes, particularly in AI and digital advertising.

Conclusion

News Corporation's journey over the past decade has been one of deliberate and significant transformation, culminating in a strategic focus on three core, digitally-oriented pillars: Dow Jones, Digital Real Estate Services, and Book Publishing. The recent divestiture of Foxtel underscores a commitment to this focused strategy, strengthening the balance sheet and increasing financial flexibility. The company's recent financial performance, particularly the robust growth in net income and Segment EBITDA for the nine months ended March 31, 2025, demonstrates the positive impact of this realignment and ongoing cost discipline.

The investment thesis for NWS is increasingly centered on the continued expansion and profitability of its B2B information services at Dow Jones, the potential for a rebound and growth in its Digital Real Estate segment (especially Realtor.com as the U.S. housing market recovers), and the steady performance and digital growth of HarperCollins. Technological differentiation, particularly in data analytics and AI integration, is becoming a more pronounced competitive advantage, supporting both B2B offerings and content monetization strategies. While challenges remain, notably in the volatile advertising market and ongoing legal matters, management's focus on cost control, digital transition, and disciplined capital allocation positions NWS to capitalize on opportunities within its core growth areas. Investors should monitor the performance of the B2B segments, the trajectory of the U.S. housing market, and the successful execution of AI monetization strategies as key indicators of the company's ability to continue unlocking value and delivering returns.