Executive Summary / Key Takeaways

• Strategic Resilience and Growth: Fox Corporation's focused strategy on live news and sports, combined with the rapid ascent and early profitability of its digital platforms like Tubi, is driving robust financial performance and sustained growth.
• Digital Profitability Milestone: Tubi, Fox's advertising-supported video-on-demand (AVOD) service, achieved profitability in Q1 fiscal 2026, significantly ahead of expectations, validating the company's targeted digital investment strategy.
• Advertising Market Strength: Fox is experiencing its most robust advertising market in years, fueled by strong engagement in news and sports, and continued digital expansion, leading to record-setting upfront volume growth and healthy pricing.
• Disciplined Capital Allocation: With a strong balance sheet, Fox is committed to shareholder returns through an increased $12 billion share repurchase authorization, including a $1.5 billion accelerated share repurchase, while maintaining flexibility for strategic M&A.
• Targeted D2C Expansion: The recent launch of FOX One, a direct-to-consumer subscription streaming service, strategically targets the "cordless market" with modest subscriber aspirations and a disciplined investment approach, aiming to be additive to existing distribution.

The Enduring Power of Live: Fox's Strategic Foundation

Fox Corporation, established as a standalone entity in March 2019 following the Disney (DIS) acquisition of Twenty-First Century Fox, Inc., has meticulously carved out a powerful niche in the dynamic media landscape. The company's overarching strategy centers on leveraging its premium, live-first content in news and sports, complemented by a rapidly expanding digital footprint. This dual-engine approach, combining the enduring appeal of real-time events with innovative digital distribution, forms the bedrock of its investment thesis.

The media industry continues to evolve, marked by shifts in consumer behavior towards on-demand viewing and the emergence of "skinny bundles." However, live news and sports remain critical pillars of viewership, commanding significant audience engagement and advertiser demand. Fox has strategically positioned itself to capitalize on this trend, ensuring its content reaches consumers across traditional and digital platforms. This foundational strength is further bolstered by a disciplined approach to capital allocation and a keen eye for strategic growth opportunities.

Technological Edge: Powering Engagement and Monetization

Fox's strategic narrative is deeply intertwined with its technological differentiators, particularly in its digital platforms and advertising capabilities. These technologies are not merely supplementary; they are central to the company's competitive moat and financial performance.

Tubi, Fox's advertising-supported video-on-demand (AVOD) service, stands out as a prime example of this technological advantage. Its core technology enables a highly personalized user experience, driven by an expansive library of over 300,000 movies and TV titles. This differentiation has translated into tangible benefits: Tubi achieved 27% revenue growth in Q1 fiscal 2026, propelled by an 18% increase in total view time. Crucially, Tubi reached profitability in Q1 fiscal 2026, earlier than anticipated, and is expected to ultimately achieve margins in the 20% to 25% range, becoming a meaningful contributor to EBITDA in the medium term. This success is largely due to its differentiated user base, with over 65% of its audience being "cordless" (cord-cutters and cord-nevers), a demographic highly coveted and difficult for advertisers to reach through traditional channels.

The recently launched FOX One direct-to-consumer (D2C) subscription streaming service also showcases Fox's technological innovation. Its user interface is designed to be "incredibly innovative" and "highly personalized," leveraging clever technology to offer a "cutting-edge" viewing experience. FOX One uniquely combines Fox's content with local affiliate content, aiming to provide local sports and news to subscribers directly through the app. This technological approach is critical to its strategy of targeting the "cordless community" without cannibalizing traditional pay-TV subscribers.

Furthermore, Fox Advertising enhances its converged media platform through collaborations with Experian (EXPN) & TransUnion (TRU) and an expanded relationship with LiveRamp (RAMP). This integration delivers expansive coverage across Fox properties for advertisers, unifying inventory and audiences across linear, streaming, and digital through a seamless, efficient, and highly targeted media buying experience. This technological sophistication in ad delivery directly contributes to Fox's ability to command strong pricing in a competitive advertising market.

Financial Strength and Operational Excellence

Fox's financial performance underscores the effectiveness of its strategy, particularly in the most recent quarter. For the three months ended September 30, 2025 (Q1 fiscal 2026), the company reported total revenues of $3.74 billion, a 5% increase year-over-year. Adjusted EBITDA grew 2% to $1.07 billion. This growth was achieved despite the absence of political advertising revenue from the prior year, a testament to the underlying strength of its core businesses.

Advertising revenue, a key driver, increased 6% to $1.41 billion, primarily due to continued digital growth led by Tubi, higher news pricing, and improved sports pricing and ratings. Distribution revenue also saw a healthy 3% increase to $1.92 billion, benefiting from higher average rates per subscriber, partially offset by a slight decrease in subscriber numbers. While net income decreased to $599 million, this was largely attributed to a change in the fair value of investments in equity securities, rather than operational performance.

Looking back, fiscal year 2025 was a record-breaking year for Fox, with total revenues exceeding $16 billion (up 17% year-over-year), adjusted EBITDA of $3.6 billion (up 26%), and free cash flow of $3 billion (up 100%). This performance was significantly boosted by the Super Bowl LIX broadcast, which generated over $800 million in gross advertising revenue.

The company maintains a robust balance sheet, with approximately $4.37 billion in cash and cash equivalents and $6.60 billion in debt as of September 30, 2025.

This financial strength supports its disciplined capital allocation strategy, which includes an expanded $12 billion share repurchase authorization. Fox recently announced a $1.5 billion accelerated share repurchase transaction, commencing October 31, 2025, strategically targeting Class B shares due to their trading discount.

Competitive Landscape and Strategic Positioning

Fox operates in a highly competitive media environment, vying for audience attention and advertising dollars against a diverse set of players, including traditional media conglomerates and digital-native platforms. However, Fox's focused portfolio and strategic execution provide distinct competitive advantages.

In the news segment, FOX News remains a dominant force. It consistently ranks as the most-watched cable network in total day and primetime, and notably, was the most viewed network across all television in weekday prime calendar year-to-date. FOX News commands a significant audience share, reporting 63% to 65% against its news competitors in Q1 fiscal 2026. This leadership translates directly into pricing power, with management noting that FOX News's CPMs are effectively half of what broadcast networks achieve, making it a highly efficient buy for advertisers. The network has attracted approximately 350 new national clients this year, further solidifying its market position.

In sports, FOX Sports is an industry leader in live event viewership, accumulating 3.3 billion hours of sports event viewing in the 2024-2025 television season to date, outperforming its closest competitor by 17%. The NFL on FOX averaged nearly 22 million viewers in September, marking its best start to an NFL season ever, and "America's Game of the Week" ranked as TV's #1 show. This strong performance in live sports provides a critical differentiator against broader entertainment-focused competitors like Disney (DIS) and Warner Bros. Discovery (WBD), which, while having vast content libraries, may not match Fox's specialized focus and audience loyalty in these real-time verticals.

Tubi's positioning as the "top premium AVOD platform in the U.S." is a significant competitive advantage against other streaming services, including those from Comcast (CMCSA) and Paramount Global (PARA). Its differentiated user base, with 65% being cordless, allows Fox to reach an audience segment that is challenging for many rivals. This focus on a hard-to-reach demographic, combined with its expansive content library, enables Tubi to compete effectively in the highly competitive connected TV market, maintaining stable rates even as others face pricing pressures.

Fox's relationships with its local affiliates also present a unique competitive dynamic. The company broadcasts fewer network hours than its national counterparts, empowering its affiliated stations to invest more in local programming, particularly local news. This strategy fosters strong community ties and local market leadership, which is critical to the health of the broadcast industry.

While the company faces ongoing litigation risks, including a $2.70 billion defamation lawsuit from Smartmatic USA Corp. and derivative lawsuits, management maintains that these claims are without merit and intends to defend against them vigorously. The company also actively manages distribution agreements, as evidenced by the recent, albeit temporary, resolution of a carriage dispute with YouTube TV.

Outlook and Strategic Initiatives

Fox's outlook is characterized by strong confidence in its ability to capitalize on a robust advertising market and the continued growth of its digital initiatives. Management anticipates the momentum from Q1 fiscal 2026 to extend into Q2, driven by a "very healthy advertising market" stemming from both upfront commitments and a strong scatter market.

The early profitability of Tubi is a significant positive, leading to a "partial moderation" in the overall net investment expected for digital operations in fiscal 2026. While the collective digital investment portfolio (including new initiatives like FOX One and LatAm sports) is projected to move back towards the $350 million mark for fiscal 2026, Tubi's improving profitability will help offset these new investments.

The launch of FOX One in August 2025 is a key strategic initiative, targeting the "cordless community" with a disciplined approach. Subscriber trends have "exceeded expectations," with engagement driven by both news and sports content. Fox has already secured bundling partnerships with ESPN and Verizon (VZ) for FOX One, further expanding its reach. The company's aspirations for FOX One subscribers are modest, in the "low to mid-single-digit millions," and its investment is primarily focused on marketing and launch costs, without incurring additional spend for original or exclusive programming.

Looking ahead, Fox expects "continued total company distribution revenue growth for the full year," with stable to improving subscriber erosion trends contributing to this positive outlook. The upcoming broadcast of the 2026 FIFA Men's World Cup, spanning Q4 fiscal 2026 and Q1 fiscal 2027, is anticipated to drive strong results, although it will introduce working capital timing headwinds in fiscal 2026 due to rights payments preceding advertising revenue collection.

Fox's M&A strategy remains focused on opportunities that strengthen its core brands and digital businesses, particularly in areas with "tailwinds," while avoiding high exposure to traditional cable entertainment assets. The recent acquisition of Caliente TV in Mexico and a 33% stake in Penske Entertainment (IndyCar) exemplify this targeted approach to expanding its sports footprint and digital reach.

Conclusion

Fox Corporation stands as a compelling investment proposition, skillfully leveraging its core strengths in live news and sports content while aggressively and profitably expanding its digital presence. The company's Q1 fiscal 2026 performance, marked by robust revenue and EBITDA growth, underscores the efficacy of its focused strategy. The early profitability of Tubi, coupled with the strategic launch of FOX One, demonstrates Fox's ability to innovate and capture new audiences in the evolving media landscape.

With a strong balance sheet, a commitment to shareholder returns through significant share repurchases, and a disciplined approach to both organic and inorganic growth, Fox is well-positioned for sustained value creation. While the media industry faces ongoing shifts and competitive pressures, Fox's leadership in critical content verticals, its technological advancements in advertising and streaming, and its clear strategic roadmap provide a solid foundation for long-term success. Investors should recognize Fox's unique blend of traditional media power and digital agility as a potent combination for future growth.