AOL Time Warner beat Wall Street estimates for Q2 earnings, but revenue growth was disappointing.
Internet and media giant AOL Time Warner on Wednesday announced earnings before interest, tax, depreciation and amortization of $2.5 billion or 32 cents per share. Last year this figure was just $2.1 billion. However, revenue growth was rather lackluster at just 3%, from $8.9 billion last year to $9.2 billion.
The slowdown in advertising hasn’t helped. However, the company is faring better than most, still managing to achieve positive growth, albeit just 1%, in advertising and commerce revenues. America Online and Time Warner Cable both saw strong growth in this area, posting increases of 26% and 29% respectively. However, this was offset by the Publishing and Networks units, which were described as in line with advertising market conditions. Overall, advertising and commerce revenues came to $2.3 billion.
For the full year, AOL Time Warner is predicting $40 billion in revenues and $11 billion in earnings. The 25% of revenue coming from advertising is not going to see much growth, so any increase in revenues will rely on gaining additional subscriptions. Overall subscriptions were up 18 million over the past year, including 1.3 million new AOL members and over a million Time Warner digital cable users.
Since AOL and Time Warner merged in January, the outlook for the company has remained fairly positive. AOL Time Warner is flouting the synergies of the combined company, and cross-promotion does seem to be paying off. Nevertheless, AOL is still making cutbacks, laying off over 2,400 staff, while another 3,800 will go when the Warner Bros Studio Stores close their doors.
While Internet and media companies have been hit hard by the economic slowdown, the size and strength of AOL Time Warner should continue to soften the blow. Still, with revenue growth showing signs of possibly slowing down, the company will need to continue watching costs if it wants to meet its ambitious targets.
