ITV shares tumble as ad revenue declines but streaming growth impresses

Shares in ITV (LSE: ITV) plunged over 6% on Wednesday after the broadcaster reported a decline in advertising revenue, though its new streaming service ITVX saw strong growth.

The company said total revenue edged up 0.9% to £2.98 billion in the first nine months of 2022, with its production division ITV Studios up 9.3%. However, revenue from its Media & Entertainment arm, including ITVX, fell 6.5% to £1.46 billion.

This was “hurt by a 7% decline in total advertising revenue”, ITV said. The company warned that for 2022 overall it expects TV ad revenue to drop around 8% year-on-year.

However, there was positive news on ITVX, which continues to gain monthly active users in line with expectations. Total digital revenue jumped 23% and streaming hours were up 27% compared to last year.

ITV pointed to “a wide range of new and returning programmes and formats in the UK and internationally” as driving Studios growth. However, it noted pressure on free-to-air broadcasters like ITV for content.

The broadcaster said it remains on track to deliver around 3% total growth in Studios this year, following a 19% surge in 2021. It also expects to hit its £50 million cost savings target between 2023 and 2026.

Carolyn McCall, ITV CEO, said the company continues to make “good strategic progress despite the challenging macro environment”.

She added: “It is evident that our strategy of growing the Studios and M&E digital business is helping ITV to offset the current headwinds, and we remain confident in delivering our 2026 targets.”

By that date, ITV is aiming for two-thirds of total revenue to come from Studios and digital activities.

ITV shares have tumbled over 20% so far this year, recently trading between 54-89p. But McCall stressed ITV has the right strategy to build more sustainable long-term growth.