ii view: ITV still struggling with weak ad market

Selling its broadcasting business to Sky will leave a content making business fit for the world stage. Buy, sell, or hold?

11th November 2026 11:53

by Keith Bowman from interactive investor

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Nine-month trading update to 30 September

Media & Entertainment (M&E) divisional sales down 1% to £1.43 billion
Studio divisional sales down 1% to £1.33 billion

Chief executive Carolyn McCall said:

“The agreed sale of our M&E business to Sky, which will position ITV Studios as a highly attractive, pure play, global content business, is progressing as planned. On 4 November, the Secretary of State issued a Public Interest Intervention Notice (PIIN). This is an expected and important milestone in the regulatory review process, and we are pleased that it is moving at pace. We continue to expect completion in the second half of 2027.

“While the outlook for advertising remains muted, we are firmly focused on self-help and mitigating actions, while continuing to execute our strategic priorities to drive performance across both businesses.”

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ii round-up:

ITV (LSE:ITV) today reported weaker-than-expected ad sales, impacted by a fragile economy, more ads on rival streamers and changes to food ad sales regulation.

The broadcaster and programme maker is selling its broadcasting and ad-dependent media division to rival Sky, which is owned by US company Comcast Corp Class A (NASDAQ:CMCSA). The deal remains subject to regulatory scrutiny. Third-quarter ad sales fell 8% year-over-year, with sales for the ongoing fourth quarter expected by management to be down as much as 10% compared to a year ago.

Shares in the FTSE 250 company fell 4% in UK trading having come into this latest news down by close to a fifth so far in 2026. Fellow streamer Amazon.com Inc (NASDAQ:AMZN) and its Prime TV business are up by close to a fifth during that time. The FTSE 250 index has risen by almost 11% year-to-date.

ITV’s Media and Entertainment (M&E) division broadcasts via traditional TV stations as well as its own ITVX streaming platform. The Studios division makes content for both ITV and fellow media organisations such as the BBC and Netflix Inc (NASDAQ:NFLX).

Year-to-date (nine-month) M&E sales fell 1% to £1.43 billion, below analyst hopes of £1.44 billion. Year-to-date Studio sales also fell 1% to £1.33 billion, matching City forecasts.

Management guidance for fourth-quarter ad sales to drop 5-10% means full-year sales will likely fall by around 3%.

The group expects full-year Studios revenue to grow ahead of the market, driven by external demand, although with the adjusted profit margin (EBITA) to come in at the lower end of a 13-15% estimate.

Annual results are scheduled for 4 March.

ii view:

First broadcasting in 1955, ITV today employs over 6,000 people. The Studio business generated most adjusted profits (EBITA) over its last financial year at 58%, with M&E the balance of 42%. Geographically, the UK accounted for most sales during that time at 63%, followed by the USA at 19% and other countries the balance of 18%.

For investors, pressured ad sales includes year-old restrictions on less healthy foods advertising, which is estimated to have cost the company £20 million in sales during the first half. The importance of the sporting calendar in generating ad sales remains, but has caused volatility in the past. The full impact of AI on programme making is tough to predict. The sale of the group’s M&E business remains subject to a government or regulatory review and could be blocked, while the internet has left ITV competing against rivals such as Alphabet Inc Class A (NASDAQ:GOOGL)-owned YouTube, Netflix, and even China’s TikTok.

On the upside, a potentially independent Studios business could eventually find itself subject to M&A interest. AI may significantly assist programme making going forward, reducing costs. Bolt-on acquisitions for the Studio business have included UK producer Moonage Pictures, creator of 'The Gentleman' on Netflix, while robust cash flows have underpinned more than £1.4 billion of shareholder returns since 2018.

On balance, the internet has slowly left ITV a small fish in a big pond, and the share price has remained rangebound at historically low levels for over four years. A potentially more focused Studios business and a dividend yield of over 7% may remain attractive to some investors, but it's unclear whether this is the catalyst for significant upside.

Positives:

Potential M&A interest in a standalone Studios business
Attractive dividend (not guaranteed)

Negatives:

Intense global competition
Advertising revenues are economically sensitive

The average rating of stock market analysts:

Hold

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