Comcast stock drops as investors balk at weakness in broadband

Comcast on Thursday outlined changes to its broadband strategy as the business continues to shed customers in the face of heightened competition.

The discussion came amid the company's first-quarter earnings call with investors. Despite the customers losses, Comcast's earnings surpassed analysts' expectations.

Comcast shares were down about 4% in early trading.

Here is how Comcast performed for the period ended March 31, compared with estimates from analysts surveyed by LSEG:

While domestic broadband revenue was up 1.7% to $6.56 billion, Comcast lost 199,000 total domestic broadband customers, reflecting the continued pressure on the cable giant's cornerstone business. Competition has ramped up in recent years due to the rise of alternative home internet options, including 5G, or so-called fixed wireless. 

"In this intensely competitive environment we are not winning the marketplace in a way that is commensurate with the strengths of our network and connectivity," said Comcast President Mike Cavanagh on the company's earnings call.

Analysts peppered Comcast executives with questions on Thursday regarding its Xfinity-branded broadband and mobile, and how the company will pivot the business.

Cavanagh said that the company had identified a "disconnect" that's translated to slowed growth despite a strong broadband network and related products. He noted the two primary headwinds are "price transparency and predictability and the level of ease of doing business with us."

During last quarter's earnings call, Comcast executives alerted investors that they would shift the company's focus to growing its mobile business following continued losses in broadband.

Comcast's less-than-10-years-old mobile business remained a bright spot during the quarter. Revenue for the unit was up roughly 16% to $1.12 billion, and it added 323,000 lines. There are now roughly 8.15 million total Xfinity Mobile lines. 

On Thursday, CEO Brian Roberts said the company is "clearly facing some challenges, but as you've heard, with a lot of passion."

"The team has a sense of urgency, energy and focus to getting customer pain points resolved," Roberts said. "While this may take a little time to fully take hold, our history of operational execution success would tell you that while sometimes we may not move first, once we get in motion we do it extremely well."

On Thursday, Comcast CFO Jason Armstrong said the company is "in an incredibly strong position to successfully execute on tough decisions we're making in the face of elevated competition in certain areas."

Broadband bloomed as a growth engine for cable companies like Comcast as the cable TV business began its decline. Comcast on Thursday reported 427,000 cable TV customer losses during the first quarter.

Following years of consistent broadband customer growth, especially during the early Covid pandemic lockdown orders when many Americans used home internet for work and school, the green shoots of competing offerings began to take hold.

The key competitive force has been the rise of fixed wireless offerings from Verizon and T-Mobile. There's been the so-called overbuilding of fiber internet, as well as 5G, a fixed wireless high-speed internet offering.

In 2022, Comcast and Charter Communications each reported their first quarterly losses in broadband customer growth.

Last September, Charter unveiled a strategy shift, which centered around new pricing, internet speeds, a push to grow mobile and making customer service changes. CEO Chris Winfrey told CNBC the goal was to remove the longtime negative perception around cable companies.

When Comcast noted the need to shift strategy earlier this year, executives said they would follow Charter's lead in these areas. Comcast recently started to introduce changes to its mobile plans and pricing, and made a new hire.

Comcast Cable President Dave Watson on Thursday said new offers — such as adding a mobile line for free for one year — that were introduced toward the end of the first quarter have already shown benefits.

"It resulted in a great quarter to start with. We're rolling here, and we expect continued acceleration in coming quarters," he said.

Watson also noted upgrades to services for existing customers as "a core piece of our strategy is innovation."

Despite the lack of growth, revenue for the broadband unit is consistently up due to strength in average revenue per user, or ARPU in industry jargon. Analysts questioned if that would take a hit with the strategy shift.

"What we're trying to do is really focus on the pain points in this market," Watson said. "We can execute this tactically, surgically and do not view it as a broad repricing of our base. We think we can still drive healthy broadband ARPU growth, but these initiatives will require some investment, which in turn will impact our ability to grow EBITDA in the near future. But we view the impact as very manageable."

For the first quarter, Comcast's net income was down 12.5% to $3.38 billion, or 89 cents a share, compared with $3.86 billion, or 97 cents per share during the same period a year earlier. Adjusting for one-time items including income tax expenses and costs related to the value of assets, among other items, Comcast reported earnings per share of $1.09. 

Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, were up nearly 2% to $9.53 billion. 

The company's revenue was down slightly to $29.89 billion compared with $30.06 billion in the same period in 2024. 

Revenue was helped by what Comcast refers to as its "growth businesses," including mobile, streaming platform Peacock, the business services unit, residential broadband, studios and theme parks. Comcast is in the process of spinning out its portfolio of cable networks, including CNBC, in a transaction that's expected to be completed this year.

Revenue for the media segment, which includes NBCUniversal, was up about 1% to $6.44 billion, and revenue in the film studios unit rose 3% to $2.83 billion. 

The media unit got a boost from Peacock, with adjusted EBITDA for the segment up 21% to $1 billion driven by the streaming platform. Revenue for Peacock itself was up 16%. The streamer's quarterly loss narrowed to $215 million, compared with a loss of $639 million in the same quarter a year prior.  

Peacock had 41 million paid subscribers, beating analyst estimates of 37.21 million for the quarter, according to StreetAccount. Peacock ended last fiscal year with 36 million paid customers. 

Competitors including Disney and Warner Bros. Discovery have each seen their streaming platforms reach profitability in recent quarters. Streamers have shifted gears to focusing on ad-supported business models and cracking down on password sharing in a bid to reach profitability as Wall Street investors shifted focus to the metric rather than subscriber additions.

NBCUniversal's theme parks revenue was down 5% to roughly $1.88 billion – driven by lower guest attendance during a quarter plagued by the Los Angeles wildfires – weighing down the overall business. 

The company is gearing up for the debut of Universal Epic Universe on May 22, which will be the first major theme park development in Florida in 25 years. In Thursday's release, Comcast called the new theme park its "most ambitious parks experience ever created," with more than 50 attractions.

In August it will also open Universal Horror Unleashed in Las Vegas. NBCUniversal also recently announced plans to build a Universal Theme Park and Resort in the U.K.

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.