新聞集團 (NWSA) 2027 財年第一季法說會：EBITDA 成長 19%

重點摘要

• 新聞集團（News Corp）公布 2027 財年第一季營收為 23 億美元，年增 6%；整體部門 EBITDA 則成長 19%，創下第一季歷史新高的 4.03 億美元。
• 整體部門 EBITDA 利潤率擴張 180 個基點至 17.7%。列報 EPS 自 0.20 美元升至 0.29 美元，調整後 EPS 則自 0.22 美元增至 0.28 美元。
• 道瓊（Dow Jones）、數位房地產服務（Digital Real Estate Services）與圖書出版（Book Publishing）部門 EBITDA 合計成長 24%，鞏固了其作為新聞集團三大核心成長引擎的地位。
• 道瓊營收成長 8% 至 6.3 億美元，部門 EBITDA 成長 11% 至 1.6 億美元。純數位訂閱數成長 10%，達到近 650 萬。
• 數位房地產服務獲利成長最為強勁：儘管房地產市況疲弱，營收仍成長 10% 至 5.29 億美元，部門 EBITDA 更大增 34% 至 2.12 億美元。
• 管理層預期道瓊營收表現將持續強勁且利潤率將進一步擴張，同時強調全財年自由現金流在季節性上仍偏重於下半年。

核心財務數據

業務與營運表現

道瓊

道瓊第一財季營收創下歷史新高，EBITDA 連續第 15 個季度實現年成長。專業資訊業務營收成長 5%。

在客戶成長、產品拓展、定價、業務量提升以及追加銷售（upselling）帶動下，風險與合規（Risk & Compliance）營收成長 11% 至 1.04 億美元。道瓊能源（Dow Jones Energy）營收成長 8% 至 7,900 萬美元，客戶留存率約為 90%，且淨新增預訂額創下自 2022 財年收購以來最高的第一季增幅。

新聞發行營收成長 4%，其中數位發行成長 6%。純數位訂閱數成長 10% 至近 650 萬，季增約 21.9 萬。在科技與金融需求帶動下，廣告營收成長 9% 至 9,300 萬美元。數位廣告成長 12%，佔廣告營收的 70%。

管理層表示，道瓊仍朝著法說會上提出的 10 億美元 EBITDA 目標穩步邁進。

數位房地產服務

REA 營收成長 13%，按固定匯率計算則成長 5%。澳洲住宅業務成長反映了價格調漲、產品滲透率提高與附加產品的挹注。收益率（Yield）提升 8%，可控收益率更成長 14%，抵消了全澳新購房屋掛牌量下滑 2% 以及雪梨與墨爾本下滑 16% 的部分壓力。

Realestate.com.au 該季平均每月不重複訪客達 1,150 萬人次，每月造訪量達 1.37 億次。REA 於 9 月完成出售 REA India，這意味著新聞集團自第二財季起財報將不再計入該業務。REA 亦同意以 4.09 億澳幣（約 2.9 億美元）收購 Distilled 35% 的股權。

Realtor.com 營收成長 5% 至 1.6 億美元，寫下連續第八個季度成長。Real Pro Select、精選房源變現能力提升以及營收多元化推動了此成果。相鄰類別（包括新屋、租賃與賣方）佔營收比重達到 23%。

潛在客戶開發量下滑 11%，反映出房市景氣以及轉向更高品質潛在客戶的策略。管理層表示，AI 支援的工作流程效率提升促進了獲利改善。根據 comScore 數據，Realtor.com 每位不重複用戶的造訪次數為 4.9 次，年增 8%。

圖書出版

哈潑柯林斯（HarperCollins）營收成長 9%，部門 EBITDA 成長 29%。一般大眾圖書與兒童出版的新書發行支撐了需求，同時比較基期亦受惠於前一年同期與一家獨立經銷商相關的呆帳沖銷。

數位營收成長 6%，其中在 Spotify、Audible 及新書推動下，有聲書成長 13%。長銷書（Backlist titles）佔消費者營收的 66%，前一年同期為 65%。由於版稅增加、印製成本上升以及新書行銷費用增加，成本成長 7%。

新聞媒體

在廣告市況艱困以及搜尋與社群演算法環境變化的影響下，新聞媒體營收下滑 1%。《泰晤士報》（The Times）該季底數位訂閱數達 68.6 萬，成長 7%；澳洲數位訂閱數則維持在 116 萬。

管理層強調了新聞集團的直接流量與目標網站流量。該公司全美網路媒體每月不重複用戶數達 2.49 億，其中《紐約郵報》（New York Post）為 8,400 萬，realtor.com 為 6,600 萬。直接流量依然是《華爾街日報》（The Wall Street Journal）最主要的流量來源。

管理層展望

• 道瓊：管理層預期營收表現將持續強勁、維持紀律性的再投資，並進一步擴張利潤率。
• REA：該業務將聚焦於新產品、產品功能提升、相鄰服務與成本效益。10 月房屋掛牌量年減 13%，若扣除少一個工作日的影響後年減 8%。
• Realtor.com：儘管房貸利率居高不下且美國房市景氣疲弱，管理層仍計劃追求持續的營收成長並擴大獲利規模。
• 圖書出版：管理層表示基本面趨勢維持健全，但預期成本將會提高以支撐強勁的新書出版計畫。
• 新聞媒體：該公司預期走勢將大致與第一財季相仿，包括持續推展《加州郵報》所產生的適度遞增成本。
• 自由現金流：管理層將第一季較疲弱的現金流歸因於資本支出時點、營收帳款收現時程以及哈潑柯林斯庫存增加。管理層對全年度強勁的自由現金流仍具信心，且現金流通常在季節性上偏重於下半年。

風險與關注焦點

• 高利率持續壓抑房市交易活動。Realtor.com 身處房貸利率高於 7% 的市場，而 REA 則面臨掛牌量減少的挑戰。
• 新聞媒體仍面臨廣告市況疲弱以及搜尋與社群演算法變化的風險。
• 中東衝突影響了道瓊能源的業務動能，不過管理層指出潛在業務管道正持續改善。
• 在供應鏈疑慮下，哈潑柯林斯增加了庫存以確保年底假期供貨無虞，進而加劇了第一季營運資金的壓力。
• 新聞集團持續對 AI 平台未經授權使用版權內容提出爭訟。管理層表示正對 Perplexity 與 Brave 採取法律行動，並預計近期將收到 Anthropic 15 億美元圖書和解協議的第一筆款項。

分析師問答重點

AI 授權與智慧財產權

執行長羅伯特·湯姆森（Robert Thomson）表示，新聞集團正與數家 AI 平台展開積極談判，包括需要最新內容來改良模型與產品的垂直專業提供商。他表示，在協議簽署完成後，財務效益應會反映在新聞集團的帳目上。該公司目前已與 OpenAI 及 Meta 建立合作夥伴關係。

AI 驅動的效率與產品

新聞集團並未量化 AI 帶來的成本節省金額。財務長拉瓦尼亞·錢德拉謝卡爾（Lavanya Chandrashekar）表示，AI 正被應用於工程研發、品質測試、客戶服務、數據分析、財務營運與行銷等領域。

管理層亦在數位房地產、有聲書以及低成本文字與語音翻譯中看見了產品機會。REA 與 realtor.com 正合作開發 AI 應用，旨在改善仲介、買方與賣方的體驗。

搜尋流量與數位廣告

管理層表示，新聞集團的指標性品牌與直接流量，使其有別於依賴通用搜尋內容的出版商。《華爾街日報》的廣告成長獲得科技與金融客戶的支撐，而直接造訪依然是其主要流量來源。

自由現金流時點

管理層將該季現金流壓力歸因於營收集中在該季最後一個月，導致帳款收現遞延至第二財季，以及哈潑柯林斯庫存增加與資本支出時程的影響。公司對全年度強勁的自由現金流仍抱持信心。

法說會全文逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Welcome to News Corp's First Quarter Fiscal 2027 Earnings Conference Call. Today's conference is being recorded. Media will be allowed on a listen-only basis. [Operator Instructions] At this time, I would like to turn the conference over to Michael Florin, Senior Vice President and Global Head of Investor Relations. Please go ahead.

Michael Florin

Thank you very much, operator. Hello, everyone, and welcome to News Corp's Fiscal First Quarter 2027 Earnings Call. We issued our earnings press release about 30 minutes ago, and it's now posted. On the call today are Robert Thomson, Chief Executive; and Lavanya Chanchashaker, Chief Financial Officer. We have some prepared remarks, and we'll be happy to take questions from the investment community. .

This call may include certain forward-looking information with respect to News Corp's business and strategy. actual results could differ materially from what is said. News Corp's Form 10-K and Form 10-Q filings identify risks and uncertainties and that could cause actual results to differ and contain cautionary statements regarding forward-looking information. Additionally, this call will include certain non-GAAP financial measurements such as total segment EBITDA, and adjusted segment EBITDA and adjusted EPS. The definitions and GAAP to non-GAAP reconciliations of such measures can be found in the earnings releases for the applicable periods posted on our website.

With that, I'll pass it over to Rob Thomson for some opening comments.

Robert Thomson

Thank you, Mike. Following a year of record revenue and record profitability in fiscal 2026, we began the new fiscal year with our first quarter revenue, 6% higher than prior year at $2.3 billion. while total segment EBITDA surged 19% to $403 million. Our positive results were bolstered by strong performances across our 3 growth engines, Dow Jones, Digital Real Estate Services and Book Publishing, which saw a collective segment EBITDA increase of 24% compared to the prior year, even though economic conditions were volatile with conflict in the Middle East, tariff turbulence and interest rate increases. And our margin for the quarter was 17.7% compared to 15.9% in the same quarter last year, while Star earnings per share were $0.29 compared to $0.20 a year ago, and adjusted EPS were $0.28 compared to $0.22. The 19% increase in total segment EBITDA marked 14 consecutive quarters of growth and we have also reported 13 consecutive quarters of year-on-year revenue increases on a continuing operations basis. .

Our company has been transformed over the past decade of the digital age, and we believe the business is primed for further growth in the age of AI when trusted sources will inevitably become more valuable and consumers and companies will be able to prompt agents to seek out those sources. In the Agentic age, individual agents will be potentially free of the political bias and media myopia that characterize some old school digital aggregators and will seek out sources that provide tangible value. We are traversing an era that rapidly exposes the femoral but which rewards companies with a cogent and coherent tech trajectory. Business is ultimately transactional. And digital drops, superficial slop is not the concrete insight sought by companies or the brilliant books sold by readers or property intelligence sought by families making the most important investment buying a home. And we have network now, meaning that those 3 growth areas are clearly more than the sum of their prosperous parts. In the U.S., we have just experienced an election, which has inevitably prompted politicization of everything from water to wattage. At least, there has been more focus on the integrity of inputs necessary in the AI age and we believe our content is an absolutely essential input.

Often lost in a debate is that intelligent content is actually the essence of AI. Infrastructure is not AI, silicon is not I Water is not AI. These are but necessary components. AI runs on created content, and we create that core intelligence. That intelligence is dependent on the content that our journalists, our writers, our teams across the world and across cultures create day after day, minute after a minute. So we, as a company, play a crucial role in creating the inputs that are contributing to the extraordinary outputs that people are experiencing. The outputs enhancing so much of the personal and of the professional. They are value-added experiences, and we are creating that core value and we do so with core values. As for the AI platforms, we note that anthropic has signaled with fanfare its intent to IPO in the near future. Publishers have serious concerns about Antropic's unlicensed use of copyrighted content to power its AI tools.

Consistent with our woo and sue strategy, we remain vigilant about protecting our IP. We will not tolerate any abuse of our IP and more broadly, the undermining of the very value of creation and creativity in our society. As we journey, and some other people stumble into the AI age, News Corp is no peripheral participant. We are a primary provider of the essential ingredients AI companies need to operate thoughtfully and productively. We are glad to have principal partners in OpenAI and Meta and others who appreciate the crucial role our inputs play. So we remain optimistic that other platforms will choose compensation over conversation, principal over plunder, and that they will understand that digital [indiscernible] is inimical to their own interests.

Turning to our segments. Dow Jones once again posted robust results with first quarter revenue rising 8% year-on-year to $630 million. while EBITDA increased 11% to $160 million, marking the 15th consecutive quarter of year-on-year EBITDA growth. Margin expanded by 80 basis points to 25.4% compared to the prior year, and we remain focused on building our high-margin professional information business. The Risk & Compliance business increased revenue 11% over the prior year, and the recent spate of painful fines for prominent financial institutions highlights the need to minimize risk and maximize compliance. The Dow Jones Energy business expanded 8% despite the Middle East conflict that inevitably had an impact on our activities. The team has pivoted savvily in the circumstances, and we are seeing a potent revenue pipeline that we expect will become more obvious later in the year. The news business saw circulation revenue expand 4% for the first quarter versus prior year, with digital volumes rising 10% to average nearly 6.5 million subscriptions during the period.

Advertising demand particularly across tech and finance helped fuel 9% revenue growth period overall with digital advertising achieving double-digit growth for the fourth consecutive quarter at 12%. And Elmar and Dowl Jones team remain firmly on track to reach the $1 billion EBITDA target that was outlined at the Dow Jones Investor briefing earlier this year. Speaking of investor briefings. Cam McIntire and the REA leadership team just held a particularly successful Investor Day in Australia and highlighted the company's revenue resilience and growth potential even in a market experiencing short-term disruption. Core messages, whether AI should be an accelerator for growth providing enhanced services for agents, sellers and buyers, and that the company has increased yield markedly even in times of a lagged listings growth and elevated interest rates.

Overall, in the Digital Real Estate Services segment, revenues for the first quarter rose 10% to $529 million and EBITDA surged 34% to $212 million. as REA and realtor.com both showed their structural strength in markets that were challenged. That excellent performance, obviously, augurs well for our company when market conditions become less hostile and more specious. At REA, revenues rose 13%, benefiting from high yield and the positive impact of a stronger currency despite a 2% national decline in listings. The team continued to sharpen their strategic focus by completing the sale of REA India to Orem and by agreeing to take a 35% stake in Distilled, the leading multi-vertical digital marketplace in Ireland, where our company has a strong media presence and we'll be able to deploy that network to enhance the business.

In the U.S., realtor.com defied a depressed market, posting its eighth consecutive quarter of top line revenue growth at 5% and achieving considerable gains in profitability. In a housing market constrained by 7% plus mortgage rates Damian and the team have exhibited exceptional discipline in their operational focus and AI integration. And that approach has converted revenue growth into meaningful bottom line expansion. They also continue to lead the industry in engagement with 4.9 visits per unique user in Q1 according to comScore, well above their competitors, while realtor.com remains the leading publisher of residential real estate news in the world's largest property market. In Book Publishing, revenues for the first quarter rose 9% to $582 million, while profitability surged 29% to $75 million. And our margins rose to 12.9% compared to 10.9% in the prior year. Audio books delivered a sterling performance with 13% year-on-year growth, propelled by a global partnership with Spotify and by a focus on enhancing audio as a higher-yielding listening event.

We had a plethora of successful titles, including Ann Patris Whistler, Rebecca Kwan's Type story and Daniel Silvers Ransom. We were delighted to reincarnate one of AgateChristi's most indomitable and encourageable characters Ms. Maple, thanks to the talented Luciole in the intriguing novel Murder At The Grand Alpine Hotel. The enduring breadth of our catalog will be on full display in the second quarter, including the knockout success of Silvestor Stallone's The Steps, which debuted as a #1 seller at the end of September. We are excited about titles from Brian Kilmed, Baba King Silver and Veronica Roth, As well as [indiscernible] much awaited adaptation of the Magician's Nephew, the CS Lewis Classic, which should benefit from extensive promotion ahead of the Fibra Premier. In the meantime, the late great Jeffrey Archer has had customer success with Adamaniv, which became an immediate best seller.

News Media continues to navigate complex market pressures including a challenging advertising environment and the ongoing evolution of the search and social algorithm landscape. As mentioned earlier, that search landscape will change dramatically with the advent of agentic AI. Revenues for the segment declined slightly versus prior year to $540 million, while EBITDA was $18 million for the quarter, which included modest investments in both the California Post and News24, our Australian-based broadcast network whose global reach has expanded rapidly. In the U.K., the Times grew digital subscribers by 7% to finish the quarter with 686,000 subs while advertising at TalkSport benefited from vibrant streaming growth. Thanks in part to the World Cup. Advertising would have benefited further had England as it should have made the final. In Australia, total digital subscribers held at $1.16 million, while digital ARPU remained resilient.

The New York Post is preparing to celebrate a notable milestone later this year, the 225th anniversary of its founding by Alexander Hamilton. And it has rarely been in such strong financial shape, having previously suffered decades of losses before the recent turnaround, which was built on a still study print subscription business and the material expansion of digital revenues. Our strong first quarter performance is a testament to the company's collective focus on higher margins and our determination to develop digital businesses with recurring revenues and promising prospects. These qualities have clearly set us far apart from other media companies or what you might call trade media. And some of that trade media has indeed become tragic media.

At News Corp, we remain committed to driving growth and profitability while exercising judicious cost discipline and prudent capital stewardship with the clear goal of creating value for all our shareholders. In this quest, we are grateful for the astute leadership of our Chair, Lachlan Murdoch and our Board of Directors. We also recognize the enduring residents of our Chairman Emeritus, Rupert Murdoch, and lowered the commitment and creativity of our employees around the world.

And now I turn to our Chief Financial Officer, Lavanya Chandrashekar for further insight into an excellent quarter for the company.

Lavanya Chandrashekar

Thank you, Robert, and good afternoon to everyone. Our first quarter results demonstrate the continued strength and resiliency of the business and its consistent earnings power. We delivered another quarter of double-digit profit growth with increased profit margins led by our core growth engines. We achieved record first quarter profitability marking our 14th consecutive quarter of year-over-year total segment EBITDA growth on a continuing operations basis. Our focus on operational efficiency has driven meaningful margin expansion and we continue to see substantial runway for further improvement. We have posted updated slides highlighting our first quarter performance, along with the trending schedule to the Investor Relations section of the News Corp website.

As I mentioned last quarter, while we believe many in the investment community appreciate that News Corp has a very valuable portfolio of assets and treat at a discount to net asset value, with which we certainly agree. We are also continuing to deliver profit growth at a faster rate than most companies in our peer group, including those in the information services sector. We have demonstrated strong earnings and free cash flow power built in financial flexibility and a clear focus on maximizing value. Turning to the quarter. Revenue for the quarter were $2.3 billion, up 6% year-over-year, and total segment EBITDA was $403 million, up 19%. And margins expanded by 180 basis points to 17.7%. Our core growth engines, Dow Jones, Digital Real Estate Services and Book Publishing, continued to generate outsized performance and collectively grew segment EBITDA by 24% this quarter. On an adjusted basis, revenue increased 4%, and total segment EBDA grew 13%. The Earnings per share were $0.29 compared to $0.20 in the prior year. Adjusted EPS were $0.28, up from $0.22.

Turning to Dow Jones. This was a record first quarter with revenues of $630 million, growing 8% year-over-year. Digital revenues represented 85% of total segment revenue, up from 84% in the prior year. Risk and Compliance revenues increased 11% to $104 million, supported by customer growth, product expansion and pricing. We continue to see growth in both feed and platform revenue including for value-added solutions, such as advanced screening and monitoring and investigative research. The majority of incremental revenue growth this quarter was driven by higher volume and product upsells. At Dow Jones Energy, as anticipated, revenues grew 8% to $79 million, improving from the prior quarter rate supported by an improved pipeline of new business. We had the highest first quarter increase in net new bookings since the acquisition in fiscal 2022. Customer retention remains very strong at approximately 90%. Other Information Services revenues declined 4%, lapping the resolution of a customer dispute in the prior year.

Overall, Professional information business revenues increased 5%. In the news business, circulation revenues grew 4%, while digital circulation increased 6%. We continue to optimize yield and posted accelerated year-over-year and quarter-over-quarter growth in digital direct subscription ARPU and expect further improvements in fiscal 2027. Digital circulation represented 76% of total circulation revenue compared to 75% in the prior year. Digital-only subscription grew 10% year-over-year to nearly 6.5 million with sequential net adds of approximately 219,000 benefiting from the timing of enterprise subscription deals topped the highest sequential net adds in almost 3 years. Advertising revenue increased 9% to $93 million, driven by 12% growth in digital advertising, while print grew 4%. Both improving from the prior quarter rate. Growth was led by strong performance in the technology and finance categories. Digital advertising represented 70% of total advertising revenue, up 2 percentage points from the prior year.

Dow Jones segment EBITDA for the quarter grew a healthy 11% to $160 million, with margins increasing to 25.4% and improving by 80 basis points versus the prior year. Turning to digital real estate. Segment revenues were $529 million, up 10% reported and 4% on an adjusted basis. Segment EBITDA was $212 million, up 34% reported and 23% on an adjusted basis, benefiting from strong profit contributions at both REA and at realtor.com. REA revenue grew 13% and 5% in constant currency. Growth was driven by the Australian residential business, led by price increases increased depth penetration and growth in add-on products, resulting in 8% growth in yield or 14% growth in controllable yield. The growth was partially offset by lower listing volumes and geo mix. National new buy listings in the quarter fell 2%, with Sydney and Melbourne down 16%. Very importantly, realestate.com.au averaged 11.5 million monthly unique visitors and 137 million monthly visits for the quarter, nearly $100 million more than the nearest competitor.

As a reminder, News Corp's results include the revenue and losses from REA India this quarter. The divestiture of this business closed in September, and our results starting the second quarter will no longer include REA India. During the quarter, REA announced an agreement to take a 35% stake in distant, which is the leading multi-vertical digital marketplace operator across Ireland and Northern Ireland, an owner of Ireland's #1 property portal Jaf.ie. The investment is expected to be AUD 409 million or approximately USD 290 million. Please refer to REA's earnings release for more details. The presentation materials and a webcast from the recent Investor Day are posted on REA'S website for your reference.

In the U.S. realtor.com continued to make very strong progress this quarter despite the difficult U.S. property market conditions with revenues rising 5% to $160 million, driven by strong execution and lapping tougher year ago comparisons. And importantly, realtor continues to demonstrate improved profitability as it realizes further cost efficiencies through the integration of AI into its workflow. Realtor has now grown revenues 8 straight quarters, an impressive trend given the macro environment. This quarter, revenue performance was driven by the growth in Real Pro Select, its premium marketing solution for top-performing agents and teams. Strong demand for and increased penetration of Real Pro Select continued to drive higher yields, complemented by a strategic focus on higher-priced listings, which offer greater monetization potential. We continued to diversify the revenues with adjacencies, comprising new homes, rentals and sellers increasing to 23% of revenues. Lead volume declined 11% impacted by the broader market conditions, coupled with the repositioning of customer acquisitions to higher quality and higher value leads.

Importantly, revenue per existing homes sold, a proxy for yield rose 25% compared to quarter 4, 2022. Based on comScore for the first quarter, realtor.com continues to lead the industry in engagement with 4.9 visits per unique user, increasing 8% year-over-year and maintaining substantial leads over Redfin and Homes.com.

Turning to Book Publishing. HarperCollins posted another strong quarter. Revenues grew 9% to $582 million, outperforming recent industry trends. Segment EBITDA was $75 million, up 29% year-over-year driven by the strong top line performance and lapping the bad debt write-off related to an independent distributor in the prior year. On an adjusted basis, revenue and EBITDA increased 8% and 29%, respectively. Costs increased 7% this quarter, driven by higher royalties, manufacturing and marketing expenses related to new frontlist releases. Results were driven by strong demand for new releases in general trade and children's. Digital revenue at HarperCollins grew 6% with titles such as [indiscernible] Whistler driving strong growth at both Spotify and Audible, leading to a 13% increase in revenue from audio books. This quarter, the backlist contributed 66% of consumer revenues compared to 65% last year.

At this time, we continue to anticipate the commencement of the anthropic settlement payments in the near term. At News Media. Revenues declined 1% to $540 million as challenging advertising conditions were partially offset by currency favorability of the Australian dollar. Segment EBITDA was $18 million, down $12 million year-over-year which included disciplined investment at the New York Post and tougher trading conditions.

Turning to free cash flow. First quarter free cash flow was impacted by the timing of working capital and capital spending. We continue to be focused on driving strong free cash flow. And as a reminder, our free cash flow generation tends to be second half weighted due to seasonality. Turning to the outlook. At Dow Jones, we expect continued strong revenue performance, and we will support this growth with disciplined reinvestment and expect continued margin expansion. REA continues to be focused on driving value in the marketplace through new offerings, product enhancements and adjacencies while pursuing cost efficiencies. October listings were down 13% year-over-year but down 8%, removing the impact of 1 less working day. At realtor, despite difficult housing conditions due to higher rates, we remain focused on driving continued revenue growth and scaling profitability.

At Book Publishing, overall trends remain healthy. Like the first quarter, we expect higher cost to support a strong front list program. At News Media, we expect broadly similar trends to quarter 1, including modest incremental costs compared to the prior year related to the continued rollout of the California post.

With that, I'll turn it over to the operator for Q&A.

Operator

[Operator Instructions] Our first question comes from Brent Penter with Raymond James.

分析師問答

Brent Penter

Just a couple on AI. Robert, you talked about the value of your content as an AI input. As you evaluate the AI deals that you've done so far, how do you think about the value you're getting out of those deals relative to a potential opportunity cost? And what have you learned from those deals? And then you also quickly mentioned agentic AI. So just as muse becomes a bigger topic -- how do you feel you're positioned for people using Agent AI to manage their consumer subscriptions?

Robert Thomson

Brent, first of all, we feel we're very well positioned in the agentic age and the agents themselves will be seeking out individual stories and servicing them, which is certainly more beneficial to us than what you might call egregious aggregation. We're in active negotiation on several fronts, and those talks with AI platforms are progressing well. Clearly, we can't reveal any details of confidential deals. But once they are concluded, you'll be able to see the impact in our accounts very clearly. There's no doubt, we already have important partnerships with OpenAI and Meta. And apart from the other large players, which you might call horizontal platforms, we're in discussion with specialist verticals who need our content and our immediacy to freshen their models and create compelling products for their specialist clients. As for litigation, we do expect the first tranche of the $1.5 billion Atopic book settlement to be received in the near term, as Lavanya indicated. And we still have issues with Antropic, we have cases against the perplexing perplexity and the not so Bravura brave. I noticed that New York Times has also brought an action against brave this week. .

And I would emphasize that not only are we pursuing companies that still our content, but also taking it in at those companies, which knowing we purchase that per line content. They are obviously receiving stolen goods and should cease and desist. As for the subscription cancellation issue, look, if making it difficult for subscribers to cancel is a core part of your strategy then clearly, you have a problem and you need a new strategy. You should be making it impossible for people to subscribers that is to cancel by exceeding their expectations and delivering quality journalism that provides unique insights and absolute value and that's our strategy.

Michael Florin

Thank you, Brent. Mariana, we'll take our next question, please.

Operator

Our next question comes from Ailsa Lei with UBS.

Ailsa Lei

My question is on the higher year-on-year CapEx. If you could please give more color on what drives the spend and how we should be thinking about the rest of FY '27.

Lavanya Chandrashekar

Sure, Ailsa. Thank you for the question. The CapEx increase in this quarter was entirely driven by timing. We continue to be very confident in our ability to deliver strong free cash flow for the year.

Michael Florin

Thank you, Ailsa. Mariana, we'll take our next question, please.

Operator

Our next question comes from Entcho Raykovski with Evans and Partners.

Entcho Raykovski

I've also had a question related to free cash flow. I mean, given it was a little bit weaker in the quarter. And I also appreciate the seasonality. But can you provide a little bit more color around the timing factors which drive the working capital movements in the quarter. So putting CapEx to 1 side, obviously, the operating activities cash was quite a bit lower Yes. So some further color would be appreciated.

Lavanya Chandrashekar

Thanks, Entcho. Yes, so I'll give you a little bit more color. I mean like other than the CapEx timing, the other thing that impacted free cash flow this quarter was the timing of working capital. And so what do I mean by the timing of working capital? It's really 2 things. One is from a revenue perspective, more of our revenue was weighted into the back -- the last month of the quarter. And that was really good news coming from the strength of the both the Dow Jones business as well as HarperCollins. And so obviously, that money gets collected in the second quarter. And then the second thing was a slight increase on inventories at HarperCollins again this is to -- given all of the supply chain issues that we -- that people are having, if this was really to make sure that we protected our ability to have an outstanding holiday season on HarperCollins. As you said, our cash flow does tend to be more second half weighted due to seasonality free cash flow continues, remains a key focus for us in terms of value expansion, and I am very confident that we will generate strong free cash flow for the year.

Michael Florin

Thank you, Entcho. Mariana, we'll take our next question please.

Operator

[Operator Instructions] Our next question comes from Craig Huber with Huber Research.

Craig Huber

I've got a couple of questions on AI, if I could, please. Can you just -- is it possible for you to quantify for us AI cost savings at your company, either at 1 or 2 segments or maybe for the whole company? I mean how significant are AI cost savings for you, right, like an annual run rate or something like that? And then secondly, where are you the most excited about using AI to enhance your products and services.

Lavanya Chandrashekar

I'll do the first part of your question, Craig. We're not quantifying cost savings. What I would say is that we are focused on driving cost efficiencies in a disciplined manner, always protecting the long-term strength of the business. And AI is increasingly becoming a tool and a capability that allows us to do so. I mean, 1 of the -- a few examples maybe is what I can give you. One, I mean, obviously, in terms of our product development in terms of engineering, folding quality testing, et cetera, that's definitely a place where we're seeing -- I mean, our teams are using AI. They're extraordinary curious about being able to do so, they're doing so in a disciplined and with the right card rails, but that is driving efficiencies. Customer service is another area where we are definitely driving efficiencies. Also anything which is automated -- being able to automate certain data analytics kind of work -- what I would say stepping back, I'd say that we're actually using AI across all of our functions across all of our business units. You see it in operations, you see it in finance operations. You see it in marketing. And so I mean, this is an extraordinarily curious and driven organization and the ability to use AI to drive both top and bottom line growth is enormous.

I'll hand it off to Robert to talk about the second part.

Robert Thomson

Yes, Craig. Look, in terms of products, really right across the company. We are talking to each other, creating new experiences, new interfaces for our customers, for our clients. And if you look, for example, at digital real estate, AI is going to enhance the real estate experience, not undermine. And we'll ensure that we use our understanding of the market, our unique data sets. Our unique real estate at a trial to leverage AI to the benefit of the customers. And that's a guiding principle both real and REA. And those 2 companies are talking to each other virtually every day about the implementation of new AI applications. And just 1 other -- 1 of many other examples, AI and HarperCollins and audio books. Obviously, we're seeing Spotify innovate as is Audible and AI is going to really provide a role in helping to bring books to live through these vivid voices and the ability to generate a compelling audio experience that makes the book even more valuable. It really does transform audio books. So there's so many more choices in reading voices, sound effects and other techniques and tools and creativity that will bring words to life. And don't forget as well how AI will enable much more cost-effective translations. And the multiple languages, both in text and audio and thus, reach new audiences and generate new revenue.

Michael Florin

Thank you, Craig. Mariana, we will take our next question, please.

Operator

Our next question comes from Douglas Wardlaw with JPMorgan.

Unknown Analyst

Robert, we've heard from some publishers in Internet platforms this earnings season about the headwinds from search traffic and AI overlays. Your digital stayed at double digits. So maybe you're seeing something different. Can you speak to engagement trends generally or just a test of your digital advertising growth over the past few quarters?

Robert Thomson

Yes, Doug, we're very fortunate that our companies are destination sites. And at a couple, we've actually seen recent increases in traffic to some of the larger sites. And so our experience is rather different to those sites, which rely on what is called evergreen content, that is sites thinking that endless lists or gardening or food would fatten their traffic. Well, those sites have definitely been on a digital diet in the AI age. Generic does not flourish as synthesis proliferates. So the Evergreen turned out to be rather seasonal and has been withering on the vine. For example, our larger sites, realtor, REA, Bible Gateway are different types of experiences in that we -- at a monthly level, we have 249 million uniques in the U.S. so it's a huge audience, but it's also a network, 84 million at the New York Post. 66 million realtor, for example. And so hard news specialist intelligence, unique expertise remain huge traffic drivers. And these really are our strengths.

And as I say, we do have a particularly potent network effect. So for example, realtor dot-com can drive traffic to viable gateway, which can drive traffic to WSJ.com and New York Post and vice versa. So we have our own circular system, which is particularly valuable at this time.

Lavanya Chandrashekar

Yes. I'll just add on Robert in terms of ad revenue growth. we did see notable strength at the Wall Street Journal. And really, it's coming from both the tech sector as well as the finance sector, and it's the kind of the unique positioning that they're able to get by advertising with the journal. And I'd also say that direct traffic at the Wall Street Journal is the -- it's a predominant source of traffic at the Wall Street is direct traffic.

Michael Florin

Thank you Doug, Mariana, we'll take our next question.

Operator

At this time, we have no further questions. I will now hand over to Michael Florin for closing remarks.

Michael Florin

Well, thank you, Mariana and thank you for participating. Have a great day and we'll talk to you all soon. Take care.