December 20, 2025 — Communication Services stocks head into the final stretch of 2025 with a rare mix of forces pulling in different directions at once: platform-driven advertising growth, mega-deal consolidation in streaming and media, and regulator-heavy telecom transactions that can reshape fiber, wireless, and spectrum markets in 2026.
The sector is broad by design. The State Street Communication Services Select Sector SPDR ETF (XLC)—a widely used proxy—spans interactive media & services, entertainment, media, and telecom. Its latest published holdings snapshot shows Meta Platforms and Alphabet as the largest weights, alongside a fast-changing entertainment/media block that now includes Warner Bros. Discovery among the top positions. [1]
Below is what matters most as of Dec. 20, 2025, pulling together today’s headlines, near-term forecasts, and the themes investors are using to frame 2026.
Where the Communication Services sector stands right now
If you want a quick “sector map,” XLC’s published allocations underscore a key point: Communication Services is not a telecom-only story anymore—it is increasingly a digital platform + entertainment story.
State Street’s data shows XLC’s industry allocation leaning toward:
- Interactive Media & Services (the “platform” bucket: social, search, etc.)
- Entertainment (streaming, studios, games)
- Media (including legacy and hybrid media)
- Smaller slices of diversified and wireless telecom services [2]
And the top holdings list illustrates why mega-cap platform earnings can dominate “sector” performance:
- Meta Platforms (largest weight)
- Alphabet Class A & Class C
- Warner Bros. Discovery
- Netflix
- Disney
- Comcast
- Omnicom, Electronic Arts, Take-Two (advertising + gaming mix) [3]
On fund characteristics, State Street’s page lists XLC with 23 holdings, a 0.08% gross expense ratio, and a recent NAV datapoint around the mid-$116 range (as of Dec. 18) along with forward valuation and growth estimates. [4]
The takeaway: Communication Services into 2026 looks less like one sector and more like three businesses sharing one label:
- Digital ads & discovery (Meta, Alphabet)
- Streaming/media consolidation (Netflix, Warner, Disney, Comcast)
- Connectivity and spectrum (Verizon, AT&T, T-Mobile and related deals)
Today’s biggest news catalysts for Communication Services stocks
1) Meta: boardroom change, monetization experiments, and “news traffic” risks
A Reuters report dated Dec. 19 says Dina Powell McCormick has resigned from Meta’s board after roughly eight months, with the possibility she may remain in an advisory capacity; Meta reportedly does not plan to fill the seat. [5]
Separately, a Guardian report this week says Facebook is testing limits on link-sharing for non-paying users, with a prompt to subscribe to Meta Verified for expanded sharing privileges—raising fresh concerns among publishers about referral traffic. [6]
Why this matters for investors:
- It reinforces a pattern: platforms are pressure-testing new monetization levers (subscriptions, paid features) even as they continue to benefit from a large ad market.
- It also highlights a recurring tension: engagement and monetization strategies that work for the platform can reduce distribution value for news and media partners, a second-order risk for parts of the media ecosystem (and, indirectly, ad inventory dynamics).
2) Netflix–Warner Bros. Discovery: the deal that’s redefining “media” valuations
The Communication Services storyline that keeps generating new angles is the proposed Netflix–Warner combination and the hostile counterpressure around it.
Reuters has reported Netflix reaffirmed its position on its Warner Bros. Discovery deal, even after a hostile bid emerged, while flagging expectations of regulatory scrutiny and explaining how the deal fits Netflix’s competition narrative (including comparisons to YouTube’s share of U.S. viewing). [7]
Warner Bros. Discovery itself published a release on Dec. 17 saying its board recommends shareholders reject Paramount Skydance’s tender offer and reiterates support for the Netflix combination. [8]
AP coverage has framed the broader implications as potentially transformative for streaming competition and content economics, including what gets bundled, what remains separate, and what regulators might scrutinize. [9]
And today, the Wall Street Journal profiled Netflix co-CEO Ted Sarandos’ expanded influence in Hollywood in the wake of the Warner deal, underscoring how strategic and cultural this consolidation moment is—not just financial. [10]
Why this matters for Communication Services investors:
- It’s a live test of how markets will value legacy cable vs. studios vs. streaming platforms.
- It raises the probability that 2026 becomes a year of more asset separations, spinouts, and consolidation—not less.
3) Comcast’s “Versant” spinoff: a valuation yardstick for shrinking cable assets
Comcast’s planned cable-network spinoff has moved from concept to tradable reality in “when-issued” form, giving investors an early read on what the market is willing to pay for a portfolio of linear networks.
Barron’s reports that Versant Media Group began when-issued trading ahead of a formal separation targeted for Jan. 2, 2026, with full trading starting Jan. 5, 2026, and that early pricing implied a modest valuation consistent with a challenged cable ad/subscriber outlook. [11]
Comcast’s own Dec. 3 release similarly outlines the mechanics and timing of the separation and when-issued trading window. [12]
Why this matters beyond Comcast:
- Versant’s early valuation effectively becomes a real-time benchmark for how markets might price the cable pieces in other deals—especially the Netflix–Warner structure, which also treats legacy networks differently than streaming/studio assets.
4) Telecom deal flow and regulation: Verizon–Frontier, AT&T spectrum, and consolidation scrutiny
Telecom is the “steady cash flow” corner of Communication Services—until it isn’t. Regulatory approvals, state conditions, and spectrum deals can materially change forward cash flows and capex needs.
Two notable developments around Verizon’s Frontier acquisition:
- New York’s Department of Public Service announced on Dec. 18 that the PSC approved Verizon’s acquisition of Frontier Telephone, including commitments such as investment and expansion elements. [13]
- Light Reading reported Dec. 18 that California approval was “inching” closer, potentially paving the way for a decision in early 2026, with conditions being a focal point. [14]
On spectrum and competitive scrutiny:
- Reuters reported Dec. 18 that Sen. Elizabeth Warren and Rep. Greg Casar raised concerns about EchoStar’s spectrum deals involving AT&T and SpaceX, urging FCC/DOJ review over competition implications. [15]
Why this matters for 2026:
- Verizon–Frontier is about fiber scale, bundling, and long-term churn economics.
- Spectrum reshuffling could change the competitive playing field (and the regulatory temperature) for wireless pricing power and network investment.
Forecasts and outlooks shaping 2026 expectations
The advertising forecast: growth is up, but concentration is the headline
A key tailwind for Communication Services—especially Meta and Alphabet—is the ad market outlook.
WARC’s Global Ad Forecast (Q3 2025) says:
- Global ad spend is projected to grow 7.4% in 2025 to $1.17 trillion.
- 2026 ad spend is expected to accelerate to 8.1% growth, reaching $1.27 trillion.
- WARC also emphasizes that online platforms capture the vast majority of incremental ad dollars, concentrating growth among the largest digital players. [16]
For Communication Services stocks, this is the core “platform premium” argument:
- If ad growth holds and remains concentrated, the largest platforms can keep compounding—even if broader consumer sentiment is mixed.
The AI-driven market narrative: still dominant, but big allocators are getting cautious
Communication Services is deeply entangled with the AI investment cycle—both through ad targeting/automation and through capex-heavy infrastructure demands.
On the bullish side, Reuters reported Dec. 15 that Citi set a 2026 year-end S&P 500 target of 7,700, explicitly arguing AI remains a key theme and expecting strong earnings to support further gains. [17]
On the cautionary side, the Financial Times reports today that AustralianSuper (A$400 billion) plans to reduce its global equities allocation in 2026, citing concerns about the sustainability and concentration of the AI-led rally and the sensitivity of inflated tech assets to rates. [18]
For Communication Services investors, the “AI question” in 2026 is less “will AI matter?” and more:
- Who can translate AI into monetization without margin erosion?
- How much valuation can stay supported if rates or risk appetite shift?
Communication Services stocks: what to watch next
Here are the practical, near-term signposts that could move the sector narrative fast:
Regulatory calendars and deal mechanics
- Netflix–Warner: the direction of regulatory scrutiny, deal structure tweaks, and any shift in competitive definitions (streaming vs. broader video attention markets). [19]
- Verizon–Frontier: state-by-state conditions, integration expectations, and whether regulators push additional commitments before closing. [20]
Valuation discovery for “legacy media”
- Versant trading dynamics may influence how markets price cable-network cash flows across the industry—especially in scenarios where those assets get spun, sold, or carved out. [21]
The ad cycle and platform policy shifts
- WARC’s forecast supports a constructive ad baseline, but platform changes (like link-sharing limits or other distribution tweaks) can quickly alter the media ecosystem and political scrutiny. [22]
Telecom competition and spectrum politics
- The EchoStar–AT&T/SpaceX scrutiny is a reminder that spectrum is not just an asset—it’s a political and regulatory battleground, and that can influence timelines and deal terms. [23]
Bottom line for Dec. 20, 2025
Communication Services stocks are heading into 2026 with strong top-line narratives (advertising growth, global platform scale) colliding with structural change (streaming consolidation, cable carve-outs) and regulatory friction (telecom deal approvals and spectrum oversight).
For investors and readers tracking the sector, the cleanest way to think about 2026 is to stop treating “Communication Services” like a single bet. It’s a basket where:
- Platform ad economics can remain powerful if forecasts hold, [24]
- Media consolidation can re-rate assets quickly, but brings execution and antitrust risk, [25]
- Telecom can look stable—right up until regulation, spectrum, or M&A reshapes the competitive map. [26]
References
1. www.ssga.com, 2. www.ssga.com, 3. www.ssga.com, 4. www.ssga.com, 5. www.reuters.com, 6. www.theguardian.com, 7. www.reuters.com, 8. ir.wbd.com, 9. apnews.com, 10. www.wsj.com, 11. www.barrons.com, 12. www.cmcsa.com, 13. dps.ny.gov, 14. www.lightreading.com, 15. www.reuters.com, 16. www.warc.com, 17. www.reuters.com, 18. www.ft.com, 19. www.reuters.com, 20. dps.ny.gov, 21. www.barrons.com, 22. www.warc.com, 23. www.reuters.com, 24. www.warc.com, 25. www.reuters.com, 26. dps.ny.gov
