Shares rose 3% in morning trade.

Viacom Chief Executive Bob Bakish credited the U.S. ad rebound to "the strategy we have been executing for the last two years," including new tools Viacom offered as part of its Advanced Marketing Solutions division that helped advertisers better target viewers, as well as growth in branded content.

Talks with CBS Corp to recombine are continuing with a deal expected shortly, people familiar with the matter have said.

Last week, the two companies, both controlled by Sumner and Shari Redstone's National Amusements Inc, agreed to a management structure that will see Bakish become the CEO of the new company.

Viacom on Thursday did not provide any details on the merger talks.

A deal still rests on valuation, people familiar with the matter said. Viacom's financial results will likely be in its favor as it demonstrates how the company is in a much different position than it was when an attempt to recombine failed last year.

Viacom has staged a turnaround at its Paramount Hollywood studios, with a slate of 16 films including a sequel to the hit "Top Gun" and another "Terminator film next year.

It has purchased and rapidly expanded a free streaming site Pluto TV, whose viewership has risen to 18 million monthly visitors from 12 million when it was purchased in January.

It has accomplished what few thought was possible in a world where viewership at its cable channels has sunk - an advertising rebound.

Viacom said domestic advertising revenue rose 6% to $976 million, boosted by advanced advertising tools and branded content sales.

Revenue from the filmed entertainment division, which includes Paramount Pictures, rose 14% to $877 million, above estimates of $855.7 million.

Net income attributable to Viacom rose to $544 million, or $1.35 per share, in the third quarter ended June 30, from $522 million, or $1.29 per share, a year earlier.

Total revenue rose to $3.36 billion from $3.24 billion, beating the average estimate of $3.33 billion, according to IBES data from Refinitiv.

Excluding items, the company earned $1.20 per share, above the average estimate of $1.07 per share.

Viacom reaffirmed its forecast of full year revenue growth in the low-to-mid-single-digits percentage on a constant currency basis.

(Reporting by Munsif Vengattil in Bengaluru and Kenneth Li in New York; Editing by Saumyadeb Chakrabarty and Bill Trott)

By Kenneth Li and Munsif Vengattil