- Warner Bros. Discovery reported revenue of $8.89 billion on a loss of $1.17 per share, in line with Wall Street revenue estimates but wider than an expected loss of 9 cents per share, per Yahoo Finance
- The $110 billion Paramount merger secured shareholder approval and remains on track to close by the third quarter
- Shares of the media giant were up 0.2% in after-hours trading following the results
Paramount CEO David Ellison is poised to inherit a streaming and film business from Warner Bros. Discovery that’s firing on all cylinders.
On Wednesday, WBD CEO David Zaslav touted HBO Max as a “global high growth asset,” which was the linchpin of the company’s rationale for pursuing a split of the company. He said he expects it to be a “huge benefit” to Paramount when the merger closes, adding that its combination with Paramount+ will create “an even more robust and compelling consumer experience” — notable as that was the only time he made an explicit reference to the looming $110 billion merger.
On a combined basis, Paramount and WBD will have over 200 million streaming subscribers — putting it within striking distance of Disney’s second place spot but still well behind Netflix’s lead of more than 325 million. On its own, WBD’s streaming business has now surpassed 140 million subscribers and is on track to exceed 150 million by year end.
Wednesday’s results underscore why Paramount was so keen to swoop in and snatch Warner Bros. away from Netflix, and why Ellison believes his company would be significantly stronger with WBD in the fold. If HBO Max keeps its momentum going, it would be a significant boost to Paramount.
WBD’s decision to go with Paramount was reflected in its first-quarter results, where its own performance was overshadowed by charges related to the pending deal, which widened its net loss to $2.92 billion. Those included $1.3 billion in “pre-tax acquisition- related amortization of intangibles, content fair value step-up, and restructuring expenses” and the $2.8 billion termination fee paid to Netflix.
Continued audience declines in its linear networks business and the loss of the NBA also weighed on revenue growth. Total revenue fell 1% to $8.89 billion, driven by a 7% decline in advertising and flat distribution revenue growth, which was offset by a 1% increase in content revenue.
“We’ve said consistently we’re living through a period of historic disruption in media and entertainment. How content is made, how it’s distributed and how it’s consumed is evolving with increasing velocity,” Zaslav told analysts on Wednesday. “When you look across Warner Brothers Discovery today in studios, streaming and global linear networks, each segment of our business is demonstrably more nimble and better positioned for future success than when Warner Brothers Discovery was formed.”
The deal’s not done
Though the Paramount merger has secured shareholder approval, it still remains subject to regulatory approval.
Regulators in the U.K. are gearing up to begin their review of the deal, with its deadline for public comments closing just last week. Paramount has also asked the FCC to approve its foreign investment in the deal, with those investors accounting for 49.5% of the equity of the combined company, and says there’s “no statutory impediments” remaining after the Department of Justice’s Hart-Scott-Rodino review period expired, though the regulator can still get involved at anytime in the process.
In addition to federal and international regulators, a group of U.S. state attorneys general led by California’s Rob Bonta are also reviewing the deal and weighing whether to take legal action against the merger. Bonta previously told TheWrap that “red flags are everywhere when you have a merger of this type” and that the states are prepared to “act timely,” but declined to provide a specific timeline for when a decision could be made.
If the deal is not closed by Sept. 30, WBD shareholders will receive a 25 cent per share “ticking fee” for each quarter until closing. In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.
Executives declined to take analyst questions on the transaction during Wednesday’s earnings call.
Streaming surpasses 140 million subscribers
Streaming was a bright spot, with revenue growing 9% to $2.9 billion, while profit jumped 29% to $438 million.
WBD has joined Netflix and Disney in no longer breaking out subscribers on a quarterly basis, but noted that it exceeded 140 million subscribers during the quarter. It remains on track to exceed 150 million subscribers by year end.
The results were driven by an increase in ad-lite subscribers, a price increase in the previous quarter and HBO Max’s ongoing international expansion, which is “largely complete” following its launches in the U.K., Ireland, Germany and Italy. That was offset by a 27% decline in content revenue due to the timing of third-party licensing deals, the absence of the NBA and a domestic distribution deal renewal in the prior year period.
The absence of the NBA is expected to continue to weigh on advertising revenue in the second quarter. Executives also anticipate a “healthy acceleration” in subscriber-related revenue growth, which will pick up “real pace” starting in the second quarter.
When asked about HBO Max’s engagement going forward, streaming chief JB Perrette told analysts that management sees no signs of a slowdown and that the service is in the “early innings” of growth.
Studio profits and revenue up
Studios also grew revenue 35% to $3.13 billion and profit 156% to $775 million, driven by higher TV and theatrical revenues from increased intercompany and third party content licensing and HBO Max’s international expansion.
Weighing the segment’s results down was the games unit, which saw its total revenue decline 30% as a result of lower library revenue. It continues to make steady progress towards the company’s long-term profit target of at least $3 billion.
Executives said that Warner Bros. Motion Picture Group has re-emerged as an industry leader through a combination of “creative risk-taking, financial discipline, and process transformations from greenlighting to production to distribution” and touted its 11 Academy Award wins in March.
WBD said the number of theatrical releases would ramp up to 14 in 2026 and 18 in 2027. It also reiterated that 2026 would be an inflection point for Warner Bros. Television Group, which will see streaming represent a greater portion of first-run deliveries than broadcast and cable combined for the first time. The Warner Bros. library generates an average of over $5 billion in annual revenues.
Looking at the second quarter, WBD warned that it would face a difficult comparison due to the performance of “A Minecraft Movie,” “Sinners,” and “Final Destination: Bloodlines” in the prior year, as well as an international content licensing deal. For 2026, it expects studio profit to be relatively in line with 2025.
Linear networks drag
Global linear networks continued to be in decline, with revenue falling 8% to $4.38 billion, while profits tumbled 9% to $1.63 billion. The results were driven by a 10% decrease in domestic linear pay TV subscribers, offset by a 2% increase in affiliate rates, the absence of the NBA and the timing of third party licensing deals.
WBD Chief Financial Officer Gunnar Wiedenfels told analysts the company remains very focused on “efficiency management” to offset the declines in linear revenue, noting that AI would become a “more meaningful contributor” to those efforts over time.
In WBD’s shareholder letter, management noted that the overall ad market remains “healthy with scatter CPMs commanding a strong premium to upfront,” but said visibility “remains limited given broader macro uncertainty.” Executives added that they are “actively monitoring the geopolitical and macro environment” and prepared to take appropriate action to help mitigate any potential effects on its results.
In the second quarter, it expects the absence of the NBA to result in a 20% year-over-year hit to ad revenue, which will be offset by the benefit of the NCAA March Madness Final Four and Championship Games and absence of the NHL Stanley Cup Final.
WBD executives said the absence of the NBA would be a benefit to adjusted EBITDA in the first half of 2026 as reduced operating expenses will more than offset the decline in ad revenue. They also noted that all key U.S. distribution renewals were completed in the first half of 2025, securing low single digit affiliate rate increases for its portfolio of networks, including a flat affiliate rate for TNT.
For the full year, WBD continues to expect a high single-digit year-over-year improvement in operating expenses.
