- Warner Bros. Discovery reported a profit of $149 million, or 6 cents per share, and revenue of $8.7 billion, compared to a loss of 1 cent per share and revenue of $9.21 billion expected by Wall Street
- The media giant’s pending $110 billion merger with Paramount is on hold as a lawsuit with state attorneys general and the WGA moves to a March 2027 antitrust trial
- WBD shares fell 0.5% in pre-market trading on Thursday following the release of the quarter’s results
Warner Bros. Discovery’s second-quarter profit fell 91% to $149 million, or 6 cents per share, and revenue declined 11% to $8.7 billion as the media giant’s continued progress in streaming was overshadowed by ongoing declines in the linear TV business and lower revenues in its studios business.
Weighing on the results was a 22% decline in ad revenue, driven by the absence of the NBA and continued pay TV subscriber declines, and a 26% drop in content revenue due to lower theatrical, TV and games revenues. WBD also incurred $1.1 billion in “pre-tax acquisition-related amortization of intangibles, content fair value step-up, and restructuring expenses.”
However, streaming was a bright spot, with direct-to-consumer revenue growing 10% to $3.08 billion and profits soaring 75% to $512 million, driven by HBO Max’s international expansion and growth in existing markets, an increased in ad-lite subscribers and content such as “Euphoria,” “House of the Dragon,” “The Pitt” and “Hacks. ”
WBD has joined Netflix and Disney in no longer breaking out streaming subscribers on a quarterly basis, but previously forecast it would exceed 150 million by year end.
Streaming stays strong
Streaming distribution revenue grew 12% to 2.7 billion, driven by HBO Max’s international expansion and growth in existing markets, including new distribution deals.
Ad revenue climbed 9% to $306 million, driven by an increase in ad-lite subscribers. But the company acknowledged the ad business was hurt by the absence of the NBA. Meanwhile, content revenue tumbled 18% to $84 million.
More than 50% of new subscribers selected ad-supported streaming plans during the quarter, bringing its overall global mix to 40%, an increase of 11% year over year.
Looking ahead, WBD expects subscriber-related year over year revenue growth to further accelerate in the second half of the year and remain healthy into 2027, driven by its content lineup, continued engagement growth, robust global advertiser demand and ongoing product improvements. It also remains confident in its long-term streaming margin target of more than 20%.
Studios continue to struggle
Studios profit dropped 89% to $96 million and revenue fell 39% to $2.33 billion, which was primarily driven by a 41% decline in content revenue.
Theatrical revenue tumbled 46% on lower box office revenue compared to the performance of “A Minecraft Movie,” “Sinners,” and “Final Destination Bloodlines” in the prior year quarter. The only major releases this quarter were “Lee Cronin’s The Mummy” and “Mortal Kombat II.”TV revenue plunged 45%, primarily driven by lower intercompany content licensing due to the timing of renewals. Games revenue slid 45% on the release of “LEGO Batman: Legacy of the Dark Knight.”
Despite the results, WBD’s studios unit remains on track to generate over $3 billion in profit in the medium to long-term. The film and television library has generated, on average, approximately $5 billion of revenue annually
over the last few years.
Its film slate for the second half of 2026 includes “Dune: Messiah,” “Practical Magic 2,” “Digger” starring Tom Cruise in his first original film in nearly a decade, and “The Cat In The Hat,” the first release from the revitalized Warner Bros. Pictures Animation.
Meanwhile, the 2027 film slate includes “F.A.S.T.” from Taylor Sheridan, “Oceans” starring Bradley Cooper and Margot Robbie, “Man of Tomorrow” from James Gunn, a follow-up to “A Minecraft Movie,” “The Great Beyond” from J.J. Abrams, “The Lord of the Rings: The Hunt for Gollum,” and WBPA’s “Bad Fairies” and “Margie Claus.”
Beyond 2027, the slate will include the theatrical event film “Aegon’s Conquest” from the Game of Thrones universe, the next installment of “The Matrix,” the next Batman film and a live-action Jetsons film starring Jim Carrey.
On the TV side, Warner Bros. has over 80 active shows produced for more than 20 third-party and our company-owned platforms. Warner Bros. TV Group expects 2026 to be an inflection point, with more first-run deliveries to streaming
platforms than broadcast and cable combined for the first time. Executives said it is “well positioned” to grow volume and profitability in 2027.
Additionally, WBD expects games to more meaningfully contribute to studios profitability as its pipeline expands, including the second installment of “Hogwarts Legacy.” Its releases during the second quarter, which included “LEGO Batman: Legacy of the Dark Knight” and mobile game “Game of Thrones: Dragonfire,” marked the first launches under its refocused gaming strategy centered on four core IPs.
Lastly, it expects the debut of HBO Max’s upcoming Harry Potter series to boost demand for its related experiences and consumer products, including the opening of the new Harry Potter Tour in Shanghai next year and the Harry
Potter Land in Abu Dhabi in the next few years. WBD said its “actively exploring” new locations to expand its Global Experiences and Retail footprint, as well as ways to leverage other franchises in its portfolio.
Linear networks feeling the pressure
Global linear network profits declined 4% to $1.45 billion and revenue fell 17% to $4 billion.
The results were driven by a 10% decrease in domestic linear pay TV
subscribers, which was offset by a 1% increase in domestic affiliate rates, and a 9% drop in content revenue due to the timing of third party licensing deals.
The segment was also weighed down by a 27% drop in ad revenue, largely due to a 17% decline in domestic audiences from the absence of the NBA. That was offset by the broadcast of the NCAA March Madness Final Four and Championship
in the current year, as well as the absence of the NHL Stanley Cup Finals broadcast.
Paramount deal in limbo
The latest quarterly results come as the company’s pending $110 billion merger with Paramount Skydance has been put on hold after a group of 12 state attorneys successfully pushed the company to delay the deal until the conclusion of its antitrust trial.
A 12-day trial has been scheduled to start March 2, 2027, which will put Paramount on the hook for over $1 billion in ticking fees. The 25 cent per share fee, which takes effect starting Oct. 1, translates to to a payout of roughly $650 million per quarter, or $7 million per day, until closing.
Paramount said it would push the closing of the merger back until five days after the outcome of a trial, or June 1, 2027, whichever comes earliest. Per the terms of the merger, the outside date is March 4, 2027, though it includes an automatic one-time extension that would push back the deal’s deadline to June 4, 2027, if all closing conditions except for regulatory approvals and governmental orders have been satisfied or waived. In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.
In addition to the state AGs and WGA, a Paramount shareholder and a group of consumers filed separate lawsuits to block the merger, though the latter was dismissed by a judge.
Despite the lawsuits, the deal already received approval from the U.S. Department of Justice, Warner Bros. shareholders and the United Kingdom’s Competition and Markets Authority. U.K. Secretary of Culture, Media and Sport Lisa Nandy and The European Commission also cleared the deal with conditions.
Other countries where the deal has received clearance or where relevant waiting periods have expired include Australia, Austria, Brazil, Canada, China, Kuwait, Saudi Arabia, Serbia, South Africa, Ukraine, Montenegro, New Zealand, and North Macedonia. Foreign direct investment authorities in Spain, Germany, Slovenia, Belgium, Czechia, Italy, France and Romania have also signed off.
More to come…
