Key facts
- Warner Bros Discovery reported Q2 revenue of $8.72 billion, below the $9.29 billion estimate.
- Studio revenue fell 39% due to weaker box office performance and fewer NBA games.
- Advertising revenue declined 22%.
- The company posted a surprise profit of 6 cents per share, exceeding analyst expectations of a loss.
- Streaming revenue rose 10%.
- The merger with Paramount is facing antitrust challenges and is paused until June 2027.
Warner Bros Discovery fell short of second-quarter revenue expectations, reporting $8.72 billion against an estimated $9.29 billion, primarily due to a significant slump in studio revenue and soft advertising sales. The studio's revenue dropped 39%, impacted by a less successful film slate compared to the previous year and the absence of NBA game broadcasts.
Advertising revenue saw a 22% decrease, attributed to the lack of NBA games and a decline in domestic linear TV viewership. While revenue at CNN-owned networks decreased by 17%, substantial operating expense reductions, including lower content spending and the absence of NBA rights costs, enabled Warner Bros Discovery to achieve a surprise quarterly profit of 6 cents per share, contrary to analyst expectations of a loss.
The streaming division emerged as a positive segment, with revenue climbing 10%. This growth was fueled by the international expansion of HBO Max and popular original series such as "The Pitt," "Euphoria," and "House of the Dragon," which contributed to subscriber increases.
The company's streaming unit is considered crucial for its proposed $110 billion merger with Paramount. The combined platforms, HBO Max and Paramount+, are intended to provide greater scale to compete with major streaming services like Netflix and Disney. However, the merger is currently facing legal hurdles, with antitrust lawsuits filed by California and eleven other states. Paramount has agreed to pause the deal until June 2027, and a federal trial is scheduled for March 2027.