Warner Bros. Discovery, Inc. Series A
WBD · Nasdaq
Next quarter
Reports Nov 5, 2026.
Consensus is $0.02 EPS for Sep 2026 across 7 estimates, ranging -$0.04 to $0.10.
WBD Jun 2026
- 146.15%
- -$0.13
- $0.06
- —
- $8.72B
Reported results
- $8.72B
- $237.00M
- 2.72%
- $149.00M
- $0.06
Highlights
- Earnings beat: Diluted EPS was $0.06 versus consensus of -$0.13, a $0.19 beat and 146.15% reported surprise; net income available to WBD was $149 million.
- Revenue pressure: Revenue fell 11% year over year to $8.72 billion, or 12% ex-FX, versus $9.81 billion, with advertising down 22% to $1.72 billion and content down 26% to $1.83 billion.
- Streaming momentum: Streaming revenue rose 10% ex-FX to $3.08 billion and Adjusted EBITDA increased 63% ex-FX to $512 million, supported by global HBO Max expansion and ad-lite subscriber growth.
- Linear and Studios drag: Global Linear Networks revenue declined 17% ex-FX to $3.99 billion and Adjusted EBITDA fell 5% to $1.45 billion, while Studios revenue dropped 39% to $2.33 billion and Adjusted EBITDA fell 89% to $96 million.
- Improved operating result: Operating income was $237 million versus a $185 million loss a year earlier and a $2.47 billion loss in Q1, although net income was well below the prior-year $1.58 billion, which benefited from a $3.0 billion debt extinguishment gain.
- Cash generation weakened: Operating cash flow declined to $848 million from $983 million, while free cash flow fell 19% to $572 million; separation and transaction-related items reduced quarterly free cash flow by approximately $350 million.
- Debt refinancing completed: WBD repaid its $15 billion bridge loan with $13 billion of dollar Term Loan B and €1.7 billion of euro Term Loan B, ending the quarter with $29.7 billion of net debt and 3.4x net leverage.
- Merger uncertainty increased: The proposed PSKY acquisition remains subject to antitrust litigation, with a joint 12-day trial scheduled for March 2-19, 2027; defendants agreed not to close before the earlier of five days after a merits ruling or June 1, 2027.
Analysis
Warner Bros. Discovery’s second quarter was an earnings beat but not a clean operating quarter. Diluted EPS of $0.06 exceeded consensus of -$0.13, while operating income improved to $237 million from a $185 million loss a year ago and a $2.47 billion loss in Q1. Revenue, however, fell 11% year over year to $8.72 billion, or 12% ex-FX, and declined modestly from $8.89 billion in Q1. Net income available to WBD was $149 million, down from $1.58 billion a year ago, when results included a $3.0 billion debt extinguishment gain.
The defining positive was Streaming: revenue grew 10% ex-FX to $3.08 billion and Adjusted EBITDA rose 63% ex-FX to $512 million as HBO Max expanded internationally. That progress was offset by a weak content slate and the absence of the NBA. Studios revenue fell 39% to $2.33 billion, while Global Linear Networks revenue declined 17% to $3.99 billion. Cash generation also softened, with free cash flow down 19% to $572 million, despite the completion of the $15 billion bridge-loan refinancing. The quarter also left the PSKY transaction facing a lengthy antitrust process, making merger timing a central consideration alongside the underlying streaming transition.
Quarterly financial performance
WBD converted a difficult first quarter into positive operating income, but the year-over-year comparison remained mixed. Revenue declined to $8.72 billion from $9.81 billion, while operating income improved to $237 million from a $185 million loss. Net income available to WBD fell to $149 million from $1.58 billion because the prior-year quarter included a $2.96 billion gain on debt extinguishment. The current quarter also included approximately $1.1 billion of pre-tax acquisition-related amortization, content fair-value step-up and restructuring expenses.
- Operating improvement: Operating income increased by $422 million year over year and by roughly $2.7 billion from Q1’s $2.47 billion loss.
- Adjusted EBITDA: Consolidated Adjusted EBITDA declined 4% reported, or 6% ex-FX, to $1.88 billion; Streaming growth was more than offset by Studios and Global Linear Networks declines.
- Revenue mix: Distribution revenue increased 1% to $4.95 billion, but advertising fell 22% to $1.72 billion and content fell 26% to $1.83 billion.
Streaming momentum
Streaming was the quarter’s clearest operating bright spot. Revenue increased 10% ex-FX to $3.08 billion, with subscriber-related revenue up 10% ex-FX to $3.00 billion. Distribution revenue rose 11% ex-FX to $2.69 billion as HBO Max expanded globally through new markets and distribution deals. Advertising revenue increased 8% ex-FX to $306 million as the ad-lite subscriber base grew, although the absence of the NBA reduced the growth rate by 16% ex-FX.
- Profit expansion: Streaming Adjusted EBITDA increased 63% ex-FX to $512 million from $293 million.
- Cost discipline: Costs of revenue were broadly flat at $1.90 billion as higher international content costs were offset by programming mix.
- Investment: SG&A rose 14% ex-FX to $663 million, primarily from marketing tied to international HBO Max launches and higher overhead.
Studios and linear networks
The two larger legacy businesses supplied the principal offset to Streaming. Studios revenue declined 39% ex-FX to $2.33 billion, driven by a 46% drop in theatrical revenue against the prior-year success of A Minecraft Movie, Sinners and Final Destination Bloodlines. Television revenue fell 45% because of the timing of intercompany licensing renewals, while Games revenue rose 45% following the release of LEGO Batman: Legacy of the Dark Knight. Studios Adjusted EBITDA fell to $96 million from $863 million.
- Linear distribution: Global Linear Networks distribution revenue declined 9% to $2.27 billion as domestic linear subscribers fell 10%, partly offset by a 1% increase in domestic affiliate rates.
- Linear advertising: Advertising revenue fell 27% to $1.43 billion, reflecting a 17% domestic audience decline and the absence of the NBA, which reduced the year-over-year growth rate by 20% ex-FX.
- Sports comparison: The NBA’s absence reduced advertising revenue by $414 million but lowered costs of revenue by $760 million, helping limit the Adjusted EBITDA decline to 5% at $1.45 billion.
Cash flow and refinancing
Cash conversion weakened even as reported operating income recovered. Cash from operations was $848 million versus $983 million a year ago, and free cash flow declined to $572 million from $702 million. Higher net content investment was partly offset by lower tax payments and working-capital timing. Separation and transaction-related items had an approximately $350 million negative impact on free cash flow, compared with approximately $250 million in the prior-year quarter.
- Debt replacement: WBD used a $13 billion dollar Term Loan B and a €1.7 billion euro Term Loan B to repay its $15 billion bridge facility in full.
- Liquidity: The company ended June with $3.4 billion of cash, $33.1 billion of gross debt and an undrawn $4.0 billion revolving credit facility.
- Leverage: Net debt was $29.7 billion and net leverage was 3.4x; the new term loans mature in 2033 and carried a weighted average debt cost of 5.2% at quarter-end.
PSKY merger litigation
The proposed acquisition by Paramount Skydance remained unresolved during and after the quarter. WBD stockholders approved the transaction in April, but a coalition of twelve state attorneys general and the Writers Guild of America filed antitrust complaints in July seeking to block it. The court entered an order on August 4 for a single 12-day trial covering both cases from March 2 through March 19, 2027. Defendants have agreed not to complete the merger until the earlier of five days after a merits determination or June 1, 2027, while the merger agreement allows termination if closing has not occurred by March 4, 2027, subject to specified extensions.
- Consideration: The agreement provides for $31.00 in cash per WBD Series A share, plus ticking consideration if closing occurs after September 30, 2026.
- Break fees: Specified termination circumstances could require WBD to pay PSKY a $3.0 billion termination fee and reimburse the $2.8 billion Netflix termination fee, while PSKY could owe WBD a $7.0 billion fee.
- Operating constraint: PSKY’s obligation to close is subject to WBD not completing the proposed separation of Streaming and Studios from Global Linear Networks or declaring a separation dividend.
