Warner Bros. Discovery Inc. reported a challenging financial period, with fourth-quarter revenue declining 6% to $9.46 billion and adjusted earnings before interest, taxes, depreciation, and amortization shrinking to $2.22 billion, though both figures surpassed Wall Street expectations. The first quarter saw the company miss analysts' estimates, posting revenue of $8.9 billion against an $8.91 billion forecast, and a larger-than-expected loss per share of $1.17 compared to estimates of an $0.11 loss. This Q1 net loss included a substantial $2.8 billion termination fee paid by Paramount to Netflix Inc., which Warner Bros. would have to refund to Paramount under certain conditions related to its ongoing merger agreement.
Despite overall revenue falling 3% and an 8% slump in advertising due to the absence of NBA games, Warner Bros. saw robust performance in its streaming and studios operations. Streaming revenue increased 7% to nearly $2.9 billion, with distribution fees up 7% and ad revenue up 19%. Production studios revenue also rose significantly by 31% to about $3.13 billion. However, these gains were overshadowed by the large financial obligation tied to dealings with Paramount and the continued erosion of its traditional TV business, where revenue fell 9% to approximately $4.38 billion, ad revenue was down 12%, and U.S. TV audiences decreased by 8%.
The company is nearing a proposed $110 billion acquisition by Paramount Skydance Corp. However, this merger faces legal challenges, with lawsuits filed by a group of states and the Writers Guild of America seeking to block the deal on antitrust grounds. A 12-day trial for these lawsuits has been scheduled to begin on March 2, 2027, in a California federal court. Amidst these developments, Warner Bros. CEO David Zaslav raised predictions for streaming subscribers, now expecting over 150 million subscribers for HBO Max by the end of 2026.
