WBD Q2 Earnings Beat Estimates, Revenues Miss on Studios Weakness

Revenues fell 11.2% year over year to $8.72 billion and missed the consensus mark by 6.19%. The top-line decline reflected sharp weakness in Studios and Global Linear Networks. Streaming was the bright spot, with revenues rising 10% ex-forex and Adjusted EBITDA up 63% ex-forex.

WBD's Revenue Mix Shows Broad Top-Line Pressure

During the quarter, Distribution revenues increased 1% ex-forex to $4.95 billion, supported by global streaming growth but partly offset by domestic linear pay-TV subscriber declines and the HBO Max domestic distribution renewal with a former related party.

Advertising revenues fell 22% ex-forex to $1.72 billion, while content revenues declined 26% to $1.83 billion. The absence of the NBA weighed on advertising, while lower theatrical revenues in the Studios segment drove the content decline.

Warner Bros. Discovery's Streaming Momentum Builds

Streaming revenues increased 10% ex-forex to $3.08 billion. Distribution revenues grew 11% ex-forex, while advertising revenues advanced 8% as global ad-lite subscribers increased. Subscriber-related revenues rose 10% ex-forex to $3.00 billion.

Streaming Adjusted EBITDA climbed to $512 million from $293 million, producing a nearly 17% margin. About 40% of global HBO Max subscribers were on the ad-supported tier at quarter-end, an 11% increase year over year. International streaming advertising revenues jumped 73% ex-forex following HBO Max launches in Germany, Italy, the U.K. and Ireland.

WBD's Studios Results Sink on Tough Comparisons

Studios revenues declined 39% ex-forex to $2.33 billion. Content revenues fell 41%, with theatrical revenues down 46% against the prior-year strength of A Minecraft Movie, Sinners and Final Destination Bloodlines. TV revenues decreased 45% on lower intercompany content licensing.

Games revenues increased 45% ex-forex following the release of LEGO Batman: Legacy of the Dark Knight. Studios Adjusted EBITDA declined 89% ex-forex to $96 million, while operating expenses decreased 24% ex-forex. Management continues to expect the segment to generate more than $3 billion of Adjusted EBITDA in the medium to long term.

Warner Bros. Discovery's Linear Networks Contract

Global Linear Networks revenues fell 17% ex-forex to $3.99 billion. Distribution revenues declined 9%, mainly because domestic linear pay-TV subscribers fell 10%, while domestic affiliate rates increased 1%.

Advertising revenues dropped 27% ex-forex, reflecting 17% domestic audience declines and the absence of the NBA. Global Linear Networks Adjusted EBITDA decreased 5% ex-forex to $1.45 billion despite a 23% reduction in operating expenses. WBD still expects high-single-digit operating expense improvement for the segment in 2026.

WBD's Balance Sheet & Cash Flow

WBD ended the second quarter with $3.37 billion of cash and cash equivalents, $33.06 billion of gross debt and $29.69 billion of net debt. Net leverage was 3.4x. The company refinanced its $15 billion bridge facility with $13 billion and €1.7 billion term loans and expects about 150 basis points of annual interest-cost savings versus the original bridge structure.

Cash provided by operating activities totaled $848 million, while free cash flow fell 19% year over year to $572 million. Free cash flow absorbed roughly $350 million of separation and transaction-related items.

Warner Bros. Discovery Sees Streaming Growth Ahead

Management expects subscriber-related revenue growth to accelerate further in the second half of 2026 and remain healthy into 2027. The company reiterated its long-term Streaming Adjusted EBITDA margin target of more than 20%, while noting that fourth-quarter marketing around Harry Potter could cause quarterly margin volatility.

The second half also includes the planned HBO Max premiere of Harry Potter on Christmas Day. Warner Bros. Discovery remains confident that its pending merger with Paramount Skydance Corporation will be completed, with closing on hold until the earlier of five days after legal proceedings are complete or June 1, 2027.

WBD’s Zacks Rank & Stocks to Consider

Currently, Warner Bros. Discovery carries a Zacks Rank #4 (Sell).

Kontoor Brands KTB, Newsmax Inc. NMAX and Viking Holdings VIK are some better-ranked stocks that investors can consider in the broader Consumer Discretionary sector.

Kontoor Brands, Newsmax and Viking Holdings carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kontoor Brands is slated to announce second-quarter 2026 results on Aug. 12. Meanwhile, Newsmax will report on Aug. 13, and Viking Holdings is scheduled to release results on Aug. 19.

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