Warner Bros. Discovery reported second-quarter results that fell short of revenue expectations, with an $8.72 billion top line that missed the LSEG-compiled estimate of $9.29 billion. The company attributed the shortfall to weak theatrical receipts and softer advertising sales in the quarter.
Studio revenue contracted sharply, down 39% year-over-year. Releases such as "Mortal Kombat II" and "Supergirl" were unable to match the box-office performance of last year’s top grossers, "A Minecraft Movie" and "Sinners." Warner’s film calendar is skewed toward the back half of the year, and the company is counting on larger releases including "Digger" and "Dune: Part Three" to help lift theatrical results later in the year.
Advertising revenue fell 22% in the quarter. The company cited the absence of National Basketball Association broadcasts this year and declines in domestic linear TV viewership as key factors behind the weaker ad sell-through.
Within its networks, the CNN-owned division saw revenue decline 17%. Cost dynamics in that unit helped the overall profit picture: operating expenses at the CNN-owned networks were down 23%, a reduction Warner said reflected the lack of NBA rights costs and lower content spending. Those cost savings contributed to a surprise quarterly profit of $0.06 per share; analysts polled by LSEG had been looking for a loss of $0.13 per share.
Streaming remained the primary bright spot in the quarter. Revenue from the streaming business rose 10%, supported by HBO Max’s international rollout and original programming such as "The Pitt," "Euphoria" and "House of the Dragon," which helped drive subscriber growth during the period. The streaming unit figures prominently in Warner’s talks with Paramount - the company has described the business as central to its proposed $110 billion merger with Paramount, which would combine HBO Max and Paramount+ into a larger streaming footprint.
Regulatory and legal developments around the merger remain mixed. Britain’s Competition and Markets Authority cleared the transaction, saying it was unlikely to harm competition in the country. At the same time, the deal remains the subject of litigation in the United States: California and 11 other states are seeking to block the merger on antitrust grounds. Paramount has agreed to pause the transaction until June 2027, and a federal trial is scheduled for March 2027.
Summary - Warner Bros. Discovery missed quarterly revenue expectations as studio and advertising revenues declined sharply, while streaming revenue increased and cost reductions in news networks helped produce a surprise per-share profit.
- Key points:
- Reported revenue: $8.72 billion vs. LSEG estimate $9.29 billion - primary impact on media and entertainment equity valuations.
- Studio revenue down 39%; advertising revenue down 22%; streaming revenue up 10% - impacts across box office, advertising, and streaming sectors.
- CNN-owned networks revenue down 17% while operating expenses fell 23%, enabling a surprise profit of $0.06 per share versus an expected $0.13 loss.
- Risks and uncertainties:
- Merger legal risk - the proposed $110 billion deal with Paramount faces U.S. antitrust challenges from California and 11 other states, with a federal trial in March 2027; transaction paused until June 2027.
- Box-office concentration risk - the company’s film slate is heavier in the second half of the year, creating dependence on forthcoming releases such as "Digger" and "Dune: Part Three" to restore theatrical momentum.
- Advertising revenue volatility - the absence of NBA broadcasts and declining domestic linear TV audiences contributed to a 22% decline in ad sales, highlighting exposure to sports rights and linear viewership trends.