Warner Bros. Discovery, Inc. (WBD) Earnings

Management highlights

### Core Strategic Direction - The company's overarching goal is to build the world's leading storytelling company centered on creative excellence and high-quality content, which has driven strong operational and financial results across all segments. - Management remains confident that the proposed merger with Paramount Skydance will be completed on schedule. ### Streaming Operational Highlights - The HBO Max turnaround is complete: the business has transformed from a predominantly U.S.-only streaming operation losing over $2 billion annually in 2022 to a profitable global high-growth asset recognized as the highest-quality streaming service globally. - Top HBO original programs average at least 25 million global viewers per episode in 2026, with several exceeding 30 million. WBD led the industry with 150 total Emmy nominations, 122 of which went to HBO Max original programming. - The streaming business is seeing solid double-digit distribution growth, with low teens subscriber growth excluding a previously disclosed related-party transaction. ### Linear Networks Operational Highlights - Premium live sports and trusted news content have driven consistent viewership growth despite ongoing industry headwinds for linear television. - Growth in HBO Max subscriber acquisition is offsetting cyclical linear viewership decline in multiple international markets. ### Studio Transformation Highlights - Management has spent years diversifying the studio segment beyond theatrical film to reduce volatility, including expanding into television production, licensing, consumer products, experiences, and gaming. - Ancillary businesses like consumer products and location-based experiences are now integrated into content development from the initial planning stage, delivering predictable, high-margin cash flow.

Guidance

- Management reaffirmed the long-term target for the studio segment of generating over $3 billion in annual adjusted EBITDA. - Theatrical film output will ramp from 14 films in 2026 to 19 films in 2027, and management expects to maintain this higher level of theatrical output long-term, with a more balanced slate of tentpole IP and original content. - Streaming growth is expected to accelerate further in the third quarter of 2026, and 2026 is on track to deliver the lowest annual churn rate in HBO Max's history, with positive momentum expected to continue into 2027. - 2027 is expected to be a stronger year for HBO original content than 2026, with a deep pipeline of returning hit series and new tentpole IP including the 10-year Harry Potter series debuting on Christmas Day 2026.

Segment performance

1. Global Streaming and Games: Revenue hit over $3 billion for the first time ever. Subscriber-related revenue growth accelerated 200 basis points sequentially to 10% XFX. Adjusted EBITDA reached $512 million, representing a more than 60% improvement year-over-year and a nearly 17% adjusted EBITDA margin. This segment is the company's core growth driver, contributing approximately 39% of total company revenue based on disclosed figures. 2. Global Networks: Linear viewership for CNN increased 24% year-over-year, and total minutes spent across all CNN platforms rose 19%. TNT Sports aired the highest-rated national championship basketball game in its history, with MLB regular season viewership up more than 20% and NHL playoff viewership up 50% year-over-year. Four of the top 10 general entertainment cable shows in Q2 2026 came from WBD network brands, and Discovery's Shark Week achieved its highest year-over-year growth in over a decade. This segment accounts for approximately 41% of total company revenue. 3. Studio: Q2 2026 theatrical film performance underperformed expectations and faced tough comparables against an outstanding Q2 2025 that included large content licensing deals and hit films. Warner Bros. Television is performing strongly, with over 80 shows airing across all major platforms. The diversified studio portfolio (theatrical, television, licensing, games, consumer products, experiences) has improved overall resilience. This segment contributes approximately 20% of total company revenue, with a long-term target of over $3 billion in annual adjusted EBITDA.

Risks & headwinds

- Theatrical film is an inherently hit-or-miss business with unavoidable volatility; 2026 has fewer tentpole films than planned, leading to underperformance in Q2 2026 against tough year-over-year comparables. - Linear advertising demand is softer in international markets in Q2 2026 compared to Q1 2026, with broad consumer weakness and limited visibility into the second half of 2026. The 2026 FIFA World Cup is creating advertising crowding out for non-rights holders including WBD. - The proposed Paramount Skydance merger has experienced repeated delays, which creates operational uncertainty for the company and its employees. - All forward-looking statements related to the merger, future financial results, and content performance are subject to significant external risks and uncertainties that could cause actual results to differ materially from management projections.

Analyst Q&A

• Q: Will there be fewer returning scripted shows for HBO in 2027, and can you update on the content pipeline and major new IP? /

  A: Management stated that 2027 will actually be HBO's strongest content slate to date, with returning hits including White Lotus, The Pit, and The Last of Us, plus the breakout new franchise A Night of the Seven Kingdoms. The 10-year Harry Potter original series is set to debut Christmas Day 2026, with the first three episodes already complete and testing very strongly. International local content production is also gaining traction, driving broader global subscriber growth. Excluding a one-time related-party deal, Q2 2026 distribution growth hit the low teens, a solid trajectory for the rest of the year.

• Q: Can you confirm the number of theatrical films planned for 2026 and 2027, and what would happen if the Paramount Skydance merger does not close? /

  A: WBD will release 14 theatrical films in 2026, ramping to 19 films in 2027, and management is confident it can maintain this higher output long-term by leveraging WBD's large library of existing IP and balanced slate of tentpoles, original films, and animation. CEO David Zaslav reaffirmed that management remains fully confident the merger will close, and the company is currently outperforming the original business plan presented to Paramount Skydance.

• Q: Can you comment on the underlying linear advertising market, and current demand for content licensing from third-party streamers? /

  A: U.S. linear advertising trends remain consistent with Q1 2026, despite an overall 30% drop driven by the NBA contract adjustment. International advertising demand is weaker in Q2 2026 than Q1, and the 2026 World Cup has crowded out ad spend for non-rightsholders. Demand for WBD library content from third-party streamers remains very healthy, with strong margins, as WBD's decades-large content library retains consistent value even for older programming.

• Q: How do you maintain employee focus amid repeated merger delays, and can you update on DC strategy and bundling performance for HBO Max? /

  A: CEO David Zaslav noted that employee focus and culture have remained strong, with 40,000 global employees continuing to prioritize performance and content quality despite the extended merger process. DC's strategy remains on track, with a robust upcoming slate including Lanterns, Clayface, the new Batman film, and Man of Tomorrow. Bundling continues to deliver strong improvements to both subscriber acquisition and retention, and WBD expects 2026 to be its best year ever for lower churn, with additional new bundles launching in Europe and Southeast Asia later in 2026.