8-K: Warner Bros. Discovery Q2 2026 Earnings: Revenue Drops, Streaming Grows

Warner Bros. Discovery reported a 12% ex-FX revenue decline for Q2 2026, with net income plummeting 91%, though its Streaming segment saw 10% ex-FX revenue growth and a 63% increase in Adjusted EBITDA.

Summary

• Total revenues for the second quarter of 2026 were $8.7 billion, an 11% decrease (12% ex-FX) from the prior year's $9.8 billion.
• Net income available to Warner Bros. Discovery, Inc. was $149 million, a significant 91% decrease from $1.58 billion in the prior year quarter.
• Adjusted EBITDA was $1.9 billion, a 4% decrease (6% ex-FX) compared to the prior year quarter.
• Cash provided by operating activities was $848 million, down 14% from $983 million.
• Free cash flow was $572 million, a 19% decrease from $702 million.
• The company ended the quarter with $3.4 billion in cash and $33.1 billion in gross debt, resulting in a net leverage ratio of 3.4x.
• The Streaming segment showed strength with a 10% ex-FX revenue increase to $3.1 billion and a 63% ex-FX increase in Adjusted EBITDA to $512 million.
• The Studios segment experienced a significant 39% ex-FX revenue decrease to $2.3 billion, with Adjusted EBITDA falling 89% ex-FX to $96 million.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to significant revenue and net income declines, despite some segment-specific growth. The ongoing merger uncertainty also weighs on the outlook.

Positives

• Streaming segment revenues increased 10% ex-FX to $3.1 billion, driven by subscriber-related revenue growth.
• Streaming Adjusted EBITDA surged 63% ex-FX to $512 million, with margins improving to nearly 17%.
• Distribution revenues in the Streaming segment increased 11% ex-FX due to global expansion and new distribution deals.
• Advertising revenue in the Streaming segment increased 8% ex-FX, driven by growth in global ad-lite subscribers.
• Games revenue in the Studios segment increased 45% ex-FX due to the release of LEGO Batman: Legacy of the Dark Knight.
• Global Linear Networks general entertainment delivery grew 5%, the first quarter of growth since 2022.
• CNN platforms saw a 19% year-over-year increase in total minutes spent, with linear viewership growing 24%.
• The company successfully refinanced its $15 billion bridge facility with new term loan facilities, expecting approximately 150 bps of annual interest cost savings.

Negatives

• Total revenues decreased 11% to $8.7 billion (12% ex-FX) compared to the prior year quarter.
• Net income available to Warner Bros. Discovery, Inc. plummeted 91% to $149 million from $1.58 billion.
• Advertising revenues across the company decreased 22% ex-FX, significantly impacted by the absence of the NBA.
• Content revenues decreased 26% ex-FX, primarily due to lower theatrical revenue at the Studios segment.
• Studios segment revenues decreased 39% ex-FX to $2.3 billion, with content revenue down 41% ex-FX.
• Studios Adjusted EBITDA decreased 89% ex-FX to $96 million.
• Global Linear Networks revenues decreased 17% ex-FX to $3.99 billion.
• Free cash flow decreased 19% to $572 million, unfavorably impacted by higher separation & transaction-related items.

Risks

• The completion of the proposed transaction with Paramount Skydance Corporation may not occur on the anticipated terms or timing, or at all.
• Regulatory approvals for the proposed transaction may not be obtained or may be subject to unanticipated conditions.
• Litigation brought in connection with the proposed transaction could disrupt management time and business operations.
• The announcement or consummation of the proposed transaction could negatively affect customer retention, key personnel, and relationships with suppliers, distributors, and advertisers.
• General economic, political, and market factors could impact the companies or the proposed transaction.
• The absence of major sporting events like the NBA significantly impacts advertising revenue.
• Continued domestic linear pay TV subscriber declines affect distribution revenue in Global Linear Networks.
• The performance of theatrical releases can create quarterly volatility in the Studios segment's financial performance.

Future Outlook

The company expects subscriber-related revenue year-over-year growth rate to further accelerate in the second half of 2026 and remain healthy into 2027. The Streaming segment is expected to achieve long-term 20%+ Adjusted EBITDA margins. The Studios segment is expected to generate over $3 billion in Adjusted EBITDA in the medium to long-term. Global Linear Networks operating expenses are expected to see high-single-digit improvement for the full year.

Management Comments

• "Great storytelling has always been and continues to be the foundation of Warner Bros. Discovery (WBD)."
• "Our ability to consistently deliver compelling, high-quality content that resonates with our increasingly global audience remains a key differentiator and foundational long-term value driver as consumption habits continue to evolve."
• "We delivered healthy revenue growth across all regions during the second quarter, particularly in EMEA with continued subscriber momentum in the U.K., Germany and Italy after successful launches in the first quarter."
• "We see meaningful opportunity to enhance the value of our platform for advertising partners and to drive better monetization through data and format innovation, and improving yield as we continue to increase still lower international fill rates while maintaining our premium positioning."
• "Our focus remains on driving sustainable long-term financial results and we continue to expect the Studios segment to generate over $3 billion in Adjusted EBITDA in the medium to long-term."
• "We remain highly confident that the Paramount merger will be completed."
• "While we plan for the closing of the Paramount merger, we remain squarely focused on delivering on our strategic priorities to continue to transform our business."

Industry Context

StockSavvy.ai notes that Warner Bros. Discovery's results reflect broader industry trends of declining linear TV viewership and subscriber losses, offset by growth in streaming. The significant impact of major sports rights (like the NBA) on advertising revenue is a common challenge across media companies. The ongoing consolidation and strategic mergers, such as the proposed Paramount transaction, highlight the intense competitive landscape and the drive for scale and efficiency in the media and entertainment sector.

Comparison to Industry Standards

• Netflix, a key competitor, has also reported subscriber growth and improved profitability in its streaming segment, though its revenue growth rates can vary.
• Disney's streaming services (Disney+, Hulu) have shown subscriber gains but have also faced profitability challenges, similar to WBD's focus on improving streaming margins.
• Paramount Global, the potential merger partner, has also experienced revenue pressures in its traditional media segments while investing heavily in its streaming platforms.
• The decline in theatrical revenue for WBD's Studios segment is consistent with the broader industry's recovery post-pandemic, which has seen shifts in consumer viewing habits and box office performance variability.
• The 3.4x net leverage ratio for WBD is within a range often seen for large media companies, but requires careful management, especially during periods of significant investment or economic uncertainty.

Legal Proceedings

• Litigation brought in connection with the proposed transaction between WBD and Paramount Skydance Corporation.

Related Party Transactions

• The domestic distribution deal renewal with a former related party in the second quarter of 2025 impacted distribution revenues.

Stakeholder Impact

• Shareholders: The significant decline in net income and revenue, coupled with merger uncertainty, may negatively impact share price and investor confidence.
• Employees: Potential impacts from the ongoing merger process, including integration and restructuring, could affect employment.
• Content Creators/Partners: Continued focus on high-quality content and franchise development aims to maintain strong relationships.
• Advertisers: Resilient demand in some areas, but significant headwinds from major sporting event cancellations affect advertising revenue potential.
• Creditors: The company's debt levels and leverage ratio are key considerations for creditors, though recent refinancing efforts aim to improve financial flexibility.

Next Steps

• Continue to scale HBO Max globally while driving subscriber-related revenue and profitability growth.
• Strategically invest to optimize Global Linear Networks.
• Maintain Studios as an industry leader and further develop high-quality content and franchises.
• Release a diverse slate of films in the second half of 2026, including Dune: Messiah, Practical Magic 2, Digger, and The Cat In The Hat.
• Launch the Harry Potter series on HBO Max later in 2026.
• Expand Global Experiences and Retail footprint, including new Harry Potter Tour in Shanghai and Harry Potter Land in Abu Dhabi.
• Continue to monitor and manage the pending merger with Paramount Skydance Corporation.

Key Dates

Recommendation

While the Streaming segment shows positive momentum and the company has taken steps to improve its debt structure, the overall decline in revenue and net income, significant impact from content and advertising shifts, and the substantial uncertainty surrounding the pending Paramount merger warrant a cautious 'hold' stance. The long-term outlook depends heavily on the successful integration of the merger and continued execution in the streaming segment.

Keywords

Warner Bros. Discovery, Q2 2026 Earnings, Streaming Revenue, Adjusted EBITDA, Studios Segment, Linear Networks, Free Cash Flow, Paramount Merger