Warner Bros Revenue Drops 6%, Spotlight on Deal Talks

• HBO Max streaming revenue grew 5% to $2.8 billion with 3.5 million new subscribers, though adjusted earnings fell 4% to $393 million due to a distribution deal ending
• Traditional businesses struggled significantly: film and TV studio adjusted income dropped 23% to $728 million, while TV network revenue fell 12% to $4.2 billion with adjusted income plunging 27% to $1.4 billion
• The company faces a critical merger decision as its board evaluates whether Paramount's revised offer is superior to the Netflix deal, with Netflix having four business days to counter if a better proposal emerges

Warner Bros Discovery Q4 Earnings Summary

Financial Performance:

Warner Bros Discovery reported a 6% decline in quarterly revenue to $9.5 billion, meeting LSEG consensus estimates. The company faces significant pressure from declining traditional media businesses while navigating a high-stakes bidding war with potential acquirers.

Streaming Bright Spot:

HBO Max added 3.5 million subscribers during the quarter, driven by popular content including "Heated Rivalry" and "It: Welcome to Derry." Streaming revenue increased 5% to approximately $2.8 billion, though adjusted earnings fell 4% to $393 million due to an ended distribution deal.

Traditional Business Struggles:

• Film & TV Studio: Adjusted income plummeted 23% to $728 million. The film studio had no major theatrical releases during the holiday quarter, despite releasing nine #1 box office movies in 2025. TV studio revenue dropped 18% due to content renewal timing.
• Linear Television Networks: Discovery's TV network group experienced severe erosion, with revenue falling 12% to $4.2 billion and adjusted income declining 27% to $1.4 billion, reflecting industry-wide pay TV subscriber losses.

M&A Developments:

Warner Bros remains at the center of competing acquisition proposals. The company's board is evaluating a revised Paramount offer against an existing Netflix merger agreement. The board has not determined which deal is superior but will engage in further discussions. Netflix holds a four-business-day right to revise its offer if a superior proposal emerges.

Market Implications:

Investor focus centers on potential deal outcomes amid accelerating cord-cutting trends and mounting pressure on traditional media businesses.