Warner Bros. Discovery Stock Rises on Strong Streaming Results
Despite missing revenue expectations, Warner Bros. Discovery (WBD) stock saw a 1% increase in premarket trading on Thursday, driven by strong streaming results in the third quarter.
Revenue Misses Expectations
The media giant reported revenue of $9.62 billion, falling short of Bloomberg consensus expectations of $9.81 billion. This represents a 3% drop compared to the $9.98 billion seen in Q3 2023. The company’s struggles in its studios segment and continued declines in its linear TV business contributed to the revenue miss.
Earnings Beat Expectations
On a positive note, WBD reported adjusted earnings per share of $0.05, surpassing consensus expectations of a loss closer to $0.09 a share. This marks a significant improvement from the loss of $0.17 in the year-earlier period.
Challenges in TV Networks Unit
WBD’s TV networks unit has been a significant challenge for the company, with advertising revenue plummeting 13% year over year. The loss of NBA media rights has further exacerbated these challenges, with Deutsche Bank projecting a potential hit of $560 million to total affiliate revenue in 2026.
Carriage Renewal Deal with Charter Communications
However, a recent carriage renewal deal with Charter Communications, which included WBD’s Max streaming service as part of the package, is expected to help mitigate some of the losses. Analysts believe that replicating this deal with other providers could significantly improve the company’s prospects.
Studios Segment Struggles
WBD’s studios segment saw revenue plummet 17% year over year, primarily driven by lower box office revenue. The performance of ‘Beetlejuice Beetlejuice’ and ‘Twisters’ failed to offset the stronger performance of ‘Barbie’ in the prior year.
Streaming Shines
The company’s streaming segment served as a bright spot, with 7.2 million subscribers added, beating estimates of a 6.1 million net increase. The launch of Max in markets outside of the US, increased bundling with competitors, and key programming such as the second season of “House of the Dragon” and the Olympics contributed to the strong subscriber growth.
Advertising Revenue Soars
Streaming advertising revenue saw a 49% year-over-year jump, while the division posted profits of $289 million in the quarter compared to $111 million in Q3 2023. Recent price hikes, including the boost to ad-free plans on Max in June, have aided profits.
Uphill Battle Ahead
Despite the strong streaming results, WBD stock remains down over 25% since the start of the year. Full-year adjusted EBITDA remains at risk of falling to $9 billion, according to Bloomberg estimates. The company has committed to aggressive cost cuts, which have helped boost free cash flow, but rumors of a potential split of the company’s digital streaming and studio businesses from its legacy linear TV unit continue to swirl.
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