Warner Bros. Discovery, Inc. (WBD) Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 revenue was $9.81B (+1% YoY), while Adjusted EBITDA rose 9% YoY to $1.95B, driven by Studios and Streaming; Global Linear Networks declined as domestic linear viewing and ad markets remained soft .
• EPS printed $0.63, a large beat vs S&P Global consensus of -$0.12, largely due to a $3.0B pre‑tax gain on extinguishment of debt; revenue was essentially inline vs consensus, while EBITDA comparisons depend on definition (company Adjusted EBITDA vs SPGI EBITDA)* .
• Streaming added 3.4M subs to 125.7M, but ARPU fell on mix shift; Studios delivered strong films (Minecraft, Sinners, Final Destination: Bloodlines) and TV licensing renewals, lifting segment EBITDA materially .
• Management reiterated Streaming FY25 Adjusted EBITDA of at least $1.3B and introduced Studios FY25 Adjusted EBITDA of at least $2.4B; Global Linear Networks advertising expected to decline faster in Q3 with lighter sports and Olympics comp .
• Near‑term stock catalysts: outsized EPS beat (non‑operational), Studios momentum, Streaming subscriber growth, and clarity around separation financing and interest expense headwinds (bridge loan raises quarterly interest by ~$80M) .

What Went Well and What Went Wrong

• What Went Well

  • Studios performance: segment revenue +55% YoY to $3.80B; Adjusted EBITDA $863M (+$653M YoY), led by theatrical hits (Minecraft, Sinners, Final Destination) and TV licensing renewals .
  • Streaming growth: +3.4M net adds to 125.7M subs; Streaming Adjusted EBITDA improved by $400M YoY to $293M, with distribution +9% and advertising +17% ex‑FX .
  • Debt actions: $2.7B gross debt reduction in Q2, cash $4.9B, net leverage 3.3x; sets groundwork for separation and capital structure optimization .
  • Management quote: “Warner Bros. became the first studio ever to open five consecutive films with more than $45 million in domestic box office,” highlighting creative momentum .

• What Went Wrong

  • Global Linear Networks under pressure: revenues -9% YoY; advertising -13% ex‑FX on 23% domestic audience declines; Adjusted EBITDA -25% ex‑FX to $1.51B .
  • ARPU pressure: global streaming ARPU fell 11% ex‑FX to $7.14 (domestic -8% to $11.16) due to wholesale mix and international expansion .
  • Free cash flow down 28% YoY to $702M on higher cash taxes, timing in working capital, and higher cash interest from tender offer settlement; ~$250M separation‑related items were a headwind .
  • Near‑term guidance headwinds: Q3 advertising set to decline at a higher rate than Q2; no NBA starting Q4 will reduce U.S. advertising and raise cost of revenues transitionally .

Financial Results

Values with asterisks retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Prepared remarks and letter highlights: “Strong creative performance drove a healthy 9% ex‑FX consolidated Adjusted EBITDA year‑over‑year growth,” and Streaming “added over 3.4 million subscribers,” while Studios is “project[ing] at least $2.4 billion of Adjusted EBITDA for the full year” .
• CEO David Zaslav: “Our top strategic objectives have always been clear… to distribute those stories to audiences worldwide through a globally scaled, profitable streaming service,” noting five consecutive $45M+ domestic openings underscoring film momentum .
• CFO Gunnar Wiedenfels detailed distribution restructuring impacts and timing of reacceleration, while JB Perrette emphasized wholesale partnership economics and net ARPU/LTV discipline .
• Separation updates: tender offers and bridge facility execution, interest and tax cash flow implications, and expected one‑time costs through closing .

Q&A Highlights

• Content licensing balance: management reiterated monetization across windows, balancing internal vs external licensing to optimize long‑term shareholder value .
• Wholesale distribution resets: CFO discussed the U.S. HBO Max restructuring, near‑term ARPU/distro impacts and anticipated reacceleration from H2’25 into 2026 with launches in Germany/Italy/UK/Ireland .
• IP/franchise strategy: DC universe rollout (Superman), multi‑year slate development and cross‑category monetization highlighted as growth drivers .
• Financing & leverage: bridge loan economics explained (SOFR + 300–400 bps ladder), monthly interest cadence, and prioritization of FCF deployment between debt paydown and opportunistic repurchases .

Estimates Context

• EPS: Reported $0.63 vs S&P Global consensus -$0.12, a significant beat driven primarily by non‑operational $2.96B gain on extinguishment of debt; core operating loss persisted on GAAP basis .
• Revenue: $9.81B vs $9.82B consensus, essentially inline; segment mix shifted toward Studios and Streaming vs Global Linear Networks .
• EBITDA: SPGI “EBITDA” consensus $1.79B vs SPGI actual $1.39B; note the company reports non‑GAAP Adjusted EBITDA of $1.95B, so direct comparisons depend on definition. Expect sell‑side models to adjust for non‑GAAP/GAAP bridge and debt‑related items*.
  Values retrieved from S&P Global.

Key Takeaways for Investors

• Studios momentum is durable, with at least $2.4B FY25 Adjusted EBITDA now guided and a strong slate/pipeline; this supports medium‑term thesis despite linear headwinds .
• Streaming is scaling efficiently with wholesale/rational pricing features, but ARPU near‑term pressure persists; reiterated ≥$1.3B FY25 Adjusted EBITDA anchors profitability trajectory .
• The EPS beat is non‑recurring: debt extinguishment gains and higher bridge‑related interest/ cash taxes will complicate GAAP optics; focus on Adjusted EBITDA, FCF conversion, and leverage path .
• Near‑term: watch Q3 advertising deceleration and no NBA in Q4; expect Global Linear Networks profitability to be pressured before improving in 2026 when rights costs reverse .
• Separation execution is progressing; capital structure flexibility improved through tender offers, but higher interest cost is a near‑term drag. FCF deployment choices (bridge paydown vs discounted debt repurchase) are pivotal .
• Segment mix shift to Studios/Streaming with strong content performance and international launches should offset linear declines over time; Germany/Italy/UK/Ireland launches are key 2026 catalysts .
• Actionable: trade the narrative around Studios beats and Streaming subscriber momentum vs ad/ARPU headwinds; monitor guidance cadence and call‑outs on distribution resets and licensing strategy in Q3.

Additional References

• 8‑K Item 2.02 and full Q2 press release/exhibits .
• Q1 2025 and Q4 2024 8‑Ks for trend analysis .
• Earnings call transcript (third‑party hosts) .
• Corporate press release page (links to earnings materials) .