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Warner Bros. Discovery Q1 Earnings Miss Estimates, Revenues Fall Y/Y
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Key Takeaways
Warner Bros. Discovery posted a wider Q1 loss as revenues slipped 1% year over year.
WBD ended Q1 with more than 140M streaming subscribers, up 14% year over year.
WBD's Studios revenue jumped 31% ex-forex, while Global Linear Networks revenue fell 9%.
Warner Bros. Discovery (WBD - Free Report) reported a first-quarter 2026 loss of $1.17 per share, missing the Zacks Consensus Estimate of a loss of 10 cents. The company had reported a loss of 18 cents per share in the year-ago quarter. The quarter's reported GAAP loss was substantially inflated by a $2.8 billion termination fee paid to Netflix in connection with the pending merger with Paramount Skydance Corporation, as well as $1.3 billion in pre-tax acquisition-related amortization and restructuring charges.
Revenues decreased 1% year over year to $8.89 billion, missing the Zacks Consensus Estimate by 0.41%.
Distribution revenues were down 1% ex-forex to $4.91 billion, as underlying growth in global streaming subscribers was offset by continued domestic linear pay TV subscriber declines and the impact of the HBO Max domestic distribution deal renewal with a former related party. Advertising revenues decreased 8% ex-forex year over year to $1.85 billion, as ad-lite streaming subscriber growth was more than offset by the absence of the NBA and continued domestic linear audience declines; the absence of the NBA negatively impacted the year-over-year growth rate by 7% ex-forex. Content revenues were relatively unchanged year over year at $1.89 billion, as higher intercompany content revenues at the Studios segment were offset by higher intercompany eliminations.
WBD ended the first quarter of 2026 with more than 140 million global streaming subscribers, meaningfully exceeding its own guidance threshold and up 14% year over year. Beginning with first-quarter 2026, WBD no longer reports granular subscriber metrics or ARPU on a quarterly basis.
Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise
The Streaming segment reported revenues of $2.89 billion, up 7% ex-forex year over year. Distribution revenues rose 7% ex-forex, driven by continued subscriber growth in existing markets and the global expansion of HBO Max through new distribution deals, partially offset by the domestic distribution deal renewal with a former related party. Advertising revenues increased 19% ex-forex, primarily reflecting growth in global ad-lite subscribers, despite a 5% ex-forex headwind from the absence of the NBA. Streaming Adjusted EBITDA increased 17% ex-forex to $438 million from $339 million in the year-ago quarter, driven by robust topline growth that more than offset higher marketing and content investment tied to HBO Max's international launches.
The Studios segment reported revenues of $3.13 billion, up 31% ex-forex year over year. Content revenues rose 33% ex-forex, with TV revenues increasing 58% ex-forex, primarily driven by higher intercompany content licensing to support HBO Max's international rollout and higher third-party licensing, while theatrical revenues advanced 21% ex-forex on a similar dynamic. Games revenues decreased 30% ex-forex on lower library revenues. Studios Adjusted EBITDA increased 156% ex-forex to $775 million from $259 million in the prior-year quarter, reflecting the step-change benefit of accelerated intercompany content licensing. On a full-year 2026 basis, Studios Adjusted EBITDA is expected to be roughly in line with 2025.
The Global Linear Networks segment reported revenues of $4.38 billion, down 9% ex-forex year over year. Distribution revenues declined 8% ex-forex, primarily driven by a 10% decrease in domestic linear pay TV subscribers, partially offset by a 2% increase in domestic affiliate rates. Advertising revenues fell 12% ex-forex, with the absence of the NBA accounting for 7% of that decline alongside 8% domestic audience declines; underlying advertising trends nevertheless improved 200 basis points sequentially. Global Linear Networks Adjusted EBITDA decreased 10% ex-forex to $1.63 billion from $1.79 billion in the year-ago quarter, though cost discipline helped partially cushion the impact as operating expenses declined 9% ex-forex.
Total Adjusted EBITDA for the first quarter of 2026 was $2.20 billion, roughly flat ex-forex year over year, as gains in the Streaming and Studios segments were offset by the decline in the Global Linear Networks segment.
WBD's Balance Sheet & Cash Flow
Warner Bros. Discovery ended the first quarter of 2026 with cash and cash equivalents of $3.26 billion, compared with $4.57 billion as of Dec. 31, 2025. As of March 31, 2026, the company's $4 billion revolving credit facility remained undrawn. WBD had $3.85 billion drawn on its revolving receivables program, a $150 million increase versus the fourth quarter of 2025. Gross debt stood at $33.4 billion with net leverage of 3.4x compared with 3.3x at the end of the fourth quarter of 2025.
First-quarter 2026 operating activities used $208 million in cash, compared with cash provided of $553 million in the prior-year quarter. Free cash flow decreased to negative $476 million from $302 million a year ago, primarily driven by higher net content investment across the Streaming and Studios segments, higher tax payments and working capital timing, partially offset by lower cash interest payments. Free cash flow was unfavorably impacted by approximately $100 million of separation and transaction-related items. WBD repaid $123 million of Senior Notes during the quarter.
Q2 & Full-Year 2026 Guidance by WBD
WBD remains on track to surpass 150 million global streaming subscribers by the end of 2026.
For the second quarter, the absence of the NBA is expected to represent a 20% ex-forex headwind to advertising revenues in the Global Linear Networks segment, partially offset by a net 400 basis point benefit from the NCAA March Madness Final Four and Championship broadcast.
The previously disclosed domestic distribution deal renewal, which has weighed on distribution revenue growth, is expected to be lapped by the end of May 2026.
For Studios, the second quarter will face a difficult comparison against A Minecraft Movie, Sinners and Final Destination: Bloodlines from the prior-year period.
The pending acquisition of WBD by Paramount Skydance Corporation received shareholder approval on April 23, 2026 and is expected to close during the third quarter of 2026. WBD expects to incur additional transaction-related cash costs through the close of the transaction.
Zacks Rank & Stocks to Consider
WBD currently carries a Zacks Rank #5 (Strong Sell).
View the Zacks #1 Rank List
Image: Bigstock
Warner Bros. Discovery Q1 Earnings Miss Estimates, Revenues Fall Y/Y
Key Takeaways
Warner Bros. Discovery (WBD - Free Report) reported a first-quarter 2026 loss of $1.17 per share, missing the Zacks Consensus Estimate of a loss of 10 cents. The company had reported a loss of 18 cents per share in the year-ago quarter. The quarter's reported GAAP loss was substantially inflated by a $2.8 billion termination fee paid to Netflix in connection with the pending merger with Paramount Skydance Corporation, as well as $1.3 billion in pre-tax acquisition-related amortization and restructuring charges.
Revenues decreased 1% year over year to $8.89 billion, missing the Zacks Consensus Estimate by 0.41%.
Distribution revenues were down 1% ex-forex to $4.91 billion, as underlying growth in global streaming subscribers was offset by continued domestic linear pay TV subscriber declines and the impact of the HBO Max domestic distribution deal renewal with a former related party. Advertising revenues decreased 8% ex-forex year over year to $1.85 billion, as ad-lite streaming subscriber growth was more than offset by the absence of the NBA and continued domestic linear audience declines; the absence of the NBA negatively impacted the year-over-year growth rate by 7% ex-forex. Content revenues were relatively unchanged year over year at $1.89 billion, as higher intercompany content revenues at the Studios segment were offset by higher intercompany eliminations.
WBD ended the first quarter of 2026 with more than 140 million global streaming subscribers, meaningfully exceeding its own guidance threshold and up 14% year over year. Beginning with first-quarter 2026, WBD no longer reports granular subscriber metrics or ARPU on a quarterly basis.
Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise
Warner Bros. Discovery, Inc. price-consensus-eps-surprise-chart | Warner Bros. Discovery, Inc. Quote
WBD's Q1 2026 Details
The Streaming segment reported revenues of $2.89 billion, up 7% ex-forex year over year. Distribution revenues rose 7% ex-forex, driven by continued subscriber growth in existing markets and the global expansion of HBO Max through new distribution deals, partially offset by the domestic distribution deal renewal with a former related party. Advertising revenues increased 19% ex-forex, primarily reflecting growth in global ad-lite subscribers, despite a 5% ex-forex headwind from the absence of the NBA. Streaming Adjusted EBITDA increased 17% ex-forex to $438 million from $339 million in the year-ago quarter, driven by robust topline growth that more than offset higher marketing and content investment tied to HBO Max's international launches.
The Studios segment reported revenues of $3.13 billion, up 31% ex-forex year over year. Content revenues rose 33% ex-forex, with TV revenues increasing 58% ex-forex, primarily driven by higher intercompany content licensing to support HBO Max's international rollout and higher third-party licensing, while theatrical revenues advanced 21% ex-forex on a similar dynamic. Games revenues decreased 30% ex-forex on lower library revenues. Studios Adjusted EBITDA increased 156% ex-forex to $775 million from $259 million in the prior-year quarter, reflecting the step-change benefit of accelerated intercompany content licensing. On a full-year 2026 basis, Studios Adjusted EBITDA is expected to be roughly in line with 2025.
The Global Linear Networks segment reported revenues of $4.38 billion, down 9% ex-forex year over year. Distribution revenues declined 8% ex-forex, primarily driven by a 10% decrease in domestic linear pay TV subscribers, partially offset by a 2% increase in domestic affiliate rates. Advertising revenues fell 12% ex-forex, with the absence of the NBA accounting for 7% of that decline alongside 8% domestic audience declines; underlying advertising trends nevertheless improved 200 basis points sequentially. Global Linear Networks Adjusted EBITDA decreased 10% ex-forex to $1.63 billion from $1.79 billion in the year-ago quarter, though cost discipline helped partially cushion the impact as operating expenses declined 9% ex-forex.
Total Adjusted EBITDA for the first quarter of 2026 was $2.20 billion, roughly flat ex-forex year over year, as gains in the Streaming and Studios segments were offset by the decline in the Global Linear Networks segment.
WBD's Balance Sheet & Cash Flow
Warner Bros. Discovery ended the first quarter of 2026 with cash and cash equivalents of $3.26 billion, compared with $4.57 billion as of Dec. 31, 2025. As of March 31, 2026, the company's $4 billion revolving credit facility remained undrawn. WBD had $3.85 billion drawn on its revolving receivables program, a $150 million increase versus the fourth quarter of 2025. Gross debt stood at $33.4 billion with net leverage of 3.4x compared with 3.3x at the end of the fourth quarter of 2025.
First-quarter 2026 operating activities used $208 million in cash, compared with cash provided of $553 million in the prior-year quarter. Free cash flow decreased to negative $476 million from $302 million a year ago, primarily driven by higher net content investment across the Streaming and Studios segments, higher tax payments and working capital timing, partially offset by lower cash interest payments. Free cash flow was unfavorably impacted by approximately $100 million of separation and transaction-related items. WBD repaid $123 million of Senior Notes during the quarter.
Q2 & Full-Year 2026 Guidance by WBD
WBD remains on track to surpass 150 million global streaming subscribers by the end of 2026.
For the second quarter, the absence of the NBA is expected to represent a 20% ex-forex headwind to advertising revenues in the Global Linear Networks segment, partially offset by a net 400 basis point benefit from the NCAA March Madness Final Four and Championship broadcast.
The previously disclosed domestic distribution deal renewal, which has weighed on distribution revenue growth, is expected to be lapped by the end of May 2026.
For Studios, the second quarter will face a difficult comparison against A Minecraft Movie, Sinners and Final Destination: Bloodlines from the prior-year period.
The pending acquisition of WBD by Paramount Skydance Corporation received shareholder approval on April 23, 2026 and is expected to close during the third quarter of 2026. WBD expects to incur additional transaction-related cash costs through the close of the transaction.
Zacks Rank & Stocks to Consider
WBD currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader Zacks Consumer Discretionary sector are Capcom (CCOEY - Free Report) , Sony (SONY - Free Report) and Fox Corporation (FOXA - Free Report) . Each stock carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Capcom is set to report fourth-quarter fiscal 2026 results on May 12. Capcom shares have declined 6.6% year to date.
Sony is slated to report fourth-quarter fiscal 2026 results on May 13. Sony shares have declined 19% year to date.
Fox Corporation is set to report third-quarter fiscal 2026 results on May 11. Fox Corporation shares have declined 14.8% year to date.