Warner Bros. Discovery Earnings Miss Expectations

Warner Bros. Discovery (WBD) reported on Feb. 26, 2026, a 6% year-over-year revenue decline and an adjusted loss per share, despite growth in streaming subscribers. The results present a tradeoff investors must consider amid an active takeover auction.

Q4 2025 Results and Outlook

Warner Bros. Discovery’s fourth-quarter 2025 revenue fell to $9.46 billion from $10.03 billion a year earlier, missing expectations. Adjusted earnings per share showed a loss of $0.10, below the consensus estimate. The company posted a net loss of $252 million, which included a $1.3 billion write-down related to merger amortization.

Revenue from linear networks declined 12% to $4.2 billion, with adjusted EBITDA falling 27% to $1.4 billion, pressured by the loss of TNT’s NBA rights. Studios revenue dropped 13% to $3.2 billion, with adjusted EBITDA down 23% to $728 million. For the full year, global box-office receipts reached $4.4 billion, and studios adjusted EBITDA totaled $2.55 billion.

Streaming subscribers for HBO Max and Discovery+ combined reached 132 million at the end of 2025, up 15 million from a year earlier and exceeding the company’s 130 million target. Recent hits included “Heated Rivalry,” averaging about 13 million viewers per episode, and “Welcome to Derry,” with about 27 million per episode. The company expects to surpass 140 million subscribers by the end of the first quarter of 2026 and exceed 150 million by year-end. Management anticipates subscriber revenue growth to accelerate due to price increases, wider adoption of an ad-supported tier, a strong content slate, and product improvements, while noting near-term advertising headwinds from the NBA rights loss.

The company ended 2025 with $33.5 billion in debt and net leverage of 3.3 times after repaying a $1 billion bridge loan. Full-year free cash flow was $3.09 billion, which included $1.35 billion in separation and transaction costs. Management projects studios adjusted EBITDA in 2026 to remain roughly in line with last year’s figure and expects operating expenses to improve in the high single digits, supporting underlying free cash flow growth.

Bidding War and Deal Terms

The takeover auction for Warner Bros. Discovery has intensified, with Paramount raising its all-cash bid to $31 per share from $30 in December 2025, competing against an earlier Netflix offer of $27.75 per share. Since September 2025, four bidders have entered the process, which has seen eight price increases, representing about a 63% rise from the initial offer.

Paramount’s proposal includes a $7 billion regulatory termination fee and an enhanced ticking fee. The reported deal value could exceed $110 billion, with a winning bidder potentially assuming more than $60 billion of incremental debt. The board is conducting a competitive, board-led sale process that has involved direct shareholder outreach and has no specified termination date.

Warner Bros. Discovery’s declining revenue, adjusted earnings shortfall, growing streaming scale, and leveraged balance sheet, combined with its cash-flow generation, will be key factors in how bidders structure financing and negotiate protections in the auction.

"We expect to finish the first quarter of 2026 with more [subscribers]... well on our way to over 150 million subscribers by year end 2026," the company said in its shareholder letter.