Warner Bros. Discovery (WBD) stock rose over 1% in premarket trading on Thursday after the company reported strong streaming results in the third quarter. But revenue missed expectations as the media giant struggled with a drop in its studios segment and continued declines from its linear TV business.
Revenue came in at $9.62 billion, missing Bloomberg consensus expectations of $9.81 billion and a 3% drop compared to the $9.98 billion seen in Q3 2023.
The company reported adjusted earnings per share of $0.05 versus a loss of $0.17 in the year-earlier period. Consensus expectations had anticipated a loss closer to $0.09 a share.
In the second quarter, WBD took a massive $9.1 billion impairment charge related to its TV networks unit following the loss of its key NBA media rights. The company is currently tied up in litigation after suing the NBA in July, citing the “unjustified rejection” of its matching rights proposal.
The company has struggled in recent quarters, with profits hit by a weak linear advertising environment and pressure on affiliate fees, or the fees pay TV providers pay to network owners to carry their channels.
To that end, the company’s networks segment continued to struggle with advertising revenue in the unit plummeting 13% year over year after it dropped 10% in the second quarter and 11% in Q1.
Analysts polled by Bloomberg had anticipated a more modest drop of 7%.
The loss of the NBA rights has further steepened those challenges, with Deutsche Bank projecting a potential hit of $560 million to total affiliate revenue in 2026 as a result.
But a recent carriage renewal deal with Charter Communications, which included WBD’s Max streaming service as part of the package, should help stem some of the bleeding.
“If WBD’s renewal with CHTR can be replicated in coming deals, we believe it would be a big improvement versus expectations,” BofA’s Reif Ehrlich said ahead of the report.
Still, it might be a tall order, as Deutsche Bank warned the company’s “upcoming batch of renewals in 2025 are with providers that haven’t necessarily shown the same proclivity to include streaming products in their video packages,” as Charter has demonstrated.
Meanwhile, the company’s studios segment saw revenue plummet 17% year over year, “primarily driven by lower box office revenue as the performance of ‘Beetlejuice Beetlejuice’ and ‘Twisters’ in the current year was more than offset by the stronger performance of ‘Barbie’ in the prior year.”
