Global entertainment and media company Warner Bros. Discovery (NASDAQ: WBD) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 1% year on year to $9.81 billion. Its non-GAAP profit of $0.31 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Warner Bros. Discovery’s second quarter results aligned with Wall Street’s expectations for revenue, but the market reacted negatively as investors focused on challenges beyond the headline numbers. Management attributed performance to strong creative output, highlighted by box office momentum and subscriber gains at HBO Max. CEO David Zaslav emphasized, “We’re seeing momentum at Motion Pictures, where Warner Bros. became the first studio ever to open five consecutive films with more than $45 million in domestic box office.” The company also noted that investments to bolster studio capabilities and content libraries pressured near-term financial results, as fewer external licensing deals were made to prioritize differentiation for HBO Max and future streaming growth.

Looking ahead, management’s guidance is anchored by the expectation that investments in major franchises and global streaming expansion will yield sustainable growth. Zaslav outlined plans to “bring a lot of those franchises back to life and also tell new and original stories,” citing upcoming projects such as Harry Potter and Lord of the Rings. CFO Gunnar Wiedenfels pointed to a transition period for HBO Max, explaining that a legacy U.S. distribution deal will dampen growth for the next year but should be offset by international launches and improved pricing power. The leadership team also underscored their focus on reducing subscriber churn, leveraging bundles, and enforcing account sharing policies to further drive profitability.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to creative momentum in film and television, ongoing investments in streaming, and a deliberate shift in content licensing that favors long-term asset value over near-term revenue.

• Studio investments yield momentum: Management credited recent box office success and Emmy nominations to a three-year strategy of enhancing creative capabilities and cross-studio collaboration, leading to stronger franchises and new content pipelines.
• Shift in content licensing: The company reduced external content licensing to prioritize HBO Max exclusivity, which management believes will drive subscriber growth and reinforce the service’s premium positioning. CFO Gunnar Wiedenfels stated that this strategic shift temporarily pressures near-term results but creates long-term value.
• HBO Max subscriber gains: HBO Max added over 3.4 million subscribers in the quarter, supported by international launches and ongoing content investments. The company is targeting over 150 million subscribers by 2026 through new market entries and product improvements.
• Franchise revitalization underway: Management is focused on reinvigorating underused intellectual property such as Superman, Harry Potter, and Lord of the Rings. Zaslav highlighted that leveraging familiar brands provides stability and underpins future growth across film, streaming, and merchandise.
• Cost discipline and deleveraging: The leadership team emphasized improved operational efficiency, noting that net leverage has been reduced to 3.3x since the merger, with further deleveraging expected as EBITDA from studios and streaming increases.

Drivers of Future Performance

Warner Bros. Discovery’s outlook is shaped by continued franchise development, international streaming growth, and efforts to optimize monetization across platforms.

• International streaming expansion: Management expects new international launches of HBO Max, particularly in Europe, to drive subscriber and revenue growth beginning early next year. JB Perrette, CEO of Global Streaming and Games, cited Australia’s recent launch as a successful model, with plans to replicate this in key European markets.
• Monetizing major franchises: The company is investing in revitalizing its core intellectual property, including Harry Potter, Lord of the Rings, and DC brands, aiming to generate revenue from theatrical releases, streaming, live events, and merchandise. Management believes these “tentpole” franchises will create recurring growth opportunities.
• Churn reduction and pricing strategy: Warner Bros. Discovery is targeting lower churn through bundle offerings with partners like Disney, improved product features, and stricter enforcement of account sharing. Leadership signaled that tighter account controls and potential price increases will support higher average revenue per user and margin improvement over time.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the execution and reception of new franchise content launches in film and streaming, (2) the impact of European HBO Max rollouts on subscriber trends and churn, and (3) the effectiveness of tighter account sharing enforcement and pricing strategies. Progress in leveraging major brands for cross-platform monetization and continued deleveraging will also be important markers of strategic success.

Warner Bros. Discovery currently trades at $11.18, down from $12.81 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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