Warner Bros. Discovery Profit Craters Ahead of Paramount Deal
Warner Bros. Discovery (WBD) reported net income tumbled 91% to $149 million as Studios weakness deepened even while streaming carried the quarter.
Warner Bros. Discovery (WBD) reported a 91% collapse in net income to $149 million for the second quarter of 2026, down from $1.58 billion a year earlier, as steep declines at its Studios and advertising businesses overwhelmed continued growth in streaming.
The entertainment and media company's results arrived as its pending $110 billion, all-cash acquisition by Paramount remains unresolved. The Q2 2026 release, filed 2026-08-06, discloses new risk-factor language tied to the transaction, covering customer and personnel retention, stock-price effects and financing risk, language absent from the original February 27 merger announcement.
Total revenue fell 12% ex-FX year over year to $8.7 billion, a steeper decline than the 7% ex-FX drop reported in the fourth quarter of 2025. The acceleration was largely due to the absence of NBA programming and lower theatrical revenue at Studios. Total Adjusted EBITDA fell a smaller 6% ex-FX to $1.9 billion, an improvement from the fourth quarter's 20% ex-FX decline, as streaming growth partially offset the drag from Studios and linear networks.
The revenue mix showed a widening split between declining legacy lines and a recovering distribution business. Advertising revenue fell 22% ex-FX, worsening from a 9% decline in the fourth quarter, with the absent NBA slate alone subtracting 20 points from the growth rate versus a 4-point drag previously. Content revenue dropped 26% ex-FX, worsening from a 10% decline, driven by weaker theatrical results. Distribution revenue, by contrast, swung to a 1% ex-FX gain from a 3% decline, as streaming subscriber growth offset domestic linear pay-TV losses and the fading impact of the prior-year HBO Max distribution deal renewal.
Streaming was the quarter's bright spot. Segment revenue grew 10% ex-FX year over year, and segment Adjusted EBITDA surged 63% ex-FX to $512 million. Studios told a different story: segment Adjusted EBITDA collapsed 89% ex-FX to $96 million, reversing a full-year 2025 trend in which the segment's revenue had risen 8% ex-FX. A weak theatrical slate against tough prior-year comparisons, including A Minecraft Movie, Sinners and Final Destination Bloodlines, along with a 41% ex-FX drop in Content revenue at the segment, contributed to the decline. Global Linear Networks Adjusted EBITDA declined a comparatively modest 5% ex-FX to $1.45 billion, easing from the steeper drop that drove the prior quarter's overall EBITDA decline. Corporate Adjusted EBITDA improved by $18 million to a loss of $298 million on lower overhead costs.
Free cash flow fell 19% year over year to $572 million, a smaller percentage decline than the 43% drop reported in the fourth quarter. Separation and transaction-related items weighed on free cash flow by roughly $350 million in the quarter, up from about $250 million a year earlier though down from roughly $600 million in the fourth quarter.
Net leverage held roughly steady at 3.4 times Adjusted EBITDA, up from 3.3 times at the end of 2025, with net debt rising to $29.7 billion from $29.0 billion and gross debt at $33.1 billion. During the quarter, the company refinanced its $15 billion bridge loan facility with a $13 billion Term Loan B and a €1.7 billion Term Loan B, following the completion of debt-related consent solicitations tied to the Paramount transaction that closed on 2026-05-27. The drawn balance on its revolving receivables program rose $50 million sequentially to $3.9 billion.
The company's disclosure also narrowed: the release no longer reports a total streaming subscriber count, a figure that stood at 131.6 million as of the fourth quarter of 2025, replacing it with subscriber-related revenue growth metrics only.