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Warner Bros. Discovery Q1 Results: Misses Analyst Expectations Despite Streaming Strength

Warner Bros. Discovery, the media conglomerate that owns streaming service Max, cable TV networks like TNT and Discovery, and a film studio, reported its first-quarter results, falling short of analyst expectations. Despite strength in its streaming unit, the company’s stock dropped 4% in premarket trading.

In terms of financial performance, Warner Bros. Discovery posted a loss per share of 40 cents, missing the expected 24 cents loss. The company’s revenue also fell 7% to $9.96 billion compared to the same quarter last year, falling short of the estimated $10.231 billion.

However, there were some positive aspects to Warner Bros. Discovery’s earnings report. The company saw improvement in its net loss attributable to the company, reporting $966 million, or 40 cents per share, compared to a loss of $1.07 billion, or 44 cents per share, in the year-ago quarter.

One significant area of growth for Warner Bros. Discovery was its streaming segment. The company added 2 million direct-to-consumer streaming subscribers during the first quarter, bringing its total to 99.6 million. This segment earned an adjusted $86 million during the quarter, showing an improvement of $36 million from the previous year.

Advertising revenue for streaming also performed well, increasing by 70% due to higher engagement on Max in the U.S., driven in part by subscriber growth in the streaming service’s ad-lite tier and the launch of sports content on the platform.

However, advertising revenue for Warner Bros. Discovery’s TV networks remained weak, with an 11% decline in revenue. This reflects the ongoing challenges faced by traditional TV networks as digital and streaming platforms continue to gain popularity.

The studio segment of Warner Bros. Discovery also experienced a decline in revenue by 12% to $2.82 billion compared to the same quarter last year. This can be attributed to the lackluster release of the latest iteration of “Suicide Squad” and the lingering effects of last year’s Hollywood writers and actors strikes.

In terms of its financial position, Warner Bros. Discovery has made progress in reducing its debt load, which currently stands at $43.2 billion. The company repaid $1.1 billion in debt during the quarter and announced a $1.75 billion cash tender aimed at further reducing its debt. The company’s cash position also improved, with free cash flow increasing to $390 million, a $1.3 billion improvement from the same quarter last year.

Looking ahead, Warner Bros. Discovery recently announced a partnership with Disney to offer a streaming bundle that combines their respective services, including Max, Disney+, and Hulu. This move reflects the ongoing efforts of media giants to make streaming profitable and adapt to changing consumer preferences. It will be interesting to see how this partnership impacts the future growth and financial performance of Warner Bros. Discovery.

Overall, while Warner Bros. Discovery’s first-quarter results fell short of expectations, there were bright spots in its streaming segment, particularly in terms of subscriber growth and advertising revenue. The company continues to face challenges in its TV networks and studio segments but is taking steps to reduce its debt and improve its financial position. The partnership with Disney also presents new opportunities for growth and innovation in the streaming industry.

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