Warner Bros. Discovery, Inc.

Warner Bros. Discovery (WBD) is a prominent global media and entertainment company that creates and distributes a diverse portfolio of content and products across various platforms, including television, film, streaming, interactive gaming, publishing, themed experiences, and consumer products ¹. Key brands include Discovery Channel, HBO Max, CNN, DC Studios, TNT Sports, HBO, Food Network, TLC, TBS, Warner Bros. Motion Picture Group, Warner Bros. Television Group, Warner Bros. Games, Adult Swim, and Turner Classic Movies ¹. The company generates revenue from distribution fees, advertising sales, content licensing and sales, and other sources like studio tours and production services ¹.

The company operates in highly competitive global media and entertainment industries, vying for viewers, distribution, and advertising spend ¹. Competition stems from other content providers, including production studios, television networks, and online-based content providers, for creative talent and content acquisition ¹. WBD's ability to produce and acquire popular content is a crucial competitive factor for distribution, monetization, attracting viewers, and advertising sales ¹. The company also faces competition from other television networks, streaming services, and production companies for content distribution and fees ¹. New market entrants, including companies from adjacent sectors with significant resources and fewer regulatory burdens, have intensified competitive pressures, potentially leading to increased costs for talent and intellectual property rights ¹.

WBD's core business model revolves around creating and distributing content across three primary segments: Streaming, Studios, and Global Linear Networks ¹. Revenue streams are diversified, including fees from distributors (cable, DTH satellite, telecommunication, and digital service providers, as well as direct-to-consumer subscriptions), advertising sales on networks and digital platforms, and content revenue from theatrical releases, licensing of films and TV programs, home entertainment, game sales, sports rights sublicensing, and intellectual property licensing ¹. The company also earns other revenue from studio tours and production services ¹.

The Streaming segment primarily encompasses premium pay-TV and streaming services, such as HBO Max and discovery+, and certain premium sports streaming products ¹. As of December 31, 2025, this segment had 131.6 million subscribers ². For the year ended December 31, 2025, distribution revenue constituted 87% of the segment's total revenue, advertising 9%, and content 4% ¹. Adjusted EBITDA for the Streaming segment increased to $1,370 million in 2025 from $677 million in 2024 ³.

The Studios segment includes the Warner Bros. Motion Picture Group, DC Studios, Warner Bros. Television Group, Consumer Products, Themed Entertainment and Brand Licensing, DC Comics Publishing, Content Licensing, Home Entertainment, Studio Operations, and Interactive Gaming ¹. Notable content highlights for 2025 included films like One Battle After Another, Sinners, Superman, A Minecraft Movie, and Weapons, with the studio being the first in Hollywood history to open seven consecutive movies above $40 million at the domestic box office ¹. For the year ended December 31, 2025, content revenue accounted for 93% of the segment's total revenue, and other revenues for 7% ¹. Adjusted EBITDA for the Studios segment grew to $2,545 million in 2025 from $1,652 million in 2024 ³.

The Global Linear Networks segment primarily consists of domestic and international television networks, including general entertainment, lifestyle, and news networks such as TNT, TBS, Turner Classic Movies, OWN, HGTV, Food Network, TLC, Discovery Channel, Adult Swim, and CNN ¹. TNT Sports is a global leader in premium sports content delivery, holding multi-platform partnerships with entities like the College Football Playoff, NCAA Division I Men’s Basketball Championship, Major League Baseball, and National Hockey League ¹. For the year ended December 31, 2025, distribution revenue represented 55% of the segment's total revenue, advertising 36%, content 7%, and other revenues 2% ¹. Adjusted EBITDA for the Global Linear Networks segment decreased to $6,412 million in 2025 from $8,149 million in 2024 ³.

For the fiscal year ended December 31, 2025, WBD reported total revenues of $37,296 million ⁴. Costs of revenues, excluding depreciation and amortization, were $20,885 million ⁴. Selling, general and administrative expenses totaled $9,418 million ⁴, while depreciation and amortization amounted to $5,684 million ⁴. Restructuring and other charges were $399 million ⁴, and impairments and loss on dispositions were $172 million ⁴. The company reported an operating income of $738 million ⁴, net income of $749 million ⁴, and net income available to Warner Bros. Discovery, Inc. of $727 million ⁴. Diluted EPS was $0.29 ⁵. Cash and cash equivalents stood at $4,566 million ⁶, and total debt was $32,567 million ⁷.

Comparing 2025 to 2024, total revenues decreased by 5% ⁴. Distribution revenue saw a 2% decline, primarily due to a 9% decrease in Networks domestic linear subscribers and the impact of a domestic wholesale deal renewal in Q2 2025, partially offset by a 13% increase in streaming subscribers and a 3% increase in domestic contractual affiliate rates ¹. Advertising revenue decreased by 11%, mainly due to a 25% decline in domestic linear network audiences, partially offset by an increase in domestic HBO Max ad-lite subscribers ¹. Content revenue decreased by 7%, primarily due to the sublicensing of Olympic sports rights in Europe which had a $576 million favorable impact in 2024, fewer initial telecast deliveries, and lower games revenue, partially offset by higher theatrical product revenue ¹. Costs of revenues, excluding depreciation and amortization, decreased by 9% ⁴. Operating income improved significantly from a loss of $(10,032) million in 2024 to an income of $738 million in 2025 ⁴, largely due to a $9,147 million non-cash goodwill impairment charge related to the Global Linear Networks reporting unit in 2024 not recurring in 2025 ¹.

During 2025, WBD initiated restructuring plans related to the previously proposed Separation Transaction ¹. In January 2026, the company terminated its Netflix Merger Agreement, under which Netflix would have acquired the Streaming and Studios segments, after receiving a "Company Superior Proposal" from Paramount Skydance Corporation (PSKY) ¹. In connection with this termination, PSKY, on behalf of WBD, paid Netflix a termination fee of $2.8 billion in cash ⁸. Subsequently, on February 27, 2026, WBD entered into a merger agreement with PSKY, where PSKY will acquire WBD, with each WBD common stock share converting into $31.00 in cash, plus potential Ticking Consideration if the closing occurs after September 30, 2026 ⁹. Larry J. Ellison and an associated trust guaranteed certain payments by PSKY, including $45.72 billion of the Merger Consideration ¹⁰. In June 2025, WBD and Discovery Global Holdings, Inc. (DGH) entered into an 18-month $17 billion Bridge Loan Facility, which was drawn to finance early settlement of Tender Offers and repayment of a $1,500 million term loan ¹¹. The company also repurchased or repaid $23,475 million of aggregate principal amount outstanding of its senior notes during 2025 ¹².

Management has not provided specific revenue, margin, or EPS guidance for the upcoming period in this filing.

The company's primary growth area is its Streaming business, with a strategy to grow globally ¹. In January 2026, HBO Max launched in Germany and Italy, with an anticipated launch in the UK in March 2026 ¹. This global expansion has already driven increased revenue and profitability for the Streaming segment, with 14.7 million global subscribers added in 2025 ¹. The content pipeline for HBO and HBO Max in 2026 includes new series such as the Game of Thrones prequel A Knight of the Seven Kingdoms, the dark comedy miniseries DTF St. Louis, and the HBO Original comedy series Rooster, alongside returning hits like House of the Dragon, Euphoria, The Pitt, and Hacks ¹.

Another growth vector for WBD is enhancing its Studios segment ¹. The Studios segment's content highlights for 2025 included successful films like A Minecraft Movie, Superman, F1, Conjuring: Last Rites, Sinners, Final Destination Bloodlines, and Weapons, demonstrating strong theatrical performance ¹. Warner Bros. Games announced a new focus on four core franchises: Harry Potter, Game of Thrones, DC, and Mortal Kombat, indicating a strategic direction for interactive gaming ¹.

Operationally, the company is focused on managing its linear networks for the best possible success ¹. WBD has implemented various restructuring and transformation initiatives, with the WarnerMedia Merger-related restructuring program substantially completed by the end of 2024 ¹. During 2025, restructuring plans related to the previously proposed Separation Transaction were initiated ¹. The company expects continued declines in linear subscribers ¹. Adjusted EBITDA for Corporate operations improved by 15% in 2025, primarily due to lower facility costs from office consolidations and closures and the release of previously recorded non-income tax reserves, partially offset by higher securitization expenses ¹.

WBD plans to continue to invest significantly in the creation and acquisition of new content, including certain sports rights ¹. Capital expenditures were $1,231 million in 2025, with significant costs expected to continue for the development and marketing of HBO Max ¹. The company has a stock repurchase program authorized by its board of directors in February 2020 for up to $2,000 million, upon completion of an existing $1,000 million authorization from May 2019 ¹³. However, there were no common stock repurchases during 2025 or 2024 ¹³. WBD has not paid any cash dividends on its common stock and has no present intention to do so ¹.

The company faces structural headwinds, including continued pressures on linear distribution, declines in linear subscribers, and continued softness in the U.S. linear advertising market, which are expected to materially impact operations ¹. The increase of digital advertising inventory available in the marketplace is expected to continue to result in increased competition for advertising expenditures for both traditional linear networks and ad-supported streaming services ¹. The imposition of tariffs by the U.S. government and retaliatory tariffs from foreign governments may negatively impact operations by leading to higher production costs or decreased advertiser spending ¹.

Execution risks include the uncertainty surrounding the PSKY Merger, which is subject to regulatory approvals and WBD shareholder approval, and PSKY's obligation is contingent on WBD not completing the separation of its Streaming & Studios business from its Global Linear Networks business ¹. Failure to complete the PSKY Merger could adversely affect the business, potentially requiring WBD to pay a termination fee of $3.0 billion and reimburse PSKY for up to $1,528 million related to a Junior Lien Exchange Offer and the $2.8 billion Netflix Termination Fee ¹⁴. The company also has significant debt, totaling $32,567 million as of December 31, 2025 ⁷, and may incur additional debt, which could adversely affect financial health and operational flexibility ¹. The Bridge Loan Facility, with $15,000 million outstanding as of December 31, 2025 ⁶, is expected to be refinanced prior to its June 30, 2027 maturity ¹.

WBD faces several material risks, including intense competition in global media and entertainment industries for talent, content, audiences, subscribers, advertising spending, and production infrastructure, with new market entrants and evolving technologies like generative AI posing significant challenges ¹. Advertising revenues are vulnerable to shifting consumer preferences towards streaming, audience fragmentation, increased digital advertising inventory, and general economic conditions, which could lead to decreased rates and volume ¹. The success of streaming products like HBO Max and discovery+ is highly dependent on attracting and retaining subscribers amidst a crowded market, and a failure to do so could adversely impact the business ¹. The company's reliance on content licenses and distribution agreements means that failure to renew or renewal on less favorable terms could cause revenue declines, especially given industry consolidation among distributors ¹. Significant investments in sports programming carry the risk of not recouping investment due to intense competition for licenses and factors outside of WBD's control, such as league decisions ¹. Labor disruptions, such as the 2023 WGA and SAG-AFTRA strikes, can cause production delays, increased costs, and content delivery issues, materially impacting financial results ¹. The company carries a significant amount of goodwill and other intangible assets, which are subject to impairment charges if negative industry or economic trends, underperformance of content, or declines in market capitalization occur, as evidenced by the $9.1 billion pre-tax, non-cash goodwill impairment of the Global Linear Networks reporting unit in 2024 ¹⁵. Service disruptions or outages affecting communications satellites or other externally managed critical technology infrastructure, including cloud-based platforms, could impair content delivery and harm reputation ¹. The company's substantial debt of $32,567 million ⁷ and potential for additional debt could restrict operations, limit financial flexibility, and increase vulnerability to adverse economic conditions, with a breach of covenants potentially accelerating outstanding debt ¹. The PSKY Merger, if not completed, could result in WBD paying a termination fee of $3.0 billion and reimbursing PSKY for up to $1,528 million related to the Junior Lien Exchange Offer and the $2.8 billion Netflix Termination Fee ¹⁴. Changes in domestic and foreign laws and regulations, including those related to data privacy, content quotas, and intellectual property, as well as foreign exchange rate fluctuations and increasing complexity of global tax policy (such as the OECD's Pillar Two GloBE rules), could adversely affect the business and increase tax liability ¹. Theft of intellectual property, unauthorized duplication, and distribution, particularly exacerbated by new technologies like generative AI, pose a threat to revenues and necessitate significant spending on enforcement ¹. The company's success also depends on attracting and retaining key employees and creative talent, with the pendency of the PSKY Merger potentially impacting morale and recruitment ¹. Cybersecurity risks, including sophisticated attacks using AI, could lead to disclosure of confidential information, service disruptions, reputational damage, legal liabilities, and financial losses ¹. Finally, global economic conditions, including inflation and high interest rates, and other global events like political unrest or natural disasters, can negatively affect consumer spending, advertising revenues, and overall profitability ¹.

Management's message to shareholders emphasizes the company's position as a leading global media and entertainment company, leveraging a differentiated and comprehensive portfolio of content and products across television, film, streaming, interactive gaming, publishing, themed experiences, and consumer products ¹. They highlight the company's extensive collection of owned content and intellectual property across sports, news, lifestyle, and entertainment, which positions them to execute key strategies: grow the streaming business globally, enhance the Studios segment, and manage linear networks for optimal success to create long-term shareholder value ¹. A significant forward-looking statement is the PSKY Merger, entered into on February 27, 2026, where each issued and outstanding share of WBD common stock will be converted into the right to receive $31.00 in cash, without interest, plus potential Ticking Consideration if the closing date occurs after September 30, 2026, with the Ticking Consideration being $0.00277778 multiplied by the number of calendar days elapsed after September 30, 2026, not exceeding $0.25 per 90 calendar day period ⁹. Management also noted the termination of the Netflix Merger Agreement, which resulted in PSKY paying a $2.8 billion termination fee on behalf of WBD ⁸. The three strategic priorities emphasized are the global growth of the streaming business, the enhancement of the Studios segment, and the effective management of linear networks ¹.