Core Thesis - Warner Bros. Discovery, Inc. (WBD) has reported its first positive net result in Q2 2025 after a challenging restructuring period post-2022 merger, with a significant corporate split planned by mid-2026 to unlock value [2][3][4] Financial Performance - WBD's share price was $16.17 as of September 11th, with trailing and forward P/E ratios of 52.16 and 39.06 respectively [1] - Q2 results showed strong performance in the Streaming & Studios segment, with 3.4 million net subscriber additions, reaching nearly 126 million subscribers, generating $3.8 billion in revenue and $863 million in EBITDA [3] - Linear Networks experienced a 9% revenue decline to $4.8 billion, with EBITDA falling 24% due to increasing cord-cutting trends [4] - Despite a GAAP profit of $1.6 billion, free cash flow decreased to $702 million, impacted by taxes, interest, and separation costs [4] Corporate Strategy - The upcoming split will create two distinct entities: Warner Bros. "Streaming & Studios" and Discovery Global, aimed at isolating high-growth assets from declining linear TV operations [2][3] - The split is structured to be tax-free, with Discovery Global retaining a 20% stake in Warner Bros. for debt reduction purposes [3] - Strategic partnerships, such as HBO Max's deal in Southeast Asia, highlight WBD's focus on global expansion [3] Market Positioning - The separation is expected to provide clearer valuation comparisons, positioning Warner Bros. alongside competitors like Netflix and Disney, while Discovery Global will be compared to Fox, AMC, and Comcast [4] - The sum-of-the-parts valuation approach may lead to significant rerating of WBD as the market begins to value its high-growth and legacy businesses separately [4] Historical Context - The stock price of WBD has appreciated approximately 45% since previous bullish coverage in February 2025, which emphasized the company's debt burden and potential divestiture of linear assets to enhance streaming growth [5]