Core Insights - Warner Bros. Discovery (WBD) is set to report its second-quarter 2025 results on August 7, with expected revenues of $9.83 billion, reflecting a 1.20% increase year-over-year, and a narrowed loss estimate of 14 cents per share, indicating a 96.56% increase from the previous year [1][8]. Financial Performance - The Zacks Consensus Estimate indicates that WBD has surpassed earnings expectations in one of the last four quarters but missed three times, resulting in a negative average surprise of 659.92% [2]. - The anticipated revenue of $9.83 billion for Q2 2025 is supported by strong performance in the streaming segment, which saw a subscriber growth of 5.3 million and an 8% increase in streaming revenues in Q1 2025 [3][8]. Streaming Segment - The streaming segment is expected to continue its momentum, bolstered by successful releases such as "The Last of Us" and "And Just Like That," along with international expansion and growth in ad-supported offerings [3]. - The Studios segment is projected to rebound due to a major licensing agreement with the streaming division and early success from new content like the Minecraft Movie and Sinners, with the release of Superman further enhancing performance [4]. Linear Networks and Advertising - The Linear Networks segment is facing challenges due to ongoing declines in traditional TV viewership and a tough advertising market, likely leading to a drop in network revenues for the upcoming quarter [5]. - Advertising performance is expected to decline by 2% year-over-year, influenced by the absence of major sports events like the Final Four, despite some offset from the Stanley Cup Finals [6]. Earnings Expectations - According to the Zacks model, WBD currently has an Earnings ESP of -47.89% and a Zacks Rank of 3, indicating a lower likelihood of an earnings beat [7].

Core Viewpoint - Warner Bros. Discovery (WBD) shares have underperformed significantly in 2023, losing 5% year to date compared to the Zacks Consumer Discretionary sector's 25.1% growth and entertainment peers like Disney, Paramount Global, and Netflix [1] Streaming Segment Performance - WBD's streaming business added 5.3 million subscribers in Q1, reaching a total of 122.3 million globally, and generated $339 million in adjusted EBITDA, aiming for at least $1.3 billion in streaming EBITDA for 2025 [2] - Popular shows like The White Lotus and The Last of Us have contributed to the streaming segment's success, with The White Lotus averaging over 25 million viewers per episode and The Last of Us attracting over 90 million viewers since its first season [2] Operational Performance - The Studios segment showed resilience with a 63% year-over-year increase in adjusted EBITDA to $259 million, driven by the success of the Minecraft Movie, which grossed nearly $900 million globally [3] - The Global Linear Networks segment faced challenges, with revenues declining 6% year over year due to cord-cutting and domestic advertising issues [3] Content Pipeline - WBD has a strong content pipeline, with the highly anticipated Superman film set to release on July 11, following a successful trailer with over 250 million views [4] - Renewals and new orders for shows like The Pitt and the upcoming Harry Potter series are expected to enhance subscriber growth for Max [4] Product Innovations - Recent product launches, such as the Extra Member Add-On feature and Profile Transfer capabilities for Max, aim to address password sharing and enhance revenue [5] - The WBD Storyverse advertising initiative and new solutions like NEO and DemoDirect are designed to improve advertiser value propositions amid challenging linear advertising markets [5] Financial Position - WBD maintained a 3.8x net leverage ratio while repaying $2.2 billion in debt in Q1, with $4.0 billion cash on hand and $38.0 billion gross debt [6] - The company reported free cash flow of $302 million in Q1, indicating improving cash generation capabilities despite concerns over elevated debt levels [6] Investment Outlook - WBD is rated as a Hold, with streaming momentum and content quality improvements being positive signs, but challenges in linear television and high leverage remain [7] - The Zacks Consensus Estimate for WBD's 2025 revenues is $37.8 billion, reflecting a 3.88% year-over-year decline, with an expected loss of 16 cents per share, an improvement from a loss of $4.62 in the previous year [8]