Warner Bros. Discovery (WBD) reported a surprise second-quarter profit on Thursday amid double-digit revenue growth in its streaming segment, while the media and entertainment giant secured regulatory approval in the UK for its proposed acquisition by Paramount Skydance (PSKY).
HBO Max parent Warner Bros. posted net income of $0.06 a share for the quarter ended June, down from $0.63 the year before, but better than the consensus on FactSet that called for a loss of $0.14. Overall revenue dropped 11% to $8.72 billion, trailing Wall Street's view for $9.25 billion.
Separately, Paramount said the UK Competition and Markets Authority cleared its planned $110 billion purchase of Warner Bros. The UK CMA's approval brings total jurisdictions that have cleared or declined to challenge the deal to 66, following the European Commission's clearance in July.
The deal has received antitrust approval in the US, although a coalition of 12 state attorneys general have filed a lawsuit seeking to block the transaction over concerns that it would lessen competition.
A federal judge has set a March 2027 trial date for the multi-state suit, Wedbush Securities analyst Michael Piccolo said in a note. "Foreign clearances continue to de-risk (Paramount/Warner Bros.) but are largely priced in; the binding constraint remains the March 2027 US trial, not incremental jurisdictional approvals," the brokerage said.
"We remain highly confident that the Paramount merger will be completed," Warner Bros. said in a Thursday shareholder letter. "The closing of the transaction is on hold until the earlier of five days after legal proceedings are complete or June 1, 2027."
Second-quarter revenue in the streaming segment climbed 10% to $3.08 billion, with subscriber-related sales contributing nearly $3 billion. The company saw "strong gains" in its ad-supported tier, accounting for more than half of retail subscriber gross additions during the quarter, Warner Bros. said in the letter.
Subscriber-related revenue growth is expected to accelerate in the second half of the year and "remain healthy into 2027," according to the company.
In the studios segment, revenue plunged 39% to $2.33 billion as the global box office performance of "certain titles" fell short of expectations during the first half of the year, Warner Bros. said.
Revenue in the global linear networks division decreased 17% to $3.99 billion. Advertising tumbled 27% as the absence of the National Basketball Association in the current year quarter impacted domestic audience.
Earlier this week, Walt Disney's (DIS) fiscal third-quarter revenue fell short of expectations despite a boost from "Toy Story 5." In July, streaming giant Netflix (NFLX) reported lower-than-expected revenue for the second quarter, while media and connectivity giant Comcast's (CMCSA) earnings per share declined year over year.
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