Warner Bros' Streaming Growth, Cost Cuts Highlighted, Analysts Stay Cautious

Warner Bros. Discovery, Inc (NASDAQ: WBD) announced fiscal first-quarter results on Thursday. The company reported a quarterly revenue decline of 9% ex-FX to $8.98 billion, missing the analyst consensus estimate of $9.60 billion. The EPS loss of 18 cents missed the analyst consensus loss estimate of 11 cents.

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Wall Street analysts rerated the stock.

Needham analyst Laura Martin maintained a Hold rating on Warner Bros.

Goldman Sachs analyst Michael Ng had a Neutral rating on Warner Bros. with a price target of $10.50, down from $10.75.

Needham: Warner Bros. highlighted continued streaming momentum with 5.3 million net global subscriber additions in the quarter, $339 million in adjusted EBITDA and reaffirmed guidance of $1.3 billion in streaming adjusted EBITDA for fiscal 2025.

Management focused on premium IP and high-quality content, particularly from HBO and Warner Bros., as the core growth engine while downplaying long-term reliance on sports rights.

The company believes the internal reorganization, announced in December 2024, provides clearer visibility into business lines and creates structural optionality.

Despite macro uncertainty, management said ad trends remain stable with a strong scatter, though upfronts may start slowly. ARPU growth is expected via global expansion of ad tiers, password-sharing crackdowns, sports upsells and bundling efforts.

Management noted the Studios division is on track to regain $3 billion+ in EBITDA with a slate backed by DC, Harry Potter, and third-party sales. At the same time, the NBA rights exit in 2026 is expected to deliver significant cost savings and margin expansion.

Martin projected negative revenue and adjusted EBITDA growth in fiscal 2025 and 1% growth in each category for fiscal 2026. The analyst liked Warner Bros. more as an investment idea when it can report mid-single-digit (or higher) revenue growth with expanding margins.

Until then, she feared that negative catalysts are more likely than positive catalysts for Warner Bros. shares. Strategically, the analyst worried that Warner Bros. is too small to compete and that the gap is widening.

Martin projected second-quarter revenue of $9.54 billion and EPS of $(0.21).

Goldman Sachs:  The results were overshadowed by a report that Warner Bros. was potentially pursuing a split-up between its Linear Networks and Streaming & Studios businesses.

Key themes emerging from the quarter include Linear Networks U.S. affiliate fees, which declined 7%, while advertising fell 12%, beating expectations of strong ratings and more sports inventory. DTC EBITDA beat on operating expenditure and net adds. Still, ARPU declined on international and wholesale/ad-supported mix shift headwinds, and Studios EBITDA should grow significantly, driven partly by a licensing deal to Streaming in the second quarter.

Ng projected second-quarter revenue of $9.97 billion and EPS of $(0.40).

WBD Price Action: WBD stock is up 1.16% at $9.11 at publication on Friday.

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