Warner Bros. Discovery Inc (WBD) — Q4 2025 Earnings Call Transcript

Thank you for joining us for our Q4 and full year 2025 earnings call. Joining me today from Warner Bros. Discovery, Inc. management are David Zaslav, President and Chief Executive Officer; Gunnar Wiedenfels, our Chief Financial Officer; and JB Perrette, CEO and President, Global Streaming and Games. This morning, we issued our earnings release, shareholder letter, and trending schedule, and these materials can be found on our website at investors.wbd.com. Today's presentation will include forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on our current beliefs and expectations. Future financial and operating results, objectives, expectations, and intentions are subject to significant risks and uncertainties outside of our control that could cause actual results to differ materially. For additional information on factors that could affect these expectations, please see the company's filings with the U.S. Securities and Exchange Commission, including but not limited to the company's most recent Annual Report on Form 10-K and its reports on Form 10-Q and Form 8-K. Before we begin Q&A, I would kindly request that you limit your questions to topics related to our Q4 results and related business and financial topics. As noted in our shareholder letter, management will not be taking questions regarding the Netflix transaction. I will now turn the call over to David. Good morning, everyone, and thank you for joining us.

It is clear we fulfilled our ambition. Warner Bros. Motion Picture Group delivered a historic run of success. The most innovative and exciting place to tell stories in the world. We set our goal for Warner Bros. Discovery, Inc. has been to make this great company shine, looking at 2025, seven consecutive films opening with more than $40,000,000 in box office sales, a first for any studio. And our films spent 16 total weeks atop the global box office. We accomplished this through brilliant original films with nine films debuting number one at the box office in 2025, titles like One Battle After Another, and global tentpole titles like a Minecraft movie and Superman. We revived IP like The Conjuring: Last Rites and Final Destination: Bloodlines. Fans responded and critics did too. Our film slate won nine Golden Globe Awards, including Best Picture, Musical or Comedy, for One Battle After Another, and Cinematic and Box Office Achievement for Sinners. Next month, we are up for an industry-leading 30 Academy Awards. The incredible original films we produced have generated over $160,000,000 at the global box office in two weeks, including an $83,000,000 opening weekend. To exceptional original storytelling, further reinforcing our commitment with tentpole and franchise powerhouses on the horizon, our 2027 film slate is set to deliver, and will deservedly be recognized. We are optimistic about 2026, and our ninth consecutive theatrical release from Wuthering Heights, for the world's leading creative talent. From Godzilla vs. Kong 3, Superman: Man of Tomorrow from James Gunn, and our position as a premier destination, to open number one, Minecraft 2, The Conjuring: First Communion, The Batman Part II from Matt Reeves, Gremlins, and The Lord of the Rings: Gollum. We also brought innovative and exciting storytelling to television, both in streaming and through our linear networks. So many breakout sensations in 2025 were delivered to audiences around the world by HBO and HBO Max. That momentum is ongoing, and series that debuted strongly, which averaged 13,000,000 viewers an episode and drove meaningful social media engagement. The Pit and Industry have become cultural sensations with their new seasons, which debuted in 2026. A Knight of the Seven Kingdoms, building on shows like The Pit, HBO continued to deliver hits, seeing 30-50% respective audience growth versus their prior season. The third installment of the Game of Thrones franchise, The White Lotus, and The Last of Us, in HBO history, averaging 27,000,000 viewers per episode. With House of the Dragon, The Gilded Age, Dune: Prophecy, and Hacks returning this year, as well as the premiere of Lanterns in 2026 for HBO. Our streaming segment also delivered terrific growth. Scaling HBO Max globally has been one of our core priorities for four years. We have executed our plan with focus and discipline. Following the successful launches of HBO Max in Germany and Italy and the upcoming launches in the UK and Ireland, we are on track to reach more than 140,000,000 total streaming subscribers by the end of the first quarter, and we are well on our way to exceed 150,000,000 subscribers by the end of the year. Our global linear networks teams clearly remain highly attuned to today's audiences. While secular headwinds persist, our portfolio of networks attracted 30% of all prime time cable viewing in the U.S. We advanced critical initiatives like the launch of CNN All Access. Encouragingly, we saw a sequential improvement in advertising trends during the fourth quarter, which has continued into Q1. The 2026 Milano Cortina Olympic Winter Games was a massive success for Warner Bros. Discovery, Inc., reigniting important legacy Warner Bros. IP, like our DC attack plan. Over the course of the Winter Games, we invested aggressively in streaming technology and storytelling. We saw more than 50% growth in linear hours viewed throughout Europe on HBO Max and Discovery+. Compared to the 2022 Winter Games, we turned HBO Max into a world-class DTC platform that we have now launched globally in over 100 countries and territories. We have taken decisive actions and evaluated all paths, resulting in eight price increases, achieving a 63% increase in value. Our board continues to lead a rigorous strategic review to unlock value, and we have been focused on maximizing shareholder value throughout this process. When we started Warner Bros. Discovery, Inc. in April 2022, the WBD stock was around $24. Since then, we have been focused on transforming the business for the future, investing in our creative culture and original storytelling at HBO, creating meaningful shareholder value.

Hey, thanks for taking the question. Really, the first one for Gunnar. As you think ahead to the spin-off of Discovery Global this summer, there is a tremendous amount of investor focus on what leverage it can handle and what is really achievable. I guess, do you see any issues with Discovery Global being three to four times levered given the free cash flow dynamics of DG right now, and why do you believe—because there has been, obviously, a lot of focus on Versant—why do you not look at that as a good comp for DG? Thanks.

Okay. Good morning, everyone, and thank you, Rich, for those questions.

Look, I do not want to talk about specific comparisons with our competitors here, but I do want to discuss the opportunity for Discovery Global, in general, internationally and locally. We have iconic brands reaching a billion people. We have trusted journalism with CNN and other players everywhere in the world, fan-favorite talent, a world-class sports portfolio, and a strong digital footprint that is already contributing meaningfully to the monetization of our brands and our network content. I have spent a lot of time over the past half a year working with the great networks leadership team, and I really believe we have an opportunity to double down on what already makes us a global leader in the field. We have unmatched scale, and we are committed to supporting that portfolio with opportunities as they arise. I want to start with the international opportunity because that is typically harder to understand from a domestic perspective. But number one, we have fundamentally different trends internationally. For example, we are expecting to be flat to slightly up in international ad sales this year, largely impacted by the fact that we have meaningful free-to-air presence in many key markets. We have scale internationally that allows us to partner and potentially think about M&A, partnerships with other players in the market, and a strong team that has been in these territories for decades. Number two is sports, and I will talk about the U.S. side here for a second. Not all sports rights are created equal. Our sports portfolio showcases that. Over the past 12 months, we have had 440 events reaching 2,000,000 people or more. Discovery+ is a profitable business. There is a tremendous opportunity ahead for us still. CNN is the most trusted global news brand, with a news-gathering organization that is unrivaled. Whenever something happens anywhere in the world, we do not have to send people; we have people on the ground who can cover events within hours or minutes. That is reflected in the stronger monetization interaction model we have launched, aimed at a much more ambitious interaction with our news offering. And as for the capital structure, Discovery Global is projected to come out of the gate with roughly a 3.3x net leverage number. That is absolutely sustainable and supportable. I expect that rating agencies will probably assign single-B, maybe low double-B ratings for Discovery Global. This is sustainable, and there is a huge opportunity as we've shown in the past.

Does not sound like you are losing a lot of sleep over leverage.

Absolutely not. There has been a lot of investor focus and debate. We prepared that estimate range of $0 to $2,000,000,000 in the proxy to give ourselves some flexibility. Regarding this famous debt allocation mechanism, we are targeting to optimize shareholder value in everything we are doing, and this board and management team are ready to make progress.

Thanks. Next question.

Good morning, everyone. Looking at all your premium Warner Bros. and HBO original content and the franchise IP that you started to talk about, what do you think is now finally being appreciated that was overlooked before the sales process heated up? And how difficult is building new franchises from scratch? And then just separately, as we think about your internal forecast for streaming profits to roughly triple by 2030, can you help us break down the drivers to reach that goal? What do you think are misunderstood areas of growth? Is it advertising, pricing, subscriber increases, or even more efficient spending?

Thanks, Robert.

Thank you. I believe there has been a lot of focus on deleveraging this company and paying back debt. We had a team that was focused on this, but we consistently asked how our content is contributing. We canceled a lot of projects that were down 50% or 60%. We invested massively in original content and reviving great franchises. Our commitment to storytelling focused primarily on creative culture. With a superb creative team that has significant latitude to take risks, the Warner Bros. library together with the creative talent we have is stunning. It took time, and we are on a long cycle, but you will see it. Movies like Batman 2, Minecraft 2, Penguin, and Superman are critical to us. Our commitment to original content has been unique. Warner Bros. today and HBO is a company that prioritizes storytelling first, and our creative slate across HBO has never been stronger.

Robert, regarding the levers for growth and what makes us confident about HBO Max’s growth, five different levers support this. The first is product and content. We have clarity on content needs, customer segments, and we have been improving that for the last four years. We have a track record of delivering on our hypotheses, such as the need for longer-running series, which led to The Pit's strength. We expect further volume and penetration growth driven by our content. Second is launching in large new markets, including Europe. Then we are in the second inning of password sharing enforcement, starting to scale, which will start in 2026. We will see growth in existing markets supported by content, marketing, and product enhancements. Lastly, monetization combines pricing and ad sales, where we are still early in the ad sales growth trajectory. Our fill rates are low internationally, so we have a strong outlook for the coming years.

Backing Channing and her team on rebuilding Warner Bros. Television is key for us, doubling down on quality content and being the largest producer of TV in the world. Our big bets focus on the motion picture business, which we love deeply. We believe strongly in the shared experience that movies provide and are excited about the return of audiences to theaters to see our content.

Thank you, Robert. Next question, please.

Your next question comes from Peter Supino of Wolfe Research. Please go ahead.

Hi. Good morning, everybody. Wanted to ask you to expand on the expansion of DC. You mentioned earlier in today's call that the programming is the product, and so I am wondering if the amount of programming that you are offering international audiences is today driving enough engagement to get you a level of ARPU that enables you to make money, or does that flywheel that you are working on require more programming dollars, and does it require any local programming? Thank you.

Yeah.

Peter, a couple of observations: when we started this journey four years ago, we believed we could return to profitability within a three- to five-year time frame. We significantly outperformed that, turning profitable in most markets within one to two years of launch. International businesses, like Latin America, are significantly profitable now. We see opportunities to drive profitability further. Our strategy focuses on launching in markets where many of the IPs we work with have global audiences already, like the HBO brands and the Game of Thrones universe. We do not need a significant increase in local content spending. We already target investment in local content as part of our plan, but a major jump is not necessary to support growth. We were proactive a couple of years ago by acquiring leading local streams in regions like Turkey and announced a partnership to feature Korean content, which also travels well. We like to invest in markets where there are strong opportunities.

Thanks, Peter. Your next question comes from Bryan Kraft of Deutsche Bank. Please go ahead.

I had two, if I could. Just first on the studio, I was wondering if you could provide some more color on the video games pipeline and how your broader strategy is evolving there, including what is coming in 2026? And just any kind of directional color on what your guidance assumes for 2026 EBITDA with a contribution from video games relative to 2025. And then I just want to ask on the network side, could you give a little more color on the advertising improvement? I know there was an NBA headwind, but how much improvement did you see in domestic advertising, excluding sports, versus the international side, which also sounds like it is performing well and had some improvement? Thanks.

Thanks, Bryan. Regarding the games business, 2025 was a year of reset. We had too broad a set of studios, and the core of last year's reset was getting back to proven studios and successful games. 2026 will see a similar year compared to the reset. We have two big IPs launching. One in May from one of our most prolific studios in the UK, TT Games. We are thrilled about the feedback and tracking for this title. The second game is from our Boston studio with our successful mobile franchise, Game of Thrones: Conquest, which will release a second game called Dragonfire this summer. We are confident it will have a solid financial trajectory like its predecessor.

Thank you, JB. Regarding ad sales, drivers include the new upfront that has kicked in, which saw 17 out of the top 25 premieres for freshman series. Once you exclude the NBA, we performed well with the MLB playoffs and NHL. CNN has seen some headwinds, but we are experiencing good scatter premiums. Overall health improvements have been noted across all our key networks, and we had top shows performing well. The international business also does well, with EMEA our largest region, and we see stability with potential growth in ad sales moving into 2026.

Great. Thank you, guys. Maybe a couple of follow-ups on the Discovery Global side. Gunnar, you guys gave some guidance for ad and OpEx savings for 2026 on that side. Anything you can tell us about the cost savings? Is it just the NBA, or are there additional opportunities for cost savings there? And then is there a way to bottom-line it in terms of how you see EBITDA trends in that business as we look out to 2026 and maybe beyond? And then I would love to get your view on how you see the sports business. You talk about the TMT sports app. Just what is your appetite for building a sports business and potentially securing additional rights? How do you see that business going forward?

Thanks, John. We will take the next question.

In terms of cost guidance, our projections and long-range plans in the proxy answer your question partly. There is significant benefit from NBA cost savings. We maintained profitability through the transformation of our sports portfolio. We will focus on efficiency improvements; AI will play a role in improving our effectiveness. We are targeting for our sports business and continue to be disciplined about acquiring rights that make financial sense. We will be engaged in ongoing processes, and we maintain appetite for sports rights going forward, even post-separation into Discovery Global.

Thank you, John, and thank you, everyone.

Okay. Thanks, Peter.