Needham trims estimates on Warner Bros. Discovery into Q3
Kevin Winter

Needham has cut third-quarter estimates for Warner Bros. Discovery (NASDAQ:WBD), pointing to some softness in the scatter advertising market, tougher currency headwinds and ongoing subscriber losses to linear TV.
The firm is cutting back on revenue, operating income and earnings per share estimates, analyst Laura Martin notes.
She's cutting expectations for advertising revenue by 10% - to -9% year-over-year - after the company guided to a drop in the "high single- to low double-digits." Ad revenue should double in the company's streaming space - to $108M - but in its cable networks, advertising revenue is seen falling 12% to $2B.
As for distribution revenue, she's cutting that estimate by 2% (to -3% year-over-year) thanks to declining subscribers in linear TV, though she's reduced distribution revenue expectations for direct-to-consumer by 5% as well, to $2.15B.
Meanwhile, not only are foreign-exchange headwinds greater than anticipated, but the company is facing tougher comparisons vs. the third quarter of 2021, when the Summer Olympics were held.
Those cuts are partly offset, though, by some higher content revenue than expected, "because WBD licensed the Lord of the Rings library movies to Amazon to coincide with its streaming release of The Rings of Power," as well as higher share count and some "higher cost synergies ... than we had previously expected."
New WBD chief David Zaslav in the spring had pledged that the combination of Discovery with WarnerMedia would result in some $3B in merger synergies.