Warner Bros. Discovery earnings watch: Ad struggles, Max in focus
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Warner Bros. Discovery (NASDAQ:WBD) posts first-quarter earnings Friday morning, and a disastrous outcome from Paramount Thursday indicates that eyes will be on how WBD's legacy television business manages the much-discussed ad slump.
Networks make up WBD's biggest business, turning more than $5.5B in revenue last quarter, though networks ad revenue had already fallen 17% to end 2022 (on a pro forma basis, to $2.23B from $2.68B), and distribution revenues fell 5% on the same basis, to $2.87B. Ad sales are expected to drop to just over $2B in Q1. The company's networks have also seen a heavy decline in ratings.
Ad sales also hit Paramount hard, so more of the same could lead to another sell-off for Warner Bros. Discovery. But don't overlook potential rough spots in the other business lines: Studios revenue had fallen 25% year-over-year in the fourth quarter, and so far this year on the film front, the disappointing Shazam! Fury of the Gods is the company's best-performing theatrical film, with a mere $57M domestic gross.
(Looking ahead, Evil Dead Rise has done well of late, and the studio is looking forward to Blue Beetle, Barbie and new DC entry The Flash for summer hits.)
Meanwhile, investors will also be watching the streaming business: As with rivals, it's currently a business line with heavy investment that's not yet profitable. Revenues have been on the rise, as have costs. And a high-stakes bet is ahead as the company's newly merged streaming service Max launches May 23, combining HBO Max with Discovery+.
Observers expect the company to report total subscribers of just under 97M.
Consensus expectations for WBD's first quarter also include revenues of $10.8B leading to an adjusted loss per share of $0.12. Revenues have seen six upward revision in the past three months, along with 13 downward revisions.
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