How did WBD's Q4 earnings surprise impact investor sentiment?

Warner Bros. Discovery Inc (WBD) reported its fiscal Q4 2024 earnings on December 27, 2024, which included several positive and negative elements that likely influenced investor sentiment in different ways:

1. **Positive Points**:
- **Strong Subscriber Growth**: Warner Bros. Discovery saw significant growth in its direct-to-consumer segment, with Max adding 13 million subscribers in Q3, reaching over 110 million globally. Direct-to-consumer revenue increased by 9% year-over-year, and EBITDA grew more than 175%. This indicates strong financial performance and suggests a growing revenue stream that could be positive for long-term investors.
- **Earnings Beat Expectations**: The company reported quarterly earnings of $0.05 per share, surpassing the Zacks Consensus Estimate of a loss of $0.07 per share. This represents a substantial earnings surprise of 171.43% and is a positive sign for investors looking for profitability.
- **Renewal Agreement with Charter**: The renewal agreement with Charter Communications is seen as a strategic win, providing enhanced value to customers and creating more stability in the industry. This could be viewed as a positive development for WBD's business model.
2. **Negative Points**:
- **Challenges in Linear Television and Advertising**: The US linear television business faces well-known challenges and headwinds, impacting overall business performance. Total company advertising declined by 7% ex-FX during the third quarter, with networks advertising down 13% ex-FX. The company faces continued secular revenue declines in advertising and affiliate revenues in the linear networks business. These factors could be concerning for investors, especially those focused on the advertising sector.
- **Underperforming Games and Motion Pictures**: The games business is underperforming, with over $300 million in write-downs due to underperforming releases. Inconsistency in the motion picture studio, highlighted by the disappointing results of Joker 2, may raise questions about the quality and profitability of future releases.
3. **Stock Reaction**: Following the earnings release, WBD experienced a positive surge, with a 4.18% increase in its stock price on December 31, 2024. This suggests that the market may have reacted positively to the earnings beat and the positive aspects of the company's performance, such as subscriber growth and the renewal agreement.

|code|Ticker|Name|Date|Percentage Change|market_code|
|---|---|---|---|---|---|
|WBD|WBD.O|Warner Bros|20241017|-2.75|185|

In conclusion, while WBD's Q4 earnings report included areas of weakness, such as challenges in linear television and underperforming segments like games and motion pictures, the company's strong subscriber growth, earnings beat, and strategic renewals could have positively influenced investor sentiment. The market's immediate response was positive, reflected in the stock price movement following the earnings release.