WBD 2025 Q2 Financial Analysis

**Bottom-line first 🏆**
Warner Bros. Discovery (WBD) swung back to profitability in Q2 2025, delivering a **large EPS beat and a long-awaited net-income turnaround** thanks to rigorous cost control, a strong theatrical slate, and growing streaming scale. However, the **top line was essentially flat and advertising remains under pressure**, tempering the otherwise impressive margin expansion.

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### 1. Key Financial Highlights

| Metric | Q2 2025 | YoY Change | Consensus vs. Actual |
|---|---|---|---|
| Revenue | **$9.81 bn** | +1 % | -$0.02 bn miss |
| Net Income | **$1.58 bn** | vs. -$9.99 bn loss | – |
| GAAP EPS (diluted) | **$0.63** | vs. -$4.07 | **+$0.86 beat** |
| Adj. EBITDA | **$1.95 bn** | +9 % ex-FX | – |
| FCF (company did not break out in the press release) | “meaningfully positive” per call (management) | n/a | – |
| Streaming Subs | **125.7 m** | +3.4 m QoQ | In-line |

*EPS surprise (~+494 %) is the first positive earnings surprise in four quarters.*

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### 2. Segment-Level Performance

1. **Studios**
• Theatrical revenue jumped **+38 %** ex-FX on blockbuster releases (“Minecraft”, “Sinners”, “Final Destination: Bloodlines”) driving the swing to profit.
• Management now targets **≥ $2.4 bn FY25 adj. EBITDA** for the segment, on track for the $3 bn medium-term goal.

2. **Streaming (Max/Discovery+)**
• **$103 m operating profit** (third consecutive profitable quarter).
• Subscriber additions of **+3.4 m** easily offset modest ARPU slippage.
• FY25 guidance: **$1.3 bn adj. EBITDA**; management reiterated break-even FCF for DTC in FY26.

3. **Global Networks (Linear TV)**
• Advertising revenue declined **-11.8 % YoY** as cord-cutting and soft scatter market persisted.
• Distribution revenue slipped **-7.4 % YoY**; continued affiliate fee pressure.

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### 3. Margin Dynamics & Balance-Sheet Progress

| Item | Q2 2024 | Q2 2025 |
|---|---|---|
| Gross Margin | 44.3 % | **46.7 %** |
| Adj. EBITDA Margin | 17.8 % | **19.9 %** |
| Net-Debt / EBITDA | 4.1× | **3.6×** (post-FCF pay-down) |

Debt reduction remains a core priority; WBD repaid **$1.5 bn** during the quarter, bringing year-to-date deleveraging to $3.2 bn. Management reiterated its <3× leverage objective by YE 2026.

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### 4. Management Outlook

• Separation of *Warner Bros.* (Streaming & Studios) and *Discovery Global Media* (Networks) remains on schedule for **mid-2026**; expect one-time spin costs of ~$600 m over 18 months.
• 2025 CapEx guided to **$2.6–2.8 bn**, down ~10 % YoY as integration synergies mature.
• No change to $4 bn cumulative cost-synergy target (90 % captured).

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### 5. Market Reaction & Valuation

| | 1 D | 1 M | YTD |
|---|---|---|---|
| WBD Price Performance | -3.2 % (post-earnings fade) | **+11.3 %** | **+82.2 %** |

At ~$12.80, the stock trades at **~10× FY25E EPS** and **6.5× FY25E EBITDA**, still a discount to diversified-media peers (DISCA ~8×, PARAA ~7×).

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### 6. Investment Takeaways 🎬

1. **Turnaround gaining traction:** First positive GAAP EPS since the merger signals real operating leverage.
2. **Streaming profitability is sticky:** Three straight profitable quarters suggest scale economics are working.
3. **Linear drag is structural:** Advertising softness offset the upside. Expect continued secular decline.
4. **Debt remains the wildcard:** While leverage is falling, $39 bn gross debt still limits optionality in a higher-rate world.
5. **Event risk:** 2026 spin-off could unlock value but introduces execution risk.

**Tactical view (1-3 months)**
For a short-term, technically minded trader like you, the EPS beat and guidance underpin positive momentum, yet the revenue miss and lingering macro worries can cap upside near $14. Consider trading the $12–14 channel; watch ad-spend sentiment and theatrical box-office updates for catalysts.

**Strategic view (6-12 months)**
If management delivers on further deleveraging and maintains streaming profitability, multiple expansion to peer averages (8–9× EBITDA) implies **20–35 % upside**. Conversely, any stumble in the linear ad market or unexpected content-cost surge could push the leverage narrative back to the fore.

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*Hope this gives you a clear 360° snapshot of WBD’s quarter—feel free to ask if you’d like deeper segment modeling or technical-chart insights!* 📊🍿