Warner Bros. Discovery (NASDAQ:WBD) reported second-quarter subscriber numbers that beat Wall Street expectations, as the media conglomerate continues to move forward with its plan to divide into two separately traded companies.
Initially announced in June, the split will carve out the company’s studios and streaming operations from its underperforming television network assets. The restructuring is aimed at strengthening Warner Bros.’ competitive stance as more consumers abandon traditional cable in favor of streaming alternatives.
In a letter to shareholders, the company noted that the separation process is “well underway” and has already achieved “several milestones” in the past two months.
To fund the corporate split, Warner Bros. secured a bridge loan that carries a higher interest rate, resulting in an expected $80 million increase in quarterly interest expenses — pushing total interest payments above $500 million.
The cost of executing the transaction amounted to roughly $250 million in the second quarter, largely driven by interest expenses. As a result, free cash flow dropped 28% year-over-year to $702 million in the quarter ending June 30.
Warner Bros. also said it plans to issue a $725 million cash tax payment in the second half of the year, tied to $3.2 billion of debt related to the separation financing.
“We expect to incur one-time transaction and restructuring costs that will impact free cash flows through the closing of the separation, which we will quantify once we finalize the key operating model and separation decisions,” the group noted.
Despite the cost pressures, Warner Bros. expressed confidence in the future of its content and streaming division, saying it is “primed to thrive as a nimble, focused, and independent entity,” while acknowledging ongoing challenges in the traditional TV space.
During the second quarter, total subscribers reached 125.7 million — beating analyst projections of 124.91 million. The increase was led by continued momentum at HBO Max, which includes hit titles such as The Last of Us and The Gilded Age. Adjusted core earnings totaled $1.95 billion, also above expectations, while revenue matched estimates at $9.81 billion.
Following the release, Warner Bros. shares moved higher in premarket trading on Thursday.
Warner Brothers Discovery stock price
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