Warner Bros. Discovery’s impending sale has rattled Hollywood — and the company’s balance sheet as the auction’s high costs increasingly come into focus.
The New York-based media company released its first-quarter earnings Wednesday, which included a $2.9 billion loss. That amount includes $1.3 billion in restructuring expenses, including updated valuations for Warner’s declining linear cable television networks.
Contributing to the net loss was the $2.8 billion termination fee paid to Netflix in late February when the streaming giant bowed out of the bidding for Warner. The auction winner, Paramount Skydance, covered the payment to Netflix but Warner still must carry the obligation on its balance sheet in case the Paramount takeover falls apart. Should that happen, Warner would have to reimburse Paramount.
Warner also spent another $100 million to run the auction and prepare for the upcoming transaction, according to its regulatory filing.
“As we prepare for our next chapter, our focus remains on executing our key strategic priorities: scaling HBO Max globally, returning our Studios to industry leadership, and optimizing our Global Linear Networks,” Warner Bros. Discovery leaders said Wednesday in a letter to shareholders.
Warner generated $8.9 billion in revenue, a 3% decline from the same quarter one year ago, excluding the effect of foreign exchange rate fluctuations.
Its streaming services, including HBO Max, notched milestones in the quarter and 9% revenue growth to $2.9 billion. The company launched HBO Max in Germany, Italy, Britain and Ireland during the quarter.
Advertising revenue for streaming was up 20% compared to the first quarter of 2025.
The streaming unit posted a 17% increase to $438 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Warner’s studios, primarily its TV business, had a strong quarter.
Studios revenue rose 31% to $3.1 billion, compared to the prior year quarter.
Television revenue soared 58% (excluding exchange rate fluctuations) due to increased program licensing fees to support the launch of HBO Max in international markets. Those launches also propelled the movie studio, which saw revenue increase 21%.
Video games revenue declined 30% because of lower library revenues.
Adjusted EBITDA for the studios grew $516 million (158%) to $775 million compared to the prior year quarter.
The company’s vast linear television networks saw revenue fall 9% to $4.4 billion compared to the prior year period.
TV distribution revenue tumbled 8% largely due to a 10% decrease in domestic linear pay TV subscribers.
The company also felt the loss of its NBA contract for its TNT channel, which NBC picked up. Advertising revenue fell 12%. “The absence of the NBA negatively impacted the year-over-year growth rate,” Warner said.
As the costs of the merger with Paramount come into clearer focus, the opposition has grown louder.
More than 4,000 artists and entertainment industry workers, including Bryan Cranston, Noah Wyle, Kristen Stewart and Jane Fonda, have signed an open letter warning about the dangers of the merger with Paramount. “This transaction would further consolidate an already concentrated media landscape, reducing competition at a moment when our industries — and the audiences we serve — can least afford it,” according to the letter.
“The result will be fewer opportunities for creators, fewer jobs across the production ecosystem, higher costs, and less choice for audiences in the United States and around the world.”
Adjusted EBITDA for the television networks fell 10% to $1.6 billion, compared to the prior year quarter.
Warner ended the quarter with $3.3 billion in cash on hand and $33.4 billion of gross debt.
