Warner Bros Discovery (WBD.O) missed second-quarter revenue expectations on Thursday, hurt by lackluster box-office performance and soft advertising sales due to the absence of NBA games.
Studio revenue slumped 39%, with releases including "Mortal Kombat II" and "Supergirl" failing to replicate the blockbuster success of last year's top grosser "A Minecraft Movie" and "Sinners".
Warner's film slate is weighted toward the second half of the year, with major releases such as "Digger" and "Dune: Part Three" expected to boost box-office performance.
The streaming business remained a bright spot, with revenue rising 10% as HBO Max's international expansion and original content like "The Pitt", "Euphoria" and "House of the Dragon" helped drive subscriber growth.
The unit is central to Warner Bros' $110 billion merger with Paramount, with the combined HBO Max and Paramount+ platforms expected to give the company greater scale to compete with streaming giants Netflix and Disney.
Britain's Competition and Markets Authority cleared the deal on Thursday saying it was unlikely to harm competition in the country.
Still, the merger remains tied up in court, with California and 11 other states seeking to block it on antitrust grounds. Paramount has agreed to pause the deal until June 2027, while a federal trial is set for March 2027.
The absence of the National Basketball Association games broadcasts this year, coupled with declines in domestic linear TV audiences, drove a 22% drop in advertising revenue for Warner Bros during the second quarter.
While revenue at the CNN-owned networks division fell 17%, a 23% decline in operating expenses due to the absence of costs tied to NBA rights and lower content spending helped Warner post a surprise quarterly profit of 6 cents per share.
Analysts polled by LSEG had expected a loss of 13 cents.
Warner Bros Discovery reported revenue of $8.72 billion in the second quarter, well below the LSEG-compiled estimate of $9.29 billion.
