Warner Bros. Discovery delivered a surprise profit for the third quarter, driven by strong growth in its Max streaming platform, buoyed by exclusive rights to stream the Paris Olympics. This milestone performance came despite challenges in its traditional TV business and a downturn in studio revenues. Shares of the company rose 3.7% in premarket trading on the back of the unexpected financial results.
The Max streaming service, which expanded its international reach in time for the highly anticipated Olympic Games, added 7.2 million global subscribers in the third quarter, surpassing analyst expectations of 6.28 million additions, according to Visible Alpha. "Max delivered its strongest quarterly subscriber gain since its launch," CEO David Zaslav stated. The platform now boasts 110.5 million subscribers as of September 30.
The streaming segment, including both Max and Discovery+, saw an 8% increase in revenue, reaching $2.63 billion. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the segment more than doubled from the previous year to $289 million. The surge in global subscribers and higher advertising revenue were key contributors to this growth, solidifying streaming as a bright spot for Warner Bros. Discovery amid industry-wide challenges in traditional television.
In contrast, the company's studio segment faced significant challenges, with revenue dropping 17% to $2.68 billion. Theatrical revenue alone plummeted by 40%, primarily due to weaker box office performances from films like "Beetlejuice Beetlejuice" and "Twisters," compared to last year's record-breaking success of "Barbie." Total revenue for the quarter fell to $9.62 billion, missing Wall Street's forecast of $9.80 billion.
The TV networks division, which includes popular channels such as Discovery Channel and Animal Planet, reported a 3% increase in revenue, totaling $5.01 billion. This growth was largely driven by sublicensing Olympic sports rights to regional European broadcast networks, providing a rare boost in an otherwise declining traditional TV landscape affected by cord-cutting trends and a soft advertising market.
Despite its mixed performance, Warner Bros. Discovery's ability to capitalize on the Olympic Games highlights its strategic shift toward international expansion and streaming dominance. The company has faced intense competition in the streaming market from industry leaders like Netflix and Disney+. Netflix reported adding 5.1 million new subscribers last quarter, while Disney's streaming service saw modest growth in its core Disney+ subscribers.
The broader streaming market continues to prioritize profitability over subscriber growth, and Warner Bros. Discovery's surprise profit stands out in this context. Paramount Global's streaming platform swung to an unexpected profit last quarter, despite a decline in Paramount+ subscribers due to the unwinding of a Korean partnership. Meanwhile, Comcast's Peacock added 3 million subscribers, benefiting from the same Olympic boost.
Analysts have turned their attention to Warner Bros. Discovery's ability to maintain its momentum. While subscriber growth has proven strong, challenges remain, especially with its studio and traditional TV segments under pressure. "The market's expectations for streaming profits have evolved," said Michael Feroli, chief U.S. economist at J.P. Morgan. "Sustained profitability in streaming will be key as the company navigates the transition away from traditional TV revenue streams."
