Warner Bros. Discovery (WBD) earnings Q2 2024

Warner Bros. Discovery‘s stock dropped Wednesday after it reported a $9.1 billion write-down on its TV networks and missed analyst estimates on revenue.

Here is how Warner Bros. Discovery performed, based on a survey of analysts by LSEG:

• Loss per share: 36 cents vs. a loss of 22 cents expected
• Revenue: $9.7 billion vs. $10.07 billion expected

The company’s shares were down roughly 9% in aftermarket trading.

Warner Bros. Discovery on Wednesday reported the non-cash goodwill impairment charge, which was triggered by the reevaluation of the book value of the TV networks segment. The book value was higher than the market value as traditional TV networks continue to see customers flee and advertisers are opting to spend on digital and streaming instead.

“While I am certainly not dismissive of the magnitude of this impairment, I believe it’s equally important to recognize that the flip side of this reflects the value shift across business models,” said CFO Gunnar Wiedenfels on Wednesday’s earnings call, adding that the company is focusing on growth in the studios and streaming units.

He said Warner Bros. Discovery’s balance sheet carries a significant amount of goodwill stemming from mergers and acquisitions, namely the combination of Warner Bros. and Discovery in 2022.

“It’s fair to say that even two years ago market valuations and prevailing conditions for legacy media companies were quite different than they are today, and this impairment acknowledges this and better aligns our carrying values with our future outlook,” CEO David Zaslav said on Wednesday’s call.

Executives highlighted Warner Bros. Discovery’s continued mission of paying down debt, much of which stems from the 2022 merger. During the second quarter the company paid down $1.8 billion in debt. As of June 30, it had $41.4 billion in gross debt and $3.6 billion cash on hand.

The company also noted uncertainty surrounding future sports rights renewals, including the NBA. Warner Bros. Discovery sued the NBA in July, looking to forcibly invoke its matching rights on a package of games earmarked for Amazon‘s Prime Video as part of the league’s new media rights deal.

Revenue for Warner Bros. Discovery’s TV networks — a portfolio that includes TBS, TNT, Discovery and TLC — was down 8% to $5.27 billion during the second quarter, with both distribution and advertising revenue down in the segment.

However, the company’s streaming business, centered around the platform Max, was a bright spot.

The company said Wednesday it added 3.6 million subscribers during the quarter ended June 30, bringing its total number of global streaming customers to 103.3 million.

The international expansion lifting subscriber growth, as well as increased ad spending on streaming, is propelling its streaming business toward profitability, executives said Wednesday, with the expectation that it would continue.

Zaslav also touted the streaming bundles Warner Bros. Discovery is forming — an entertainment pairing with Disney’s Disney+ and Hulu — and a sports bundle with Disney’s ESPN and Fox set to launch this fall.

Still, direct-to-consumer streaming revenue decreased 5% to $2.57 billion, driven by content revenue dropping 70% due to a lower volume of third-party licensing deals. Yet advertising revenue for streaming was up 99%, the company said, driven by higher domestic engagement on Max, and ad-supported subscriber growth. Global revenue also increased 4% driven by the ad tier.

Total revenue for the quarter was down 6% to $9.7 billion. Total adjusted earnings before interest, taxes, depreciation and amortization decreased 15% to $1.8 billion.

Correction: This article has been updated to reflect that Warner Bros. Discovery’s revenue was $9.7 billion for the quarter.