MW As deal drama swirls around Warner Bros., its earnings show a declining industry
By Lukas I. Alpert
WBD reported continued losses and declines in revenue in its TV and studio businesses despite a string of hits, offset by steady gains in streaming
With Warner Bros. Discovery deep in negotiations to be acquired, its earnings show it is a company struggling in a fast-changing industry. (Photo by Patrick T. Fallon / AFP via Getty Images)
All eyes have been on the fight to acquire Warner Bros. Discovery. On Thursday, the company provided insight into what its rivals may ultimately end up buying - a company struggling to find a path in an industry in persistent decline.
The famed Hollywood studio and television giant $(WBD)$ reported ongoing losses and a decline in revenue in its fourth quarter, following a year in which the company saw a string of hits in both theaters and on television.
The earnings report comes amid a battle between Netflix $(NFLX)$ and Paramount Skydance $(PSKY)$ to acquire the legendary Hollywood powerhouse. Earlier this week, Warner Bros. signaled that Paramount may be on the verge of stealing the company away from Netflix following a last-minute boost in its offer.
While under pressure to possibly change horses midstream, Warner Bros. Discovery CEO and President David Zaslav said his company remained focused on leaning in to making "great film and television" to help it thrive in an industry facing rapid change.
"Four years ago, Warner Bros. was a business in need of transformation. Over that time, we have invested aggressively in transforming Warner Bros. Discovery for the future," he said in a call with analysts. "We invested big in making great film and television. We invested in streaming and turned HBO Max into a world-class direct-to-consumer platform."
Warner Bros. shares were down 0.3% in early morning trading on Thursday. Paramount shares rose more than 7%, while Netflix's stock was up nearly 2%.
Warner Bros.' earnings report came after Paramount's results, released late Wednesday, showed a widening fourth-quarter loss but revenue that edged higher.
Warner Bros. Discovery reported a net loss of $252 million in the quarter, below analysts' forecast of a loss of $66 million, according to FactSet. That was an improvement on the $494 million loss the company reported in the same quarter last year, but marked the sixth quarter in the last eight in which it recorded a net loss.
The company attributed the losses in its fourth quarter largely to accounting measures taken to absorb $1.3 billion in pretax acquisition-related amortization costs, restructuring expenses and changes in the valuation of its content.
The company also reported a 6% year-over-year decline in revenue to $9.5 billion, although that beat analysts' expectations of $9.35 billion, according to FactSet. Adjusted earnings before interest, taxes, depreciation and amortization, a widely followed measure of the underlying profitability of a business, fell 19% year-over-year.
The company said its quarterly revenue decline was largely driven by the loss of advertising revenue in its television unit, stemming from the end of its deal to air NBA games on TNT. Warner's film studio didn't release a new movie in the quarter either, after a string of box-office hits earlier in the year.
The company managed modest gains in its HBO Max streaming business, adding 3.5 million subscribers from the prior quarter for a total of 131.6 million paying customers. That boosted revenue for the segment by 5% year-over-year, although earnings before interest, taxes, depreciation and amortization for the division fell by 4%.
The last-minute offer of $31 per share from Paramount on Monday added a wild twist to an already dramatic bidding process for the legendary Hollywood studio, HBO Max streaming service and television business that had seemed firmly in Netflix's hands.
Warner Bros.' board said the new offer from Paramount "could reasonably be expected to lead to a 'company superior proposal,'" meaning that talks with Paramount will continue.
If Warner Bros. decides the Paramount bid is ultimately better, Netflix would have four days to decide whether it wants to sweeten its proposal or walk away. Netflix could also raise its bid now to avoid more drawn-out talks.
In addition to a $1-per-share increase from its previous offer of $30 per share, Paramount offered to pay a $7 billion regulatory termination fee if the merger does not clear regulatory hurdles and a $2.8 billion termination fee it would be required to pay Netflix.
Paramount also offered to pay a 25-cents-a-share "ticking fee" for every quarter the deal doesn't close after Sept. 30.
The new bid from Paramount puts considerable pressure on Netflix to either raise its bid of $27.75 per share for Warner's studio and streaming business, or drop out of the bidding.
Part of Paramount's case has been that its offer was more likely to pass muster with regulators because its CEO, David Ellison, and his father, Oracle $(ORCL)$ co-founder Larry Ellison, enjoy a good relationship with President Donald Trump. Netflix has argued that Paramount is on no better footing with regulators and that claiming otherwise was an attempt to mislead shareholders.
The Trump administration has signaled that it intends to scrutinize the deal. Trump at one point said he had no plan to involve himself in the transaction, then over the weekend demanded that Netflix fire board member Susan Rice, a former Obama administration official, or else "pay the consequences."
Regulators in Europe will also have to sign off on any deal.
-Lukas I. Alpert
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February 26, 2026 10:28 ET (15:28 GMT)
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