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Earnings Results: Warner Bros. Discovery stock slammed after earnings debut

In its first earnings report since bringing in HBO Max and other WarnerMedia properties, Warner Bros. Discovery Inc. on Thursday missed revenue expectations by roughly $2 billion and reported a large loss due to charges related to the combination, sending its stock south.

Warner Bros. Discovery WBD, +4.61% reported a second-quarter loss of $3.42 billion, or $1.50 a share, on revenue of $9.84 billion, up from $3.06 billion a year ago, before Discovery acquired the former WarnerMedia assets in a complicated spinout and merger deal with AT&T Inc. T, -0.54%. The company did not provide adjusted earnings per share, after reporting 89 cents a share on an adjusted basis a year ago, though it did delineate nearly $4 billion in costs related to amortization of intangibles, restructuring, transaction and integration expenses and other charges.

Analysts on average expected earnings of 12 cents a share on revenue of $11.83 billion, according to FactSet. Shares dove nearly 9% in after-hours trading immediately following the release of the results, after closing with a 4.6% increase at $17.48.

Warner Bros. Discovery reported total streaming subscribers of 92.1 million, which would compare with 260.67 million subscribers for streaming pioneer Netflix Inc. NFLX, +1.40%. Average revenue per subscriber was $7.66, and the company added 1.7 million subscribers on a net basis in the quarter.

“We’re confident we’re on the right path to meet our strategic goals and really excel, both creatively and financially, and couldn’t be more excited about the future of our company,” Chief Executive David Zaslav said in a statement.

Analysts hope that the approaching premiere of “Game of Thrones” spinoff “House of the Dragon” can pump up subscribers, while planned cuts of up to $3 billion in postmerger “synergies” can boost the bottom line.

“‘House of the Dragon’ should minimally buffer subscriber erosion from discontinuing AT&T Mobile promotions and may represent the most plausible 2022-2023 stock catalyst outside visibility on $3B in cost reductions and free cash generation,” Benchmark analyst Matthew Harrigan wrote Wednesday in previewing the report, while maintaining a buy rating and $26 price target.

Executives did not provide a forecast in the announcement. Analysts on average were expecting third-quarter adjusted earnings of 15 cents a share on sales of $11.34 billion, according to FactSet.

Wall Street’s reaction to the report may depend more on what executives say in their conference call, which is scheduled to begin at 4:30 p.m. Eastern. Amid reports of completed movies being scuttled even for streaming and large cuts in HBO Max original productions, executives promised to “provide a Direct-to-Consumer strategy update” in the call.

Warner Bros. Discovery stock has declined 25.6% since the beginning of the year, while the S&P 500 index SPX, -0.08% has declined 12.8%. The merger closed on April 8.

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