Warner Bros. Discovery reported second-quarter 2026 revenue of $8.72 billion, missing Wall Street expectations of $9.18 billion to $9.29 billion and declining 11.2% from a year earlier.

Yet the company's stock moved higher, rising about 1.5% to 1.9% on the day, as investors focused on a stronger-than-expected earnings result. Warner Bros. Discovery posted adjusted earnings per share of $0.06, topping analyst estimates for a $0.10 to $0.14 loss.

The company also reported adjusted EBITDA of $1.88 billion, slightly below the $1.90 billion forecast, and net income of $149 million, down 91% year over year. Free cash flow margin was 6.6%, roughly flat with the same quarter last year, while the company's market capitalization stood at $65.1 billion.

A key factor behind the profit beat was a 23% decline in operating expenses, helped by the absence of NBA rights costs and lower content spending. The expiration of NBA media rights — one of the most expensive sports broadcast deals in the U.S. — has been a major variable for companies that have historically relied on live sports to anchor linear television schedules. That cost reduction offset weakness in several parts of the business.

Studio revenue fell 39% in the quarter. Warner Bros. Discovery said "Mortal Kombat II" and "Supergirl" underperformed compared with last year's releases such as "A Minecraft Movie" and "Sinners." The company said its film slate is weighted toward the second half of the year, with major titles including "Digger" and "Dune: Part Three" expected later in 2026.

Advertising revenue dropped 22% as the loss of NBA broadcast rights weighed on results and domestic linear TV audiences continued to shrink. The decline reflects a broader, multiyear trend of cord-cutting that has pressured ad-supported linear television across the traditional media sector. Warner Bros. Discovery also said the 2026 FIFA World Cup pulled viewers and ad spending away in several markets during June and July.

The CNN-owned networks division posted a 17% revenue decline, although cost cuts helped offset part of that pressure at the operating level. Operating margin improved to 2.7%, compared with negative 1.9% in the same period a year earlier.

Streaming remained a bright spot. Revenue in the segment rose 10%, supported by international expansion and original programming including "The Pitt." HBO Max continued to be an important driver as the company leans more heavily on streaming in its longer-term strategy. The growth comes as the global streaming market remains highly competitive, with Netflix, Amazon Prime Video, Disney+, and Apple TV+ all investing heavily in original content and international markets.

The earnings release also came as Warner Bros. Discovery's planned merger with Paramount remained under scrutiny. Britain's Competition and Markets Authority cleared the $110 billion Warner-Paramount deal on Thursday, saying it was unlikely to harm competition in the UK.

However, the transaction still faces legal challenges in the United States. California and 11 other states are seeking to block the merger on antitrust grounds. Paramount has agreed to pause the deal until June 2027, and a federal trial is scheduled for March 2027.

Seth Shafer, principal analyst at S&P Global Market Intelligence, said the CMA approval could help Paramount's position in U.S. proceedings, but added that the outcome will ultimately depend on arguments presented in court. Both CEOs said on the post-earnings call that they remain confident the deal will close.

Looking ahead, sell-side analysts expect Warner Bros. Discovery revenue to grow 3.8% over the next 12 months, below the sector average.