Warner Bros. Discovery · 10-Q · Item 2 MD&A

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of financial condition and results of operations is a supplement to and should be read in conjunction with the accompanying consolidated financial statements and related notes. This section provides additional information regarding our businesses, current developments, results of operations, cash flows and financial condition. Additional context can also be found in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”).

BUSINESS OVERVIEW

Warner Bros. Discovery is a leading global media and entertainment company that creates and distributes a differentiated and comprehensive portfolio of content and products across television, film, streaming, interactive gaming, publishing, themed experiences, and consumer products through brands including: Discovery Channel, HBO Max, CNN, DC Studios, TNT Sports, HBO, Food Network, TLC, TBS, Warner Bros. Motion Picture Group, Warner Bros. Television Group, Warner Bros. Games, Adult Swim, Turner Classic Movies, and others.

We are home to one of the largest collections of owned content in the world with assets and intellectual property across sports, news, lifestyle, and entertainment in most languages and regions of the globe. We create some of the best-in-class content using our renowned library, beloved franchises, and acclaimed creative expertise to serve our audiences and consumers. Our asset mix strongly positions us to execute our key strategies: grow our streaming business globally, enhance our Studios segment, and manage our linear networks for the best possible success in order to create long-term value for our stockholders.

In the first quarter of 2025, the Company renamed its DTC reportable segment to Streaming and its Networks reportable segment to Global Linear Networks.

Termination of Netflix Merger

On January 19, 2026, the Company entered into an amended and restated agreement and plan of merger, by and among the Company, Netflix, Inc. (“Netflix”), Nightingale Sub, Inc., a wholly owned subsidiary of Netflix, and New Topco 25, Inc., a wholly owned subsidiary of WBD (the “Netflix Merger Agreement”), pursuant to which Netflix would have acquired the Streaming and Studios segments (subject to certain deviations) and certain other assets and liabilities, including the Company’s film and television studios, HBO Max, and HBO, following the separation and distribution of Discovery Global to the Company’s stockholders (the “Separation Transaction”).

Following the board of directors’ determination that it had received a “Company Superior Proposal,” as defined in the Netflix Merger Agreement, from Paramount Skydance Corporation (“PSKY”) and Netflix’s waiver of its right to propose revisions to the Netflix Merger Agreement, on February 27, 2026, in accordance with the terms of the Netflix Merger Agreement, the Company terminated the Netflix Merger Agreement in connection with entering into the PSKY Merger Agreement (as defined below). As a result of the termination of the Netflix Merger Agreement, PSKY, on behalf of the Company, paid Netflix a termination fee of $2.8 billion in cash (the “Netflix Termination Fee”) as required by the terms of the Netflix Merger Agreement.

In the first quarter of 2026, the Company recorded an expense for the Netflix Termination Fee in the consolidated statements of operations. The amount paid by PSKY is reimbursable by the Company to PSKY in certain circumstances in the event the PSKY Merger Agreement is terminated and has been recorded in accrued liabilities in the consolidated balance sheets.

PSKY Merger

On February 27, 2026, the Company entered into an Agreement and Plan of Merger, by and among the Company, PSKY and Prince Sub Inc., a wholly owned subsidiary of PSKY (“Merger Sub”) (as may be amended from time to time, the “PSKY Merger Agreement”), pursuant to which and subject to the terms and conditions therein, at the effective time, Merger Sub will merge with and into WBD, with WBD surviving as a wholly owned subsidiary of PSKY (the “PSKY Merger”).

Upon completion of the PSKY Merger, each issued and outstanding share of WBD’s Series A common stock (“WBD Common Stock”) (subject to certain exceptions) will be converted into the right to receive an amount in cash equal to $31.00, without interest, plus, if the closing date of the PSKY Merger occurs after September 30, 2026, the Ticking Consideration (together, the “Merger Consideration”). The “Ticking Consideration” will be an amount in cash equal to $0.00277778 multiplied by the number of calendar days elapsed after September 30, 2026 to and including the closing date (which, for the avoidance of doubt, will not exceed $0.25 per 90 calendar day period).

Concurrently with the execution of the PSKY Merger Agreement, Larry J. Ellison and an affiliated trust entered into a guarantee in favor of WBD to, among other things, jointly and severally guarantee certain payments by PSKY under the PSKY Merger Agreement, including $45.72 billion of the aggregate Merger Consideration, and assist WBD with the consummation of the PSKY Merger.

On April 23, 2026, WBD stockholders approved the adoption of the PSKY Merger Agreement. In July 2026, two lawsuits were filed in the United States District Court for the Northern District of California by a coalition of twelve state attorneys general and the Writers Guild of America West and Writers Guild of America East seeking to block the PSKY Merger, alleging the transaction would violate Section 7 of the Clayton Act by reducing competition in key markets. On July 24, 2026, defendants agreed not to complete the PSKY Merger until the earlier of (i) five days after the merits determination in these matters or (ii) June 1, 2027. (See Note 15 to the accompanying consolidated financial statements.) T1The outcome of such litigation is uncertain and could prevent the completion of the PSKY Merger.

The completion of the PSKY Merger is subject to customary closing conditions, including regulatory clearances. In addition, PSKY’s obligation to consummate the PSKY Merger is subject to WBD not having completed the separation of its Streaming & Studios business from its Global Linear Networks business nor having declared or made any dividend to WBD’s stockholders to effectuate the separation. There can be no assurance that the PSKY Merger will occur in accordance with the expected plans or anticipated timeline, or at all.

The PSKY Merger Agreement contains certain customary termination rights for WBD and PSKY, including, without limitation, a right for either party to terminate if the PSKY Merger is not completed on or before March 4, 2027, subject to an extension to June 4, 2027 in certain circumstances as specified in the PSKY Merger Agreement. Termination under specified circumstances will require WBD to pay PSKY a termination fee of $3.0 billion and reimburse PSKY for (i) any payment made by PSKY, which will in no event be more than $1,528 million, in connection with WBD’s obligation to complete the Junior Lien Exchange Offer (as defined below) by March 4, 2027 and (ii) the Netflix Termination Fee, or PSKY to pay WBD a termination fee of $7.0 billion.

Additionally, the PSKY Merger Agreement provides for customary pre-closing covenants of WBD, including covenants relating to conducting its business in the ordinary course consistent with past practice and to refrain from taking certain actions without PSKY’s consent.

Reportable Segments

As of June 30, 2026, we classified our operations in three reportable segments:

•Streaming - Our Streaming segment primarily consists of our premium pay-TV and streaming services.

•Studios - Our Studios segment primarily consists of the production and release of feature films for initial exhibition in theaters, production and initial licensing of television programs to third parties and our networks/streaming services, distribution of our films and television programs to various third party and internal television and streaming services, distribution through the home entertainment market (physical and digital), related consumer products and themed experience licensing, and interactive gaming.

•Global Linear Networks - Our Global Linear Networks segment primarily consists of our domestic and international television networks.

Our segment presentation is aligned with our management structure and the financial information management uses to make decisions about operating matters, such as the allocation of resources and business performance assessments.

INDUSTRY TRENDS

T2Headwinds in the industry, such as continued pressures on linear distribution and declines in linear subscribers and continued softness in the U.S. linear advertising market, have had, and are expected to continue to have, a material impact on the operations and results of the Company, including a negative impact on the results of operations attributed to declines in linear advertising revenue. The increase of digital advertising inventory available in the marketplace has also resulted in, and is expected to continue to result in, increased competition for advertising expenditures for both traditional linear networks and ad-supported tiers in streaming services. In addition, T3the imposition of tariffs by the U.S. government and any retaliatory tariffs from foreign governments, including tariffs directly or indirectly applicable to our industry, may negatively impact our operations and results, including by leading to higher productions costs or decreased spending by advertisers whose expenditures are sensitive to such actions or to general economic conditions.

We continue to closely monitor the ongoing impact of industry trends to our business; however, the full effects on our operations and results will depend on future developments, which are highly uncertain and cannot be predicted.

RESULTS OF OPERATIONS

Foreign Exchange Impacting Comparability

The impact of exchange rates on our business is an important factor in understanding period-to-period comparisons of our results. For example, our international revenues are favorably impacted as the U.S. dollar weakens relative to other foreign currencies and unfavorably impacted as the U.S. dollar strengthens relative to other foreign currencies. We believe the presentation of results on a constant currency basis (“ex-FX”), in addition to results reported in accordance with U.S. GAAP provides useful information about our operating performance because the presentation ex-FX excludes the effects of foreign currency volatility and highlights our core operating results. The presentation of results on a constant currency basis should be considered in addition to, but not a substitute for, measures of financial performance reported in accordance with U.S. GAAP.

The ex-FX change represents the percentage change on a period-over-period basis adjusted for foreign currency impacts. The ex-FX change is calculated as the difference between the current year amounts translated at a baseline rate, which is a spot rate for each of our currencies determined early in the fiscal year as part of our forecasting process (the “2026 Baseline Rate”), and the prior year amounts translated at the same 2026 Baseline Rate. In addition, consistent with the assumption of a constant currency environment, our ex-FX results exclude the impact of our foreign currency hedging activities, as well as realized and unrealized foreign currency transaction gains and losses. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies.

Consolidated Results of Operations

The table below presents our consolidated results of operations (in millions).

Three Months Ended June 30,

Six Months Ended June 30,

% Change

% Change (ex-FX)

% Change

% Change (ex-FX)

Revenues:

Distribution

$

$

1

%

1

%

$

$

1

%

—

%

Advertising

%

%

%

%

Content

%

%

%

%

Other

%

%

(4)

%

(6)

%

Total revenues

%

%

(6)

%

(7)

%

Costs of revenues, excluding depreciation and amortization

%

%

%

%

Selling, general and administrative

4

%

3

%

8

%

7

%

Netflix Termination Fee (See Note 1)

—

—

—

%

—

%

—

NM

NM

Depreciation and amortization

%

%

%

%

Restructuring and other charges

%

%

NM

NM

Impairments and loss on dispositions

%

%

%

%

Total costs and expenses

%

%

4

%

4

%

Operating income (loss)

NM

NM

NM

NM

Interest expense, net

(Loss) gain on extinguishment of debt, net

Income (loss) from equity investees, net

5

(2)

Other income, net

(Loss) income before income taxes

Income tax benefit (expense)

Net income (loss)

Net income attributable to noncontrolling interests

(7)

Net (income) loss attributable to redeemable noncontrolling interests

—

(1)

—

3

Net income (loss) available to Warner Bros. Discovery, Inc.

$

$

$

$

NM - Not meaningful

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis. The ex-FX percent changes of line items below operating loss in the table above are not included as the activity is principally in U.S. dollars.

Revenues

Distribution revenue increased 1% and remained flat for the three and six months ended June 30, 2026, respectively, primarily attributable to continued growth in existing streaming markets and the global expansion of HBO Max, including new distribution deals, partially offset by a 10% decline in domestic linear subscribers for both periods and the impact of the previously disclosed domestic wholesale streaming deal renewal that occurred in the second quarter of 2025.

T4Advertising revenue decreased 22% and 16% for the three and six months ended June 30, 2026, respectively, primarily attributable to audience declines in domestic networks of 17% and 13%, respectively, which were impacted by the absence of the NBA in 2026, partially offset by the broadcast of the NCAA Final Four and championship game in the current year quarter and an increase in global ad-lite streaming subscribers.

Content revenue decreased 26% and 16% for the three and six months ended June 30, 2026, respectively, primarily attributable to a 46% and 21% decrease in theatrical product revenue as a result of lower film rental revenue due to the current year slate in relation to the strong performance of A Minecraft Movie, Sinners, and Final Destination Bloodlines, which were released in the second quarter of 2025. Additionally, content revenue for both periods was negatively impacted by the timing of third-party licensing deals at Global Linear Networks, partially offset by higher Studios third-party television content sales.

Other revenue decreased 11% and 6% for the three and six months ended June 30, 2026, respectively, primarily attributable to the absence of the NBA in 2026.

Costs of Revenues

T5Costs of revenues decreased 23% and 17% for the three and six months ended June 30, 2026, respectively, primarily attributable to lower domestic sports costs due to the absence of the NBA in 2026, lower Studios theatrical content expense commensurate with lower theatrical product revenue, and lower content expense related to the amortization of purchase accounting fair value step-up for content, partially offset by higher international content costs to support HBO Max launches.

Selling, General and Administrative

Selling, general and administrative expenses increased 3% and 7% for the three and six months ended June 30, 2026, respectively, primarily attributable to higher transaction and integration costs and higher marketing expenses.

Netflix Termination Fee

During the six months ended June 30, 2026, the Company recorded a $2.8 billion expense for the Netflix Termination Fee. (See Note 1 to the accompanying consolidated financial statements.)

Depreciation and Amortization

Depreciation and amortization decreased 20% and 20% for the three and six months ended June 30, 2026, respectively, primarily attributable to intangible assets acquired in connection with the acquisition of the WarnerMedia Business from AT&T Inc. that are being amortized using the sum of the months’ digits method and the end of the useful life for certain intangible assets.

Restructuring and other charges

Restructuring and other charges were $113 million and $317 million for the three and six months ended June 30, 2026, respectively. Restructuring and other charges primarily includes organization restructuring costs, employee retention, and consulting fees related to the previously announced Separation Transaction and the PSKY Merger. (See Note 3 to the accompanying consolidated financial statements.)

Impairments and Loss on Dispositions

Impairments and loss on dispositions were $23 million and $37 million for the three and six months ended June 30, 2026, respectively.

Interest Expense, net

Interest expense, net increased $48 million and $161 million for the three and six months ended June 30, 2026, respectively, primarily attributable to higher interest costs associated with the Bridge Loan Agreement, which was repaid in full in June 2026. (See Note 8 to the accompanying consolidated financial statements.)

Loss (Gain) on Extinguishment of Debt, net

Loss (gain) on extinguishment of debt, net was $75 million and $102 million for the three and six months ended June 30, 2026, respectively. (See Note 8 to the accompanying consolidated financial statements.)

Income From Equity Investees, net

Income from our equity method investees was $28 million and $23 million for the three and six months ended June 30, 2026, respectively. The changes are attributable to our share of net earnings and losses from our equity investees. (See Note 7 to the accompanying consolidated financial statements.)

Other Income, net

Other income, net was $50 million and $12 million for the three and six months ended June 30, 2026, respectively. (See Note 13 to the accompanying consolidated financial statements.)

Income Tax Benefit (Expense)

Income tax benefit (expense) was $433 million and $(866) million for the three months ended June 30, 2026 and 2025, respectively, and $647 million and $(881) million for the six months ended June 30, 2026 and 2025, respectively. The increase in income tax benefit for the three and six months ended June 30, 2026 compared to the same periods in 2025 was primarily attributable to lower pre-tax book income, including the absence of a $3.0 billion gain recognized in 2025 associated with the Tender Offers (see Note 8 to the accompanying consolidated financial statements), as well as excess tax benefits from share-based compensation.

Income tax benefit for the three and six months ended June 30, 2026, reflects an effective income tax rate that differs from the federal statutory tax rate primarily due to the effect of foreign operations, excess tax benefits from share-based compensation, and changes in unrecognized tax benefits. Income tax benefit for the six months ended June 30, 2026 also reflects a book tax difference in the Netflix Termination Fee accrual based on current assessments. (See Note 1 to the accompanying consolidated financial statements.)

The Organization for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GloBE”) model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million. Numerous foreign jurisdictions have already enacted tax legislation based on the GloBE rules, with some effective as early as January 1, 2024. In January 2026, the OECD issued additional guidance on the minimum tax framework, including a “side by side” safe harbor framework that would apply to U.S.-parented groups. Even if this safe harbor applies, we would still be subject to local minimum tax regimes in countries that have adopted these rules.

The interpretation and adoption of the OECD’s recommendations continue to vary across jurisdictions. As of June 30, 2026, we recognized an immaterial income tax expense for Pillar Two GloBE minimum tax. The Company is continuously monitoring the evolving application of this legislation and assessing its potential impact on our future tax liability. (See Note 12 to accompanying consolidated financial statements.)

Segment Results of Operations

The Company evaluates the operating performance of its segments based on financial measures such as revenues and Adjusted EBITDA. Adjusted EBITDA is defined as operating income excluding:

•employee share-based compensation;

•depreciation and amortization;

•restructuring and facility consolidation;

•certain impairment charges;

•gains and losses on business and asset dispositions;

•third-party transaction and integration costs;

•amortization of purchase accounting fair value step-up for content;

•amortization of capitalized interest for content; and

•other items impacting comparability.

The CODM uses this measure to assess the operating results and performance of the segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. The Company believes Adjusted EBITDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses. The Company excludes employee share-based compensation, restructuring, certain impairment charges, gains and losses on business and asset dispositions, and transaction and integration costs from the calculation of Adjusted EBITDA due to their impact on comparability between periods. Integration costs include transformative system implementations and integrations, such as Enterprise Resource Planning systems, and may take several years to complete.

The Company also excludes the depreciation of fixed assets and amortization of intangible assets, amortization of purchase accounting fair value step-up for content (which is included in consolidated costs of revenues), and amortization of capitalized interest for content, as these amounts do not represent cash payments in the current reporting period.

The table below presents our Adjusted EBITDA for each of the Company’s reportable segments, corporate, and inter-segment eliminations (in millions).

Three Months Ended June 30,

Six Months Ended June 30,

% Change

% Change

Streaming

$

$

%

$

$

%

Studios

$

$

%

$

$

%

Global Linear Networks

$

$

(4)

%

$

$

(7)

%

Corporate

$

$

6

%

$

$

(3)

%

Inter-segment eliminations

$

$

NM

$

$

%

Streaming Segment

The following table presents, for our Streaming segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (loss) (in millions).

Three Months Ended June 30,

Six Months Ended June 30,

% Change

% Change (ex-FX)

% Change

% Change (ex-FX)

Revenues:

Distribution

$

$

%

%

$

$

%

9

%

Advertising

9

%

8

%

%

%

Content

%

%

%

%

Other

—

(1)

NM

NM

2

1

NM

NM

Total revenues

%

%

9

%

8

%

Costs of revenues, excluding depreciation and amortization

—

%

—

%

1

%

1

%

Selling, general and administrative

%

%

%

%

Adjusted EBITDA

%

%

%

%

Depreciation and amortization

Restructuring and other charges

7

Impairment and amortization of fair value step-up for content

Impairments and loss on dispositions

1

1

Operating income (loss)

$

$

$

$

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

Revenues

Distribution revenue increased 11% and 9% for the three and six months ended June 30, 2026, respectively, primarily attributable to continued growth in existing markets and the global expansion of HBO Max, including new distribution deals, partially offset by the impact of the previously disclosed domestic wholesale deal renewal that occurred in the second quarter of 2025.

Advertising revenue increased 8% and 13% for the three and six months ended June 30, 2026, respectively, primarily attributable to an increase in global ad-lite subscribers, partially offset by the absence of the NBA in 2026.

Costs of Revenues

Costs of revenues were relatively flat for the three and six months ended June 30, 2026, as higher international content costs to support HBO Max launches were offset by shifts in the overall mix of programming.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses increased 14% and 16% for the three and six months ended June 30, 2026, respectively, primarily attributable to higher marketing expenses to support HBO Max launches and higher overhead costs.

Adjusted EBITDA

T6Adjusted EBITDA increased 63% and 38% for the three and six months ended June 30, 2026, respectively.

Studios Segment

The following table presents, for our Studios segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating (loss) income (in millions).

Three Months Ended June 30,

Six Months Ended June 30,

% Change

% Change (ex-FX)

% Change

% Change (ex-FX)

Revenues:

Distribution

$

4

$

1

NM

NM

$

5

$

2

NM

NM

Advertising

—

—

NM

NM

—

1

NM

NM

Content

%

%

%

%

Other

(5)

%

(5)

%

2

%

—

%

Total revenues

%

%

%

%

Costs of revenues, excluding depreciation and amortization

%

%

%

%

Selling, general and administrative

(1)

%

(1)

%

2

%

1

%

Adjusted EBITDA

%

%

%

%

Depreciation and amortization

Restructuring and other charges

(1)

(6)

Impairment and amortization of fair value step-up for content

Amortization of capitalized interest for content

3

9

Impairments and gain on dispositions

—

—

1

(1)

Operating (loss) income

$

$

$

$

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis. The Studios discussion below also includes intra-segment revenue and expense between product lines, which represented less than 3% of total revenues and operating expenses for this segment for the three and six months ended June 30, 2026, respectively. Intra-segment revenue and expense are eliminated at the Studios segment level.

Fluctuations in results for our Studios segment may occur due to various factors, including (but not limited to) the timing and number of new film releases each quarter, the timing of marketing expenses recognized relative to (i.e., prior to) a film’s release, and the mix of content distributed each period.

Revenues

Content revenue decreased 41% for the three months ended June 30, 2026, primarily attributable to a 46% decrease in theatrical product revenue, and a 45% decrease in television product revenue, partially offset by a 45% increase in games revenue.

•The decrease in theatrical product revenue was primarily driven by lower film rental revenue due to the current quarter slate in relation to the strong performance of A Minecraft Movie, Sinners, and Final Destination Bloodlines, which were released in the second quarter of 2025.

•The decrease in television product revenue was primarily attributable to lower intercompany content licensing, primarily due to the timing of renewals.

•The increase in games revenue was primarily attributable to the release of LEGO Batman: Legacy of the Dark Knight in the current quarter.

Content revenue decreased 13% for the six months ended June 30, 2026, primarily attributable to a 21% decrease in theatrical product revenue and a 7% decrease in television product revenue, partially offset by a 9% increase in games revenue.

•The decrease in theatrical product revenue was primarily driven by lower film rental revenue due to the current year slate in relation to the strong performance of A Minecraft Movie, Sinners, and Final Destination Bloodlines, which were released in the second quarter of 2025, partially offset by higher intercompany content licensing related to HBO Max international launches.

•The decrease in television product revenue was primarily attributable to lower intercompany content licensing, primarily due to the timing of renewals, partially offset by third-party content sales.

•The increase in games revenue was primarily attributable to the release of LEGO Batman: Legacy of the Dark Night in the current quarter, partially offset by the prior year catalog.

Costs of Revenues

Costs of revenues decreased 32% for the three months ended June 30, 2026, primarily attributable to a 41% decrease in theatrical product content expense and a 35% decrease in television product content expense, partially offset by a 52% increase in games content expense.

•The decrease in theatrical content expense was primarily due to lower film costs commensurate with lower theatrical product revenue, partially offset by impairments in the current year.

•The decrease in television product content expense was due to lower costs commensurate with lower revenues.

•The increase in games content expense was primarily due to higher games content expense commensurate with higher games revenue.

Costs of revenues decreased 12% for the six months ended June 30, 2026, primarily attributable to a 23% decrease in theatrical product content expense, an 8% decrease in television product content expense, and a 3% decrease in games content expense.

•The decrease in theatrical content expense was primarily due to lower film costs commensurate with lower theatrical product revenue, partially offset by impairments in the current year.

•The decrease in television product content expense was due to lower costs commensurate with lower revenues.

•Games content expense was relatively flat.

Selling, General and Administrative

Selling, general and administrative expenses decreased 1% and increased 1% for the three and six months ended June 30, 2026, respectively. The decrease for the three months ended June 30, 2026 was primarily attributable to lower marketing expenses, partially offset by higher overhead costs. The increase for the six months ended June 30, 2026 was primarily attributable to higher overhead costs, partially offset by lower marketing expenses.

Adjusted EBITDA

T7Adjusted EBITDA decreased 89% and 26% for the three and six months ended June 30, 2026, respectively.

Global Linear Networks Segment

The table below presents, for our Global Linear Networks segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (in millions).

Three Months Ended June 30,

Six Months Ended June 30,

% Change

% Change (ex-FX)

% Change

% Change (ex-FX)

Revenues:

Distribution

$

$

(9)

%

(9)

%

$

$

(8)

%

(8)

%

Advertising

%

%

%

%

Content

(9)

%

%

(9)

%

%

Other

%

%

%

%

Total revenues

%

%

%

%

Costs of revenues, excluding depreciation and amortization

%

%

%

%

Selling, general and administrative

(6)

%

(6)

%

(3)

%

(3)

%

Adjusted EBITDA

(4)

%

(5)

%

(7)

%

(8)

%

Depreciation and amortization

Employee share-based compensation

—

—

—

1

Restructuring and other charges

Impairment and amortization of fair value step-up for content

—

—

Impairments and loss on dispositions

7

1

3

Operating income

$

$

$

$

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

Revenues

Distribution revenue decreased 9% and 8% for the three and six months ended June 30, 2026, respectively, primarily attributable to a 10% decline in domestic linear subscribers for both periods, partially offset by 1% and 2% increases in domestic affiliate rates for the three and six months ended June 30, 2026, respectively. Declines in linear subscribers are expected to continue.

Advertising revenue decreased 27% and 20% for the three and six months ended June 30, 2026, respectively, primarily attributable to audience declines in domestic networks of 17% and 13%, respectively, which were impacted by the absence of the NBA in 2026 and had a negative impact to advertising revenue of $414 million and $547 million for the three and six months ended June 30, 2026, respectively. Additionally, advertising revenue benefited from the broadcast of the NCAA Final Four and championship game in the current year quarter.

Content revenue decreased 12% and 10% for the three and six months ended June 30, 2026, respectively, primarily attributable to the timing of third-party licensing deals.

Other revenue decreased 59% and 25% for the three and six months ended June 30, 2026, respectively, primarily attributable to the absence of the NBA in 2026.

Costs of Revenues

Costs of revenues decreased 27% and 20% for the three and six months ended June 30, 2026, respectively, primarily attributable to lower domestic sports costs due to the absence of the NBA in 2026, which had a favorable impact to costs of revenues of $760 million and $1,107 million for the three and six months ended June 30, 2026, respectively.

Selling, General and Administrative

Selling, general and administrative expenses decreased 6% and 3% for the three and six months ended June 30, 2026, respectively, primarily attributable to lower overhead costs, partially offset by higher marketing expenses.

Adjusted EBITDA

Adjusted EBITDA decreased 5% and 8% for the three months ended June 30, 2026, respectively.

Corporate

The following table presents our Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).

Three Months Ended June 30,

Six Months Ended June 30,

% Change

% Change (ex-FX)

% Change

% Change (ex-FX)

Adjusted EBITDA - Corporate

$

$

6

%

6

%

$

$

(3)

%

(2)

%

Depreciation and amortization

Employee share-based compensation

Restructuring and other charges

Netflix Termination Fee (See Note 1)

—

—

—

Transaction and integration costs

Facility consolidation costs

—

4

—

9

Impairments and loss on dispositions

Operating loss

$

$

$

$

Corporate operations primarily consist of executive management and administrative support services, which are recorded in selling, general and administrative expense, as well as substantially all of our share-based compensation and third-party transaction and integration costs.

Adjusted EBITDA improved 6% and declined 2% for the three and six months ended June 30, 2026, respectively. The improvement for the three months ended June 30, 2026 was primarily attributable to lower corporate overhead expense. The decline for the six months ended June 30, 2026 was primarily attributable to the release of previously recorded non-income tax reserves in 2025, partially offset by lower corporate overhead expense.

Inter-segment Eliminations

The following table presents our inter-segment eliminations by revenue and expense, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (loss) (in millions).

Three Months Ended June 30,

Six Months Ended June 30,

Inter-segment revenue eliminations

$

$

$

$

Inter-segment expense eliminations

Adjusted EBITDA - Inter-segment eliminations

Depreciation and amortization

(2)

—

(5)

—

Impairment and amortization of fair value step-up for content

2

4

Operating income (loss)

$

$

$

$

Inter-segment revenue and expense eliminations primarily represent inter-segment content transactions and marketing and promotion activity between reportable segments. In our current segment structure, in certain instances, production and distribution activities are in different segments. Inter-segment content transactions are presented at market value (i.e., the segment producing and/or licensing the content reports revenue and profit from inter-segment transactions in a manner similar to the reporting of third-party transactions, and the required eliminations are reported on the separate “Eliminations” line when presenting our summary of segment results). Generally, timing of revenue recognition is similar to the reporting of third-party transactions. The segment distributing the content, e.g., via our streaming or linear services, capitalizes the cost of inter-segment content transactions, including “mark-ups” and amortizes the costs over the shorter of the license term, if applicable, or the expected period of use. The content amortization expense related to the inter-segment profit is also eliminated on the separate “Eliminations” line when presenting our summary of segment results.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Sources of Cash

Historically, we have generated a significant amount of cash from operations. During the six months ended June 30, 2026, we funded our working capital needs primarily through cash flows from operations. As of June 30, 2026, we had $3,369 million of cash and cash equivalents on hand. We are a well-known seasoned issuer and have the ability to conduct registered offerings of securities, including debt securities, common stock and preferred stock, on short notice, subject to market conditions. Access to sufficient capital from the public market is not assured. We have a $4,000 million revolving credit facility and a commercial paper program described below. We also participate in a revolving receivables program and an accounts receivable factoring program described below.

•Debt

First Lien Credit Facility

During the three months ended June 30, 2026, we and DGH entered into a First Lien Credit Agreement with JPMorgan Chase Bank, N.A and JPMorgan SE. The First Lien Credit Agreement provides for (i) 7-year $13,000 million U.S. dollar-denominated term loans and (ii) 7-year €1,717 million Euro-denominated term loans. The First Lien Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants. As of June 30, 2026, we were in compliance with all applicable covenants and there were no events of default under the First Lien Credit Agreement.

Revolving Credit Facility and Commercial Paper

DCL and certain subsidiaries of the Company, as borrowers, have a multicurrency revolving credit agreement (the “Credit Agreement”) and have the capacity to borrow up to $4,000 million under the Credit Agreement (the “Credit Facility”). DCL may also request additional commitments up to $1,000 million from the lenders upon the satisfaction of certain conditions. The Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants. As of June 30, 2026, we were in compliance with all applicable covenants and there were no events of default under the Credit Agreement.

Additionally, our commercial paper program is supported by the Credit Facility. Under the commercial paper program, we may issue up to $2,000 million. Borrowing capacity under the Credit Facility is effectively reduced by any outstanding issuances under the commercial paper program.

During the six months ended June 30, 2026, we and DCL borrowed and repaid $1,261 million under our Credit Facility and commercial paper program. As of June 30, 2026, we and DCL had no outstanding borrowings under the Credit Facility or issuances under the commercial paper program.

•Revolving Receivables Program

We have a revolving agreement to transfer up to $4,000 million of certain receivables through our bankruptcy-remote subsidiary, Warner Bros. Discovery Receivables Funding, LLC, to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. We service the sold receivables for the financial institution for a fee and pay fees to the financial institution in connection with this revolving agreement. As customers pay their balances, our available capacity under this revolving agreement increases and typically we transfer additional receivables into the program. In some cases, we may have collections that have not yet been remitted to the bank, resulting in a liability. The outstanding portfolio of receivables derecognized from our consolidated balance sheets was $3,900 million as of June 30, 2026.

•Accounts Receivable Factoring

We have factoring agreements to sell certain of our non-U.S. trade accounts receivable on a limited recourse basis to a third-party financial institution. No amounts were sold under the Company’s factoring arrangement during the six months ended June 30, 2026.

Uses of Cash

Our primary uses of cash include the creation and acquisition of new content, business acquisitions, income taxes, personnel costs, costs to develop and market our enhanced streaming service HBO Max, principal and interest payments on our outstanding senior notes, funding for various equity method and other investments, and repurchases of our capital stock.

•Content Acquisition

We plan to continue to invest significantly in the creation and acquisition of new content, as well as certain sports rights. Contractual commitments to acquire content have not materially changed as set forth in “Material Cash Requirements from Known Contractual and Other Obligations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K.

•Debt

Initial Term Loans and Bridge Loan Agreement

During the three months ended June 30, 2026, we used net proceeds from the Initial Term Loans, together with cash on the balance sheet, to repay in full $15,000 million of outstanding loans under the Bridge Loan Agreement. Additionally, we repaid $250 million of aggregate principal amount outstanding of the Initial Term Loans.

Senior Notes

During the six months ended June 30, 2026, we repurchased or repaid $123 million of aggregate principal amount outstanding of our senior notes. In addition, we had $16 million of senior notes that were due in July 2026, and an additional $1,480 million of senior notes coming due through June 2027.

We may from time to time seek to prepay, retire or purchase our other outstanding indebtedness through prepayments, redemptions, open market purchases, privately negotiated transactions, tender offers, exchange offers, or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, as well as applicable regulatory, legal and accounting factors. Whether or not we repurchase or exchange any debt and the size and timing of any such repurchases or exchanges will be determined at our discretion.

•Capital Expenditures

We effected capital expenditures of $544 million during the six months ended June 30, 2026, including amounts capitalized to support HBO Max. We expect to continue to incur significant costs to develop and market HBO Max.

•Investments and Business Combinations

Our uses of cash have included investments in equity method investments and equity investments without readily determinable fair value. (See Note 7 to the accompanying consolidated financial statements.) We also provide funding to our investees from time to time. During the six months ended June 30, 2026, we contributed $25 million for investments in and advances to our investees.

•Redeemable Noncontrolling Interest and Noncontrolling Interest

Distributions to redeemable noncontrolling interests and noncontrolling interests totaled $144 million and $174 million for the six months ended June 30, 2026 and 2025, respectively.

•Income Taxes and Interest

We expect to continue to make payments for income taxes and interest on our outstanding First Lien Credit Facility and senior notes. During the six months ended June 30, 2026, we made cash payments of $588 million and $1,260 million for income taxes and interest on our outstanding debt, respectively.

Cash Flows

The following table presents changes in cash and cash equivalents (in millions).

Six Months Ended June 30,

Cash, cash equivalents, and restricted cash, beginning of period

$

$

Cash provided by operating activities

Cash used in investing activities

Cash used in financing activities

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

Net change in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, end of period

$

$

Operating Activities

Cash provided by operating activities was $640 million and $1,536 million during the six months ended June 30, 2026 and 2025, respectively. The decrease in cash provided by operating activities was primarily attributable to a decrease in net income excluding non-cash items and an increase in cash used from working capital activity.

Investing Activities

Cash used in investing activities was $499 million and $431 million during the six months ended June 30, 2026 and 2025, respectively. The increase in cash used in investing activities was primarily attributable to reduced proceeds from the sale of assets and investments during the six months ended June 30, 2026.

Financing Activities

Cash used in financing activities was $1,273 million and $1,886 million during the six months ended June 30, 2026 and 2025, respectively. The decrease in cash used in financing activities was primarily attributable to lower net debt repayments, partially offset by proceeds received for the contribution of 70% of our music catalog to a joint venture in 2025 and higher amounts paid to settle share-based awards.

Capital Resources

As of June 30, 2026, capital resources were comprised of the following (in millions).

Total

Capacity

Outstanding

Indebtedness

Unused

Capacity

Cash and cash equivalents

$

$

—

$

Revolving credit facility and commercial paper program

—

Term loans

—

Senior notes (a)

—

Total

$

$

$

(a) Interest on the senior notes is paid annually or semi-annually. Our senior notes outstanding as of June 30, 2026 had interest rates that ranged from 1.90% to 8.30% and will mature between 2026 and 2062.

We expect that our cash balance, cash generated from operations and availability under the Credit Agreement will be sufficient to fund our cash needs for the next 12 months. Additionally, our borrowing costs and access to capital markets can be affected by short and long-term debt ratings assigned by independent rating agencies which are based, in part, on our performance as measured by credit metrics such as interest coverage and leverage ratios. Credit rating agencies may continue to review and adjust our ratings or outlook. For example, in 2025, S&P, Moody’s and Fitch downgraded certain of our ratings in part due to declines in our linear business, including as a result of the weak operating environment for linear networks, our leverage ratio, and an increase in secured debt and uncertainty in connection with the previously planned separation of Warner Bros.

The 2017 Tax Cuts and Jobs Act features a participation exemption regime with current taxation of certain foreign income and imposed a mandatory repatriation toll tax on unremitted foreign earnings. As of June 30, 2026, the Company intends to remit certain previously undistributed foreign earnings to the United States. Accordingly, the Company has recorded deferred taxes for applicable foreign withholding associated with the expected remittance. The Company may continue to reinvest other foreign earnings outside of the United States. For those earnings, if any, that remain indefinitely reinvested, additional taxes would be recognized upon repatriation. Determination of the amount of any unrecognized deferred income tax liability related to such earnings is not practicable.

Summarized Guarantor Financial Information

Basis of Presentation

As of June 30, 2026 and December 31, 2025, the Company has outstanding senior notes issued by DCL, which are guaranteed by the Company, Scripps Networks, and DGH; senior notes issued by DGH, which are guaranteed by the Company, Scripps Networks, and DCL; and senior notes issued by the legacy WarnerMedia Business (not guaranteed). (See Note 8 to the accompanying consolidated financial statements.) DCL, Scripps Networks, and DGH are wholly owned by the Company.

The tables below present the summarized financial information as combined for Warner Bros. Discovery, Inc. (the “Parent”), Scripps Networks, DCL, and DGH (collectively, the “Obligors”). All guarantees of DCL and DGH’s senior notes (the “Note Guarantees”) are full and unconditional, joint and several and unsecured, and cover all payment obligations arising under the senior notes.

Note Guarantees issued by Scripps Networks, DCL or DGH, or any subsidiary of the Parent that in the future issues a Note Guarantee (each, a “Subsidiary Guarantor”) may be released and discharged (i) concurrently with any direct or indirect sale or disposition of such Subsidiary Guarantor or any interest therein, (ii) at any time that such Subsidiary Guarantor is released from all of its obligations under its guarantee of payment, (iii) upon the merger or consolidation of any Subsidiary Guarantor with and into DCL, DGH or the Parent or another Subsidiary Guarantor, as applicable, or upon the liquidation of such Subsidiary Guarantor and (iv) other customary events constituting a discharge of the Obligors’ obligations.

Summarized Financial Information

The Company has included the accompanying summarized combined financial information of the Obligors after the elimination of intercompany transactions and balances among the Obligors and the elimination of equity in earnings from and investments in any subsidiary of the Parent that is a non-guarantor (in millions).

Current assets

$

$

Non-guarantor intercompany trade (payables) receivables, net

Noncurrent assets

Current liabilities

Noncurrent liabilities

Revenues

$

Operating loss

Net loss

Net loss available to Warner Bros. Discovery, Inc.

MATERIAL CASH REQUIREMENTS FROM KNOWN CONTRACTUAL AND OTHER OBLIGATIONS

In the normal course of business, we enter into commitments for the purchase of goods or services that require us to make payments or provide funding in the event certain circumstances occur. Our contractual commitments have not materially changed as set forth in “Material Cash Requirements from Known Contractual and Other Obligations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K.

RELATED PARTY TRANSACTIONS

In the ordinary course of business, we enter into transactions with related parties, such as our equity method investees, entities that share common directorship, or minority partners of consolidated subsidiaries. (See Note 14 to the accompanying consolidated financial statements.)

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates have not changed since December 31, 2025. For a discussion of each of our critical accounting estimates, including information and analysis of estimates and assumptions involved in their application, see “Critical Accounting Estimates” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K.

NEW ACCOUNTING AND REPORTING PRONOUNCEMENTS

We adopted certain new accounting and reporting standards during the six months ended June 30, 2026. (See Note 1 to the accompanying consolidated financial statements.)

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, marketing and operating strategies, integration of acquired businesses, new product and service offerings, financial prospects and anticipated sources and uses of capital. Words such as “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “potential,” “predict,” “project,” “strategy,” “target” and similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will” and “would,” among other terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be accomplished. The following is a list of some, but not all, of the factors that could cause actual results or events to differ materially from those anticipated:

•the completion of the proposed transaction with PSKY pursuant to which PSKY will acquire the Company (the “PSKY Merger”) on the anticipated terms and timing;

•the occurrence of any event, change or other circumstance that could give rise to the termination of the PSKY Merger, including the risk that the necessary regulatory approvals for the PSKY Merger may not be obtained or are obtained subject to unanticipated conditions;

•failure to satisfy in a timely manner any of the conditions to the PSKY Merger or complete the PSKY Merger in a timely or favorable manner or at all;

•the effects of the announcement, pendency or completion of the PSKY Merger on our ongoing business operations or on the market price of WBD Common Stock;

•unforeseen costs, execution risks, and operational challenges related to the PSKY Merger, including risks relating to disruption of management time away from ongoing business operations;

•more intense competitive pressure from existing or new competitors in the industries in which we operate;

•reduced spending on domestic and foreign television advertising, due to macroeconomic conditions, industry or consumer behavior trends or unexpected reductions in our number of subscribers;

•the imposition of tariffs, including tariffs directly or indirectly applicable to our industry, by the U.S. government and any retaliatory tariffs from foreign governments;

•uncertainties associated with product and service development and market acceptance, including the development and provision of programming for new television and telecommunications technologies, and the success of our streaming services;

•market demand for foreign first-run and existing content libraries;

•negative publicity or damage to our brands, reputation or talent;

•realizing streaming subscriber goals;

•disagreements with our distributors or other business partners;

•continued consolidation of distribution customers and production studios;

•industry trends, including the timing of, and spending on, sports programming, feature film, television and television commercial production;

•the possibility or duration of an industry-wide strike, such as the strikes of the Writers Guild of America (“WGA”) and Screen Actors Guild-American Federation of Television and Radio Artists (“SAG-AFTRA”) in 2023, player lock-outs or other job action affecting a major entertainment industry union, athletes or others involved in the development and production of our sports programming, television programming, feature films and interactive entertainment (e.g., games) who are covered by collective bargaining agreements;

•inherent uncertainties involved in the estimates and assumptions used in the preparation of financial forecasts;

•our level of debt, including the significant indebtedness incurred in connection with the acquisition of the WarnerMedia Business, and our future compliance with debt covenants;

•challenges related to obtaining or consummating financing or refinancing on favorable terms in a timely manner or at all;

•changes to our corporate or debt-specific credit ratings or outlook;

•changes in, or failure or inability to comply with, laws and government regulations, including, without limitation, regulations of the U.S. government and other international governments, the Federal Communications Commission and similar authorities internationally and data privacy regulations;

•adverse outcomes of legal proceedings or disputes, including those related to the PSKY Merger, or adverse outcomes from regulatory proceedings;

•threatened or actual cyber-attacks and cybersecurity breaches;

•theft of our content and unauthorized duplication, distribution and exhibition of such content; and

•general economic and business conditions, fluctuations in foreign currency exchange rates, global events such as pandemics, natural disasters impacting the geographic areas where our businesses and operations are located, and political uncertainty, armed conflict, or unrest in the markets in which we operate.

Forward-looking statements are subject to various risks and uncertainties which change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results.

These risks have the potential to impact the recoverability of the assets recorded on our balance sheets, including goodwill and other intangibles. Management’s expectations and assumptions, and the continued validity of any forward-looking statements we make, cannot be foreseen with certainty and are subject to change due to a broad range of factors affecting the U.S. and global economies and regulatory environments, factors specific to the Company, and other factors described under Part I, Item 1A, “Risk Factors,” in our 2025 Form 10-K. These forward-looking statements and such risks, uncertainties, and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions, or circumstances on which any such statement is based.