Warner Bros. Discovery reported a net loss of $2.9 billion in the first quarter, a figure dominated by costs tied to its pending sale to Paramount $PARA Skydance, even as the company's streaming business continued to grow.
That result was a dramatic widening from the $453 million net loss recorded in the year-ago period, the company disclosed. Among the charges was a $2.8 billion payment owed to Netflix $NFLX after an earlier transaction between the two companies collapsed. Under the terms of the Paramount Skydance merger agreement, Paramount paid the fee on Warner Bros. Discovery's behalf — but because the amount is refundable to Paramount under certain circumstances, the obligation sits on Warner Bros. Discovery's books until the deal closes.
An additional $1.3 billion charge covered amortization of intangibles, content fair value adjustments, and restructuring costs on a pre-tax basis.
First-quarter revenue came in at $8.89 billion, a 1% year-over-year decline, while adjusted EBITDA reached $2.2 billion, up 5%.
Streaming was the strongest part of the business. The company had over 140 million subscribers worldwide, beating its own forecast. Management expects this number to go over 150 million by the end of the year. Streaming revenue reached $2.89 billion, helped by HBO Max's international launch and more subscribers choosing the ad-supported tier. Advertising revenue for streaming grew 19% when adjusted for currency changes.
Warner Bros. Discovery CEO David Zaslav said on an earnings conference call that HBO Max is "really the linchpin" of the company's growth plans and would be a "huge benefit" to Paramount once the merger closes, according to Reuters.
At $3.13 billion, film studio revenue climbed sharply from the prior-year quarter on a constant-currency basis. TV revenue within the segment rose 58% on a constant-currency basis, while games revenue fell 30%.
CNN, TBS, the Discovery Channel, and the rest of Warner Bros. Discovery’s traditional cable channels continued to face challenges, bringing in $4.38 billion in revenue. Advertising on these networks fell at constant currency, mainly because they lost NBA programming. The absence of NBA content reduced the company’s overall advertising growth rate by 7% at constant currency.
At the end of the quarter, gross debt was $33.4 billion and cash was $3.3 billion, resulting in net debt of $30.1 billion and a leverage ratio of 3.4. Free cash flow was negative $476 million, compared to positive $302 million in the first quarter of 2025.
WBD shareholders voted to approve the Paramount Skydance transaction in April, and regulators are now reviewing it. In its Monday earnings release, Paramount indicated that closing remains on track for the third quarter, describing progress on the deal as substantial.