Warner Bros. Discovery's Barbie Record-Breaking Run Doesn't Cheer Investors, Stock Tanks After Q3 Report

Warner Bros. Discovery, Inc WBD reported a third-quarter FY23 revenue growth of 1% ex-FX year-on-year to $9.98 billion, missing the consensus of $10.00 billion marginally. EPS loss of $(0.17) missed the consensus loss of $(0.06).

Studios revenues were $3.23 billion, up 3% ex-FX Y/Y on a pro forma combined basis. Content revenue increased 3% ex-FX courtesy of higher theatrical revenue due to the strong performance of Barbie and games revenue from the release of Mortal Kombat 1 and the continued performance of Hogwarts Legacy. 

Barbie was the highest-grossing film in Warner Bros. history, generating nearly $1.5 billion in global box office.

Networks revenues were $4.87 billion, down by 7% ex-FX, on a pro forma combined basis. 

Distribution revenue decreased 2% ex-FX, primarily driven by increases in U.S. contractual affiliate rates. 

Advertising revenue fell 13% ex-FX, primarily driven by audience declines in domestic general entertainment and news networks and soft advertising markets, mainly in the U.S. 

DTC revenues were $2.44 billion, up 5% ex-FX Y/Y on a pro forma combined basis. Distribution revenue increased 2% ex-FX, primarily attributable to new partnership launches, price increases in the U.S. and specific international markets, and the launch of the Ultimate tier in the U.S.

Total DTC subscribers decreased by 0.7 million to 95.1 million at the end of Q3 vs. 95.8 million subscribers at the end of Q2. Global DTC ARPU was $7.82, a 6% ex-FX increase Y/Y.

WBD generated $2.52 billion in operating cash flow and held $2.38 billion in cash and equivalents. Net loss was $(417) million.

The Q4 consensus for revenue and EPS are $10.76 billion and $0.00.

Price Action: WBD shares traded lower by 15.60% at $9.80 on the last check Wednesday.