Warner Bros. Discovery streaming revenue hits $3.1 billion amid pending sale

The transition of HBO Max into a profitable global engine is critical as Warner Bros. Discovery prepares for its Paramount Skydance merger. By reaching a 17% adjusted EBITDA margin in streaming, the company proves it can sustain high-quality HBO production while absorbing the structural decline of domestic linear networks. This shift is essential to managing a $29.7 billion net debt position and a 3.4x leverage ratio during a period of theatrical volatility. The industry should monitor the 2027 film slate, which management expects to expand to 19 films to stabilize studio earnings.

Paramount Skydance, the acquiring party in the pending Warner Bros. Discovery deal, reported its own Q2 2026 results that underscore the streaming profitability race both companies are navigating. Paramount reported its best quarter for retention in Paramount+ history, gaining roughly 2 million subscribers to reach 81.6 million worldwide, with direct-to-consumer revenue rising 9% year-over-year to $2.5 billion. Paramount+ advertising revenue grew more than 30% in the quarter, while total DTC ad revenue rose 8% year-over-year, according to the same report. The combined entity now projects $30 billion in full-year 2026 revenue. The regulatory path for the Warner Bros. Discovery acquisition remains contested. Paramount CEO David Ellison told the Q2 earnings call he is "highly confident" the merger will close, even as a federal judge scheduled an antitrust trial for March 2, 2027, pitting the company against 12 U.S. states and the Writers Guild of America. Ellison argued that the combined company would account for just 13.4% of total U.S. television and streaming viewing time, positioning the deal as pro-competitive against tech platforms like Netflix, Amazon, and Apple. Paramount raised its full-year adjusted EBITDA guidance to a range of $3.8 billion to $3.9 billion, citing savings from the Skydance merger and expecting $2.7 billion in run-rate efficiencies by year-end. The linear television decline affecting Warner Bros. Discovery is mirrored across the industry. Paramount's TV media segment saw revenue fall 9% to $3.1 billion, with ad revenue dropping 14% due to difficult comparisons and affiliate revenue declining 6% on pay TV subscriber erosion. Despite those headwinds, the unit posted a profit of $1.1 billion, benefiting from Paramount Warner Bros merger cost-cutting. Paramount expects free cash flow conversion of at least 10% before roughly $800 million in transformation costs for the full year, signaling that both merging companies are betting on streaming margins to offset structural linear declines.