Shares of Warner Bros. Discovery (WBD -2.17%) were taking a dive today after the diversified entertainment company posted disappointing results in its third-quarter earnings report and sounded cautious heading into 2024.
As a result, the stock was down 16.2% as of 12:14 p.m. ET.
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A turnaround still waiting to turn
Investors have been hoping to see progress in Warner Bros. Discovery's turnaround as it tackles a bloated debt burden and the transition to streaming, but the company came up short in the latest quarterly update.
Currency-neutral revenue rose just 2% to $9.98 billion, missing the consensus at $10.04 billion. It was unable to make up for declining revenue in its cable networks segment, the company's biggest revenue contributor, from streaming. Revenue in its networks segment fell 7% to $4.87 billion, while it grew 5% to $2.44 billion in direct-to-consumer, which includes HBO and its two streaming services. In its studios segment, revenue was up 4% to $3.23 billion, led by the Barbie movie.
Total direct-to-consumer subscribers also declined by 700,000 to 95.1 million, while average revenue per user in the segment rose 6% to $7.82.
On the bottom line, the company did show progress with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) up 22% to $2.97 billion, and it reported a generally accepted accounting principles (GAAP) operating profit of $97 million. However, interest expense remains elevated at $574 million, leading to a net loss of $417 million, or a $0.17 loss per share, which was worse than expectations of a per-share loss of $0.06.
CEO David Zaslav said the company had made "great strides in just 19 months" and said it was on track to pay down nearly $12 billion in debt this year.
What's next for Warner Bros. Discovery
What also seemed to push the stock lower were comments on the earnings call. CFO Gunnar Wiedenfels said linear advertising trends have been weak and that it was unlikely that the company would reach its leverage range of 2.5x to 3x debt to adjusted EBITDA as the company had forecast earlier.
With the debt burden still impacting the bottom line, streaming growth sluggish, and cautiousness heading into 2024, it's not surprising to see the stock falling today.
