The Two-Track Mind of Warner Bros. Discovery : Sell or Split?

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The Two-Track Mind of Warner Bros. Discovery

On November 6, 2025, Warner Bros. Discovery (WBD) held its third-quarter earnings call. On the surface, it was a bullish, chest-thumping presentation of a 3.5-year turnaround story culminating in a movie studio that had a dominant 2025 and a newly profitable streaming business.

But reading between the lines—and paying close attention to the one topic management flatly refused to discuss —reveals a very different story.

This wasn’t just an earnings call; it was an auction preview.

CEO David Zaslav, while declining questions on the matter, confirmed the company is in an active process to evaluate strategic alternatives following their recent announcement of a potential company split. This is the massive, overshadowing context for everything else. WBD is officially on a two-track path: Plan A is to cleave the company in two. Plan B is to sell it, either in pieces or as a whole.

This Q3 call was all about dressing the assets for that sale. I don’t know if anyone looks at the merger of Warner Bros and Discovery as a success so it likely makes sense to wind it down and try something else. After all, when the merger happened, this was a company guiding for $50B+ in Revenue and $13B+ in EBITDA. The actual results, sub $40B in revenue and sub $10B in EBIDTA. Not great, Bob. On the other side, they did get stuck with a ton of debt and have done a decent job of paying a lot of that down and now with the split, have another way to manage that debt via positioning more of it onto the less attractive company(global linear networks).

👑 The Good: The Studio is Back

If WBD was trying to prove the value of its crown jewels, it succeeded. The Warner Bros. Studio, which Zaslav claimed was stuck in last place when they took over, is now killing it.

This was the cleanest win of the entire call. Zaslav gleefully reported that WBD is leading the 2025 box office—domestically, internationally, and globally. It is the only film studio to have crossed $4 billion in box office revenue so far this year. That likely won’t hold with Disney releasing Zootopia and Avatar coming up but it’s a great result anyway you slice it.

The fuel for this fire comes from a balanced slate:

Franchise Gold: The successful Q3 launch of a new era for the DC Studios, Superman. While the movie didn’t destroy any records, it did well enough to be deemed a success.
Genre Dominance: The horror hits Weapons and The Conjuring: Last Rites, which together pulled in over $750 million.
Prestige Plays: The critically acclaimed One Battle After Another from Paul Thomas Anderson. That one wasn’t a hit at the box office but is lined up pretty well for an Oscar or two.

They even announced a new Gremlins film for 2027, with Steven Spielberg and Chris Columbus returning. On the television side, the studio snagged 14 Emmys, including wins for The Pitt and The Penguin.

The financial target here is ambitious: management expects the studio segment to meaningfully exceed $2.4 billion in EBITDA this year and is marching toward a $3 billion EBITDA goal. That’s a hefty bet but Studio results can be fickle year to year and there’s no guarantee that 2026 will be anywhere as successful as 2025 and certainly has a tough comparable against 2025 results.

📈 The Mixed: Streaming is Profitable…Maybe

The second pillar of Zaslav’s turnaround is HBO Max, and its story is one of a dramatic financial swing.

The Win: The Streaming segment will contribute more than $1.3 billion in EBITDA this year. This is a staggering reversal from the $2.5 billion loss it posted just three years ago. The service is now in over 100 countries and has added 30 million subscribers in three years. Big new markets like the UK, Germany, and Italy are slated to launch in 2026 , with the company targeting over 150 million total streaming subs by the end of that year. While finally swinging towards positive EBITDA is great, it’s hard to parse that out into actual cash flow generation just yet.

The content, as Zaslav hammered home, is all about the how good not how much. HBO’s cultural dominance continues with It: Welcome to Derry, which just delivered the third most-watched premiere in HBO history.

The Weeds: This is where the user-prompted mediocre results start to show. The Q&A session revealed two soft spots in this otherwise rosy picture.

Slowing ARPU (Average Revenue Per User): An analyst poked at the U.S. streaming ARPU, and management was forced to admit it’s facing pressure. For the next three quarters, U.S. ARPU will be down. The company gave two reasons: an affiliated party transaction(likely AT&T) is being reset to normal market rates , and the successful (but cheaper) ad-supported streaming tier is growing, which naturally pulls the average price down. That’s one of the reasons that overall growth in the streaming segment was flat which isn’t great for the streaming & studios segment which is supposed to be the growth engine in the future split.
A Strategy of “Disintegration”: In a world where everyone else is bundling, WBD is… un-bundling. Analysts questioned the logic of launching a new stand-alone CNN streaming app and a separate U.S. sports streaming app. Management defended this, claiming they are just skins on essentially the same product platform with “very limited incremental operating cost”. It’s a strategy that runs counter to the entire industry trend, and Wall Street noticed. I’m not sure it’s the wisest idea or one that will drive any incremental revenue. After all, a standalone CNN was just launched and shuttered not too long ago.

🧊 The Ugly: The Melting Ice Cube of Linear TV

The third pillar, “optimizing our linear networks,” is where the spin was thickest.

Zaslav acknowledged the well understood headwinds facing cable channels like TNT, TBS, CNN, and Discovery. He called them resilient and a powerful cash flow contributor.

However, an analyst Q&A exposed the raw nerve. One questioner pointed out that WBD’s linear business seems to be performing worse than its peers, with lower affiliate fee increases (around 2%) and potentially higher subscriber decline rates.

CFO Gunnar Wiedenfels conceded they are in a transition period after giving greater flexibility in recent renewal deals.

This is the poor result at the heart of the company’s problems. The linear business, which still throws off immense cash, is declining and was down an impressively bad 22% this quarter. Even without the comparable of the Olympics in Europe last year, the decrease was 12% which is pretty awful. This decline is precisely why the company is being forced to consider a dramatic split. They know the value lies in streaming & studios and they don’t want the overhang of this sinking ship.

✂️ The Great Divide: What a Split or Sale Looks Like

This brings us back to the “active process”. The Q3 call was a showcase for two very different businesses.

Company 1: Streaming & Studios A.K.A The Gem (Warner Bros. + HBO Max) This is the growth story. It contains the #1 movie studio so far this year, the DC universe , the Harry Potter and Lord of the Rings IP , and the high-prestige HBO Max streaming service which is moving into profitability. This is the company that a tech giant or a larger media competitor would want to buy. However, this growth story did have some stumbles this quarter with streaming being flat and the overall streaming & studios business only growing at 8% despite a banner year in Studios.
Company 2: Global Linear Networks A.K.A The Cash Cow This is the melting ice cube and where a bunch of the overall debt would be dumped. It would hold the linear cable networks (TLC, HGTV, Food Network, CNN, etc.) and the sports portfolio. This company would be a cash-flow-generating, debt paying business… that is in a state of managed decline. It’s also where the post-NBA sports strategy will live, with management spinning the loss of the NBA as a good thing, saving hundreds of millions of dollars next year.

And the Suitors?

Zaslav noted the media reports as to potential interested parties but refused to comment. But the call effectively laid out the buffet for potential buyers.

Comcast (NBCUniversal): The most logical, and most difficult, suitor. Combining Universal Studios with Warner Bros. and Peacock with HBO Max would create an unrivaled media goliath. The regulatory hurdles would be astronomical, but the industrial logic is undeniable.
Netflix or Apple: Would a tech giant want all this? They are flush with cash. They would almost certainly only want Company 1 (Streaming & Studios). They want the IP, the studio, and the streaming service. They have zero interest in the melting ice cube of linear networks. A split would make this acquisition much cleaner.
Paramount: A merger of the weak that’s often floated. It’s hard to see how combining two sub-scale companies would solve the fundamental problems of either, but in a world of consolidation, it can’t be ruled out and Paramount certainly has the backing that might be needed to get this approved on the government side.

There’s potentially other players out there as well like Amazon or even Sony but the above have had the most chatter.

In any case, the potential buyout is the main reason the stock is up 112% YTD and barely moved despite the mediocre earnings. I think at this point investors think that one of the above players will make an offer above the current trade price and Paramount has already been rumored to make an offer of $23.50 which was declined.

🎤 Takeaways from the Analyst Q&A

Beyond the “poor results” in linear and ARPU, the analyst questions highlighted the core tensions within WBD’s strategy.

The $3 Billion Studio Dream: When asked how the studio gets from $2.4B to $3B in EBITDA, Zaslav’s answer was all about mining the IP. He listed DC, Harry Potter, Lord of the Rings, and Gremlins and, critically, a new focus on merchandising and experiences —a page taken directly from the Disney playbook.
The Magic of HBO: One analyst asked a brilliant question: What makes HBO special besides its IP? Zaslav gave an unscripted-sounding answer, crediting the creative team (Casey Bloys and others) who have been together for 15-20 years. He described it as a family that top talent wants to work with, which is why we get a lot of the best product for less money. This cultural asset is harder to quantify but is core to the Gem package. Sounds like corporate nonsense but what do I know?
The Post-NBA Gamble: Analysts were clearly focused on the sports strategy. The plan is to replace the NBA with a portfolio of other rights and launch a new stand-alone U.S. sports app. This is a huge, unproven gamble that will become the central challenge for Global Linear Networks. I think at this point most investors are more interested in Streaming & Studios and likely don’t care as much about this other company and its many problems with the assumption that a buyout will happen before any of these issues can be seen.

In the end, this earnings call was a tale of two companies. One, a revitalized creative engine (Studios/HBO Max) being polished for a sale. The other, a declining-but-profitable cash machine (Linear Networks) being set aside with the less attractive assets.

Zaslav has successfully reduced debt and made the individual pieces more attractive. Now, the active process will determine who gets to own them. It’s hard to imagine a sale not going through at this point as the current price point has been driven up by speculation of that acquisition which could send this stock north of $25 whenever that happens. It might not be the best thing for consumers as losing a major studio wouldn’t be great for the creative process but it seems like that’s the likely result at this point.

The deadline for a decision is sometime in December so we’re only a month or two away from knowing all the details.