Company Reports

Warner Bros. Discovery has agreed to be taken over by Paramount, and we expect the deal to secure regulatory approval and be completed. If the deal falls through, we think Netflix would reenter the fray and look to acquire Warner’s streaming and studios businesses, though at a materially lower price than the $27.75 it previously offered. Either way, we think Warner is unlikely to stay completely independent. If it did, however, we think streaming and studios have a promising future, while global networks face perpetual decline.

Paramount settled lawsuits brought by 12 US state attorneys general and the Writers Guild of America, paving the way for it to complete its acquisition of Warner Bros. Discovery soon, avoiding a March 2027 trial and the $7 million daily “ticking fee” if it didn't close by Sept. 30, 2026.

Warner Bros.' total revenue was down 11% year over year in the second quarter, mostly due to the loss of very costly NBA rights. Streaming revenue was up 10% while profitability again expanded. Studios performance disappointed, even with declines expected after last year's huge box-office hits.

Warner Bros. Discovery has agreed to be taken over by Paramount, and we expect the deal to secure regulatory approval and be completed. If the deal falls through, we think Netflix would reenter the fray and look to acquire Warner’s streaming and studios businesses, though at a materially lower price than the $27.75 it previously offered. Either way, we think Warner is unlikely to stay completely independent. If it did, however, we think streaming and studios have a promising future, while global networks face perpetual decline.

Excluding a currency tailwind, Warner Bros. Discovery's first-quarter revenue dropped 3% year over year, while adjusted EBITDA was flat. Rapid streaming growth was offset by the ongoing decline in linear networks, though networks performance was encouraging, considering the loss of NBA rights.

Warner Bros. Discovery has agreed to be taken over by Paramount, and we expect the deal to secure regulatory approval and be completed. If the deal falls through, we think Netflix would reenter the fray and look to acquire Warner’s streaming and studios businesses, though at a materially lesser price than the $27.75 it previously offered. Either way, we think Warner is unlikely to stay completely independent. If it did, however, we think streaming and studios have a promising future, while global networks face perpetual decline.

After Warner Bros. Discovery deemed Paramount's revised bid for its company as superior to the one it had in place with Netflix, Netflix declined to exercise its right to match. We therefore expect Warner to officially accept Paramount's offer to buy the whole company for $31 per share.

There were bright spots in Warner Bros. Discovery's lackluster fourth-quarter results in streaming, but other segments were expectedly weak. Studio results are notoriously choppy, but the networks business showed few positives, a factor in our preference for Paramount's offer to acquire Warner.

Following recent takeover bids by Netflix and Paramount, we see it as unlikely that Warner Bros. Discovery remains independent and goes through with its plans to split into two separate companies—one holding streaming and studio assets, with the other holding linear networks. If the entire business remains independent, however, we think streaming and studios have a promising future, while global networks face perpetual decline.

Paramount revised its offer for Warner Bros. Discovery but did not disclose details. Variety reported the offer would likely be for $32 per share, up from $30. Netflix now has four days to respond and may raise its offer of $27.75 per share, which is for only the streaming and studios businesses.

With Netflix's approval, Warner Bros. Discovery has re-engaged in negotiations with Paramount in pursuit of the best deal for shareholders. Talks will remain open through Feb. 23, and Paramount has said that it is willing to improve upon its offer to buy all of Warner for $30 per share in cash.

With a tender offer to Warner Bros. Discovery shareholders outstanding, Paramount revised details of its bid but maintained the value: $30 in cash per share. Larry Ellison is now personally guaranteeing the equity financing, and Paramount will pay Warner $5.8 billion if it cannot complete the deal.

Warner Bros. Discovery urged shareholders to reject Paramount's offer to buy their shares for $30 apiece and instead affirm the board's decision to merge only its streaming and studios business with Netflix. Netflix and Warner assert the Netflix bid is superior, while Paramount says the opposite.

Following recent takeover bids by Netflix and Paramount, we see it as unlikely that Warner Bros. Discovery remains independent and goes through with its plans to split into two separate companies—one holding streaming and studio assets, with the other holding linear networks. If the entire business remains independent, however, we think streaming and studios have a promising future, while global networks face perpetual decline.

Paramount Skydance has offered $30 per share in cash for all of Warner Bros. Discovery, forcing the latter's shareholders to weigh the bid against Netflix's $27.75 cash and stock offer (nearly 85% cash) for the streaming and studios business, which constitutes most of Warner's equity value.

Netflix plans to pay 25 times estimated 2026 EBITDA for Warner Bros.' streaming and studios business, which strikes us as exorbitantly high, even with the premier, unique assets Netflix will acquire. Regulatory approval is highly uncertain.

CNBC reported that Netflix is the leading bidder to acquire Warner Bros. Discovery, and CNBC published a letter that Paramount sent to Warner alleging that Warner is running an unfair process. Paramount is likely bidding for all of Warner, while Netflix is interested only in streaming and studios.

Warner Bros. Discovery's third-quarter revenue per streaming subscriber declined much more than we anticipated, and the rapid decline in linear networks sales continued. But fantastic studios performance propelled total revenue (down 6%) to nearly what we expected and EBITDA outperformance (up 2%).

Warner Bros. Discovery has initiated a strategic review. This move follows reports that Paramount is interested in acquiring the firm; CNBC reported on Oct. 21 that Netflix and Comcast's NBC Universal are also interested.

The Wall Street Journal reported that Paramount is preparing a cash bid to acquire Warner Bros. Discovery, though it did not say for how much. Surprisingly, the bid would reportedly include the declining global networks business from which Warner is preparing to separate.