Warner Bros. Discovery Stock Jumps on Max Streaming Momentum, Upbeat M&A Outlook

Investors pushed Warner Bros. Discovery stock to its highest levels in nearly nine months, rallying behind progress on its Max streaming business and the possibility that a Donald Trump administration could grease the wheels for industry consolidation.

WBD shares climbed more than 15% in early trading Thursday after the company reported Q3 results. As of 10:40 a.m., the stock was up 14.5%, to $9.60 per share.

Revenue in Warner Bros. Discovery’s direct-to-consumer streaming segment rose 9% to $2.6 billion, and adjusted earnings came in at $289 million, a $178 million increase from the year-prior quarter (including a $41 million loss from the broadcast of the Olympics in Europe).

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It was the best quarterly gain ever for Max: Global subs increased 7.2 million in the period, to reach 110.5 million at the end of Q3.

And company execs said Max’s profitability is expected to grow into next year. On the earnings call with analysts Thursday, WBD CEO David Zaslav says the company expects to “meaningfully exceed” its goal of $1 billion in streaming profit in 2025. Global streaming and games chief JB Perrette said Max will kick off some “very soft messaging” about password sharing before the end of the year, which is a “form of a price rise” for the service.

Zaslav also said the company is improving its “cadence” with content releases on Max, citing as an example “The Penguin,” starring Colin Farrell (pictured above). The DC-based series, released Sept. 19, “ranks as one of the largest premieres on Max, with audiences similar to ‘The Last of Us’ and ‘House of the Dragon,'” according to WBD.

In addition, Zaslav expressed hope that president-elect Trump’s administration will ease media-industry consolidation, which he said was “needed” and would be “a real positive.” The WBD CEO has recently espoused his belief that media companies must consolidate in order to gain scale amid the shift to a streaming-centric business.

Still, WBD continued to show weakness in its linear TV business, which includes CNN, TBS, Discovery, Food Network and others. Revenue ticked up 3%, to $5.0 billion for Q3, while operating costs rose 21% and adjusted earnings fell 12%. TV ad revenue decreased 13%, primarily driven by “domestic networks audience declines of 21% and the soft linear advertising market in the U.S.,” according to the company.

On the earnings call, Wall Street analysts pressed WBD execs to explain the value of keeping the company’s linear TV, studio and streaming businesses together. Its rivals are looking at other possibilities: Comcast last week said it would explore the potential to spin off its cable networks, which could set them up for a sale or merger.

WBD execs insisted that the components of the company work together synergistically and that they don’t have plans to diverge from the strategy. “We see the benefits of running this company on an integrated basis every single day,” said CFO Gunnar Wiedenfels.

Warner Bros.’s film studio also suffered a drop in Q3, with revenue down 17% year over year and earnings down 58%. That’s in part given the comparison with the year-ago quarter that included the release of blockbuster “Barbie” — and the recent box-office flop “Joker 2,” which Zaslav conceded was “disappointing.”

Zaslav also suggested WBD has forgone some $1 billion in licensing revenue over the past year from its studio business, to instead put content exclusively on Max. He described that as an “investment” in the streaming business.