Warner Bros Discovery posts surprise quarterly profit on 'Minecraft' hit

Warner Bros Discovery posted a surprise second-quarter profit on Thursday, as the international rollout of HBO Max sent subscriber numbers climbing and blockbuster hits like "A Minecraft Movie" dominated the US box office.

However, shares of the company were down about 7 per cent, after its cable TV unit reported a 9 per cent decline in revenue due to continued erosion of domestic subscribers.

Its streaming unit, which also includes Discovery+, added 3.4 million subscribers globally, beating Visible Alpha expectations for 2.71 million additions, driven in part by its expansion into Australia.

A Minecraft Movie, inspired by the iconic videogame, grossed nearly $1 billion worldwide, while Michael B. Jordan starrer Sinners powered past $360 million at the global box office.

A title-heavy quarter led to 55 per cent growth in the studio, pushing total revenue to $9.81 billion in the second quarter and beating expectations for $9.76 billion, according to data compiled by LSEG.

LAGGING TV BUSINESS CONCERNS INVESTORS

The linear network unit - which houses CNN and TNT Sports - saw a 12 per cent drop in advertising revenue as demand weakened amid the continued shift in consumer preference toward streaming.

Investors were fretting that the studio success and new subscriber additions are "mere box-office cameos," while the sagging linear-TV business and upcoming increase in spending on sequels remain the main focus, according to Michael Ashley Schulman of Running Point Capital Advisors.

WBD expects current-quarter advertising revenue for the TV unit to decline at a higher rate than the second quarter, given the lighter sports schedule and as CNN benefited last year from U.S. election coverage.

The company's streaming unit posted an adjusted core profit of $293 million, compared with a loss of $107 million a year ago.

WBD posted a quarterly profit of 63 cents per share, compared with expectations for a loss of 21 cents.

"With high debt levels and continued challenges in traditional TV, some investors might be cautious and would like a wow factor to get them excited," said Adam Sarhan, chief executive of 50 Park Investments.