Episode Details

Warner Bros. Discovery, Inc. (WBD) Q2 2026 — Revenue $8,717M DOWN 12% ex-FX. Adjusted EBITDA $1,879M DOWN 6% ex-FX. Free cash flow $572M after ~$350M of deal costs. Streaming's first-ever $3B quarter, Adjusted EBITDA +63% ex-FX to $512M. Net debt $29.7B at 3.4x. GAAP EPS $0.06 vs a -$0.13 bar - but that is a $433M tax benefit on a $271M pre-tax loss. Stock +1.98% to $26.49 on a pre-market print. Warner Bros. Discovery is under a signed, shareholder-approved, all-cash merger at $31.00 a share from Paramount Skydance - and the stock is $26.49, a 17% discount. That gap is not a view on earnings. In July, twelve state attorneys general and the Writers Guild sued in the Northern District of California to block the deal under Section 7 of the Clayton Act, and nobody can close until five days after a merits ruling or June 1, 2027. The quarter itself was fine: Adjusted EBITDA $1,879M, Streaming's first $3B revenue quarter with EBITDA up 63% ex-FX, and $15B of bridge debt refinanced. None of it matters much next to the court date. THE CALL: HOLD (3/5, YOU ARE UNDERWRITING A TRIAL, NOT A MEDIA COMPANY) — base-case value ~$27.0 vs ~$26.485 today. KEY METRICS: - CALL: HOLD 3/5, fair value ~$27 vs the $26.49 tape. Street Hold, ~$30 avg (32 analysts). - DEAL: Paramount Skydance $31.00 CASH plus a ticking fee. Closes $31.68, breaks $17.50. - Q2: revenue $8,717M -12% ex-FX. Adjusted EBITDA $1,879M -6%. Free cash flow $572M. - The $0.06 EPS is a $433M TAX BENEFIT on a $271M pre-tax LOSS. Use EBITDA, not GAAP. - 12 state AGs and the Writers Guild sue to block. No close before Jun 1 2027; outside date Jun 4. What to watch: UP: a merits ruling for the defendants, a settlement with the twelve state attorneys general, or a firm trial date comfortably before the June 2027 outside date. BEAR: an injunction, an appeal that pushes past June 4 2027, or any sign the parties are renegotiating the $31.00 price downward. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.