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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-02-27 · 246 added, 228 removed, 435 unchanged (52% of the section changed)

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BUSINESS OVERVIEW

On April 8, 2022, Discovery, a global media company that provides content across multiple distribution platforms, including linear, free-to-air, and broadcast television, authenticated GO applications, digital distribution arrangements, content licensing arrangements, and DTC subscription products, completed its Merger with the WarnerMedia Business of AT&T and changed its name from “Discovery, Inc.” to “Warner Bros.

Discovery, Inc.” On April 11, 2022, our shares started trading on Nasdaq under the trading symbol WBD.

(See Note 3 and Note 4 to the accompanying consolidated financial statements.)

Discovery is a leading global media and entertainment company that creates and distributes a differentiated and comprehensive portfolio of content and products across television, film, streaming, interactive gaming, publishing, themed experiences, and consumer products through brands including:

Discovery Channel, Max, CNN, DC Studios, TNT Sports, HBO, Food Network, TLC, TBS, Warner Bros.

Discovery Channel, HBO Max, CNN, DC Studios, TNT Sports, HBO, Food Network, TLC, TBS, Warner Bros.

Motion Picture Group, Warner Bros.

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For a discussion of our global portfolio see our business overview set forth in Item 1, “Business” in this Annual Report on Form 10-K.

In connection with the Merger, we have announced and taken actions to implement projects to achieve cost synergies for the Company.

In connection with the WarnerMedia Merger, we have announced and taken actions to implement projects to achieve cost synergies for the Company.

We finalized the framework supporting our ongoing restructuring and transformation initiatives during the year ended December 31, 2022, which included, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities, and other contract termination costs.

At that time, we expected to incur approximately $4.1 - $5.3 billion in pre-tax restructuring charges, of which we have incurred $4.7 billion as of December 31, 2024.

Of the total expected pre-tax restructuring charges, we expected total cash expenditures to be $1.0 - $1.5 billion.

While our restructuring efforts are ongoing, the Merger-related restructuring program was substantially completed at the end of 2024.

At that time, we expected to incur approximately $4,100 - $5,300 million in pre-tax restructuring charges, of which we incurred $4,662 million as of December 31, 2024.

While our restructuring efforts are ongoing, the WarnerMedia Merger-related restructuring program was substantially completed at the end of 2024.

During 2023, we initiated a strategic realignment plan associated with our Warner Bros.

Pictures Animation group and during 2024, we initiated two additional restructuring initiatives;

an organizational and personnel restructuring plan and a restructuring initiative associated with our Warner Bros.

Pictures Animation group.

During 2024, we initiated two additional restructuring initiatives - an organizational and personnel restructuring plan and a restructuring initiative associated with our Warner Bros.

During 2025, we initiated restructuring plans related to the previously proposed Separation Transaction.

As of December 31, 2025, we classified our operations in three reportable segments:

• Studios - Our Studios segment primarily consists of the production and release of feature films for initial exhibition in theaters, production and initial licensing of television programs to our networks/DTC services as well as third parties, distribution of our films and television programs to various third party and internal television and streaming services, distribution through the home entertainment market (physical and digital), related consumer products and themed experience licensing, and interactive gaming.

• Networks - Our Networks segment primarily consists of our domestic and international television networks.

• DTC - Our DTC segment primarily consists of our premium pay-TV and streaming services.

• Streaming - Our Streaming segment primarily consists of our premium pay-TV and streaming services.

• Studios - Our Studios segment primarily consists of the production and release of feature films for initial exhibition in theaters, production and initial licensing of television programs to third parties and our networks/streaming services, distribution of our films and television programs to various third party and internal television and streaming services, distribution through the home entertainment market (physical and digital), related consumer products and themed experience licensing, and interactive gaming.

• Global Linear Networks - Our Global Linear Networks segment primarily consists of our domestic and international television networks.

Our segment presentation was aligned with our management structure and the financial information management uses to make decisions about operating matters, such as the allocation of resources and business performance assessments.

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Restructuring and other charges 399 447 (11) % (11) %

Impairments and loss on dispositions 9,603 77 NM NM

Impairments and loss on dispositions 172 9,603 (98) % (98) %

Total costs and expenses 36,558 49,353 (26) % (26) %

Operating loss (10,032) (1,548) NM NM

Operating income (loss) 738 (10,032) NM NM

Interest expense, net (2,085) (2,017)

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Loss from equity investees, net (24) (121)

Other income (expense), net 150 (29)

Loss before income taxes (11,388) (3,863)

Income tax (expense) benefit (94) 784

Net loss (11,482) (3,079)

Net loss (income) attributable to noncontrolling interests 129 (38)

Net loss (income) attributable to redeemable noncontrolling interests 42 (9)

Net loss available to Warner Bros.

Other income, net 65 150

Income (loss) before income taxes 1,639 (11,388)

Income tax expense (890) (94)

Net income (loss) 749 (11,482)

Net (income) loss attributable to noncontrolling interests (24) 129

Net loss attributable to redeemable noncontrolling interests 2 42

Net income (loss) available to Warner Bros.

Discovery, Inc.

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The ex-FX percent changes of line items below operating loss in the table above are not included as the activity is principally in U.S.

Distribution revenues are generated from fees charged to network distributors, which include cable, DTH satellite, telecommunications and digital service providers, and DTC subscribers.

Distribution revenues are generated from fees charged to network distributors, which include cable, DTH satellite, telecommunications and digital service providers, and streaming subscribers.

The largest component of distribution revenue is comprised of linear distribution rights to our networks from cable, DTH satellite, and telecommunication service providers.

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In some cases, we have provided distributors launch incentives, in the form of cash payments or free periods, to carry our networks.

Distribution revenue decreased 1% in 2024, primarily attributable to an 8% decline in Networks domestic linear subscribers and our exit from our regional sports business (“AT&T SportsNets”) in the U.S., which had an unfavorable impact of $225 million for the year, partially offset by a 5% increase in domestic contractual affiliate rates, a 20% increase in DTC subscribers, and an increase in pricing following the launch of Max in Europe in 2024.

Advertising revenues are principally generated from the sale of commercial time on linear (television networks and authenticated TVE applications) and digital platforms (DTC subscription services and websites), and sold primarily on a national basis in the U.S.

Distribution revenue decreased 2% in 2025, primarily attributable to an 9% decline in Networks domestic linear subscribers and the impact of the previously disclosed domestic wholesale deal renewal that occurred in the second quarter of 2025, partially offset by a 13% increase in streaming subscribers as a result of continued growth and global expansion of HBO Max and a 3% increase in domestic contractual affiliate rates.

Advertising revenues are principally generated from the sale of commercial time on linear (television networks and authenticated TVE applications) and digital platforms (streaming subscription services and websites), and sold primarily on a national basis in the U.S.

and on a pan-regional or local-language feed basis outside the U.S.

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We also generate revenue from the sale of advertising through our digital platforms on a stand-alone basis and as part of advertising packages with our television networks.

Advertising revenue decreased 7% in 2024, primarily attributable to audience declines in domestic linear networks of 18%, partially offset by an increase in domestic Max ad-lite subscribers.

Advertising revenue decreased 11% in 2025, primarily attributable to audience declines in domestic linear networks of 25%, partially offset by an increase in domestic HBO Max ad-lite subscribers.

Content revenues are generated from the release of feature films for initial exhibition in theaters, production of programs licensed for initial television/SVOD exhibition, the additional licensing of feature films and television programs to various television, SVOD and other digital markets, distribution of feature films and television programs in the physical and digital home entertainment market, sales of console games and mobile in-game content, sublicensing of sports rights, and licensing of intellectual property such as characters and brands.

Content revenue decreased 8% in 2024, primarily attributable to a 53% decrease in games revenue due to the strong performance of the 2023 slate, including Hogwarts Legacy , compared to the 2024 slate, and a 4% decrease in theatrical product revenue due to the strong prior year performance of Barbie , which was released in 2023, partially offset by the sublicensing of Olympic sports rights in Europe in the current year, which had a favorable impact of $576 million in 2024.

Other revenue primarily consists of studio production services and tours.

Other revenue increased 4% in 2024, primarily attributable to the opening of Warner Bros.

Studio Tour Tokyo in June 2023, partially offset by the timing of services provided to the unconsolidated TNT Sports UK joint venture.

Content revenue decreased 7% in 2025, primarily attributable to sublicensing of Olympic sports rights in Europe, which had a favorable impact of $576 million on content revenue in 2024, lower initial telecast revenue due to fewer deliveries, and a decrease in games revenue due to lower carryover and fewer releases in 2025, partially offset by an increase in theatrical product revenue due to higher film rental revenue.

Other revenue primarily consists of studio production services and tours, and decreased 15% in 2025.

Costs of Revenues

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The costs of producing a content asset and bringing that asset to market consist of production costs, participation costs, and exploitation costs.

Costs of revenues decreased 6% in 2024, primarily attributable to lower content expense related to the amortization of purchase accounting fair value step-up for content, lower content expense commensurate with lower content revenue at DTC, and our exit from the AT&T SportsNet business, partially offset by the broadcast of the Olympics in Europe in the current year.

The exit from the AT&T SportsNet business had a favorable impact to costs of revenues of $277 million for the year.

The broadcast of the Olympics in Europe in the current year had an unfavorable impact to costs of revenues of $664 million.

Costs of revenues decreased 9% in 2025, primarily attributable to the broadcast of the Olympics in 2024, which had an unfavorable impact to costs of revenues of $664 million in 2024, lower games content expense due to impairments of $384 million in the prior year and lower content expense commensurate with lower revenue in 2025, and lower content expense related to the amortization of purchase accounting fair value step-up for content, partially offset by higher international content costs to support HBO Max launches and higher theatrical content expense commensurate with higher revenue.

Selling, General and Administrative

Selling, general and administrative expenses consist principally of employee costs, marketing costs, research costs, occupancy, and back office support fees.

Selling, general and administrative expenses decreased 3% in 2024, primarily attributable to lower marketing costs due to lower theatrical and games marketing expenses and the prior year launch of Max in the U.S., partially offset by the continuation of Max launches internationally.

Selling, general and administrative expenses increased 1% in 2025, primarily attributable to higher overhead costs, partially offset by lower marketing costs.

Depreciation and Amortization

Depreciation and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets.

Depreciation and amortization decreased 12% in 2024, primarily attributable to intangible assets acquired during the Merger that are being amortized on an accelerated basis, partially offset by the shortening of the useful lives of certain intangible assets.

Depreciation and amortization decreased 19% in 2025, primarily attributable to intangible assets acquired in connection with the WarnerMedia Merger that are being amortized using the sum of the months’ digits method and the end of the useful life for certain intangible assets, partially offset by the shortening of the useful lives of certain intangible assets.

(See Note 5 to the accompanying consolidated financial statements.)

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Impairments and Loss on Dispositions

Impairments and loss on dispositions was a $9,603 million and $77 million loss in 2024 and 2023, respectively.

The loss in 2024 was primarily attributable to a $9.1 billion pre-tax, non-cash goodwill impairment charge related to the Networks reporting unit during the second quarter of 2024 (see Note 5 to the accompanying consolidated financial statements) and $411 million right-of-use asset (“ROU asset”) impairment charges primarily related to the Hudson Yards, New York office lease.

(See Note 12 to the accompanying consolidated financial statements.) The loss in 2023 was primarily attributable to lease ROU asset impairments and costs associated with our exit from AT&T SportsNets.

Interest Expense, net

Actual interest expense, net decreased $204 million in 2024, primarily attributable to lower debt during the period.

Impairments and loss on dispositions were $172 million and $9,603 million in 2025 and 2024, respectively.

The loss in 2024 was primarily attributable to a $9,147 million non-cash goodwill impairment charge related to the Global Linear Networks reporting unit during the second quarter of 2024 and $411 million right-of-use asset (“ROU asset”) impairment charges primarily related to the Hudson Yards, New York office lease.

Impairments in 2025 were primarily attributable to an additional $112 million ROU asset impairment charge related to the Hudson Yards, New York office lease.

(See Note 5 and Note 12 to the accompanying consolidated financial statements.)

Interest Expense, net

Actual interest expense, net increased $68 million in 2025, primarily attributable by higher interest costs associated with the Bridge Loan Facility, partially offset by lower debt during the year.

(See Note 11 to the accompanying consolidated financial statements.)

Gain on Extinguishment of Debt

During 2024, we repaid in full at maturity $40 million of aggregate principal amount outstanding of our floating rate notes due March 2024 and we repurchased or repaid $5,923 million of aggregate principal amount outstanding of our senior notes.

During 2025, the Company commenced and completed the Tender Offers (as defined herein) by purchasing senior notes and debentures in the aggregate principal amount of $17,665 million and recorded a gain on extinguishment of debt of approximately $2,959 million.

(See Note 11 to the accompanying consolidated financial statements.)

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(See Note 10 to the accompanying consolidated financial statements.)

Other Income (Expense), net

Other income (expense), net was $150 million and $(29) million in 2024 and 2023, respectively.

The increase was primarily attributable to our gain on sale of equity method investments and an increase to the Merger related tax indemnification receivable accrual, partially offset by foreign currency losses.

(See Note 18 to the accompanying consolidated financial statements.)

Income Tax Expense (Benefit)

Income tax expense (benefit) was $94 million and $(784) million, and the Company’s effective tax rate was (1)% and 20% for 2024 and 2023, respectively.

In 2024, the Company recorded a non-cash goodwill impairment charge of $9.1 billion, the majority of which was not deductible for tax purposes.

(See Note 5 to the accompanying consolidated financial statements.) For the year ended December 31, 2024, the increase in income tax expense compared to the same period in 2023 was primarily attributable to a decrease in pre-tax book loss (excluding the non-cash goodwill impairment charge), an increase in state and local income taxes (including a state deferred tax adjustment recorded in the year ended December 31, 2024 and a one-time favorable release of an unrecognized state tax benefit in 2023 that did not recur in 2024), and a one-time favorable release of an unrecognized U.S.

tax benefit in 2023 that did not recur in 2024.

Other Income, net

Other income, net was $65 million and $150 million in 2025 and 2024, respectively.

(See Note 18 to the accompanying consolidated financial statements.)

Income tax expense for 2024 reflects an effective income tax rate that differs from the federal statutory tax rate primarily attributable to the non-deductible goodwill impairment charge and the effect of foreign operations.

Income Tax Expense

Income tax expense was $890 million and $94 million, and the Company’s effective tax rate was 54% and (1)% for 2025 and 2024, respectively.

The increase in income tax expense in 2025 was primarily attributable to an increase in pre-tax book income, including a $2,959 million gain recognized in connection with the Tender Offers in 2025, as well as the absence of a non-cash goodwill impairment charge of $9,147 million recorded in 2024, the majority of which was not deductible for tax purposes (See Note 5 and Note 11).

Income tax expense for 2025 reflects an effective income tax rate that differs from the federal statutory tax rate primarily attributable to the effect of foreign operations and changes in unrecognized tax benefits.

The Organisation for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GloBE”) model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million.

Numerous foreign jurisdictions have already enacted tax legislation based on the GloBE rules, with some effective as early as January 1, 2024.

As of December 31, 2024, we recognized a nominal income tax expense for Pillar Two GloBE minimum tax.

As of December 31, 2025, we recognized an immaterial income tax expense for Pillar Two GloBE minimum tax.

The Company is continuously monitoring the evolving application of this legislation and assessing its potential impact on our future tax liability.

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• other items impacting comparability.

Management believes that Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company’s operating segments because it is the primary measure used by the Company’s chief operating decision maker to assess the operating results and performance of the segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment.

Management believes that Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company’s operating segments because it is the primary measure used by the Company’s CODM to assess the operating results and performance of the segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment.

(See Note 23 to the accompanying consolidated financial statements.)

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2025 2024 % Change

Streaming $ 1,370 $ 677 NM

Studios 2,545 1,652 54 %

Networks 8,149 9,063 (10) %

DTC 677 103 NM

Global Linear Networks 6,412 8,149 (21) %

Corporate (1,096) (1,260) 13 %

Inter-segment eliminations (487) (186) NM

Studios Segment

The following table presents, for our Studios segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (in millions).

Supplemental Streaming & Studios and Global Linear Networks Division Information

The following tables present, for our Streaming & Studios and Global Linear Networks divisions, supplemental information about revenues and Adjusted EBITDA (in millions).

Year Ended December 31,

2025 2024 % Change % Change (ex-FX)

Streaming $ 10,876 $ 10,313 5 % 5 %

Studios 12,619 11,607 9 % 8 %

Streaming & Studios eliminations (3,124) (2,129) (47) % (47) %

Streaming & Studios 20,371 19,791 3 % 3 %

Global Linear Networks 17,656 20,175 (12) % (13) %

Corporate 2 8 (75) % (75) %

Other inter-segment eliminations (733) (653) (12) % (12) %

Total revenues $ 37,296 $ 39,321 (5) % (5) %

Adjusted EBITDA

Year Ended December 31,

2025 2024 % Change % Change (ex-FX)

Streaming $ 1,370 $ 677 NM NM

Studios 2,545 1,652 54 % 52 %

Streaming & Studios eliminations (419) (202) NM NM

Streaming & Studios 3,496 2,127 64 % 66 %

Global Linear Networks 6,412 8,149 (21) % (21) %

Corporate (1,096) (1,260) 13 % 15 %

Other inter-segment eliminations (68) 16 NM NM

Adjusted EBITDA $ 8,744 $ 9,032 (3) % (3) %

Streaming Segment

The following table presents, for our Streaming segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).

Year Ended December 31,

2025 2024 % Change % Change (ex-FX)

Distribution $ 9,444 $ 9,022 5 % 5 %

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Selling, general and administrative 2,105 2,177 (3) % (4) %

Adjusted EBITDA 1,652 2,183 (24) % (23) %

Adjusted EBITDA - Streaming segment

1,370 677 NM NM

Depreciation and amortization 1,415 1,831

Employee share-based compensation (1) —

Restructuring and other charges 27 3

Transaction and integration costs — (1)

Facility consolidation costs 1 —

Impairment and amortization of fair value step-up for content 169 282

Amortization of capitalized interest for content 46 46

Inter-segment eliminations — 31

Impairments and loss on dispositions 23 47

Operating income $ 529 $ 211

Operating loss $ (264) $ (1,485)

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

The Studios discussion below also includes intra-segment revenue and expense between product lines, which represented less than 3% of total revenues and operating expenses for this segment for the year ended December 31, 2024.

Intra-segment revenue and expense are eliminated at the Studios segment level.

Fluctuations in results for our Studios segment may occur due to various factors, including (but not limited to) the timing and number of new film releases each quarter, the timing of marketing expenses recognized relative to (i.e., prior to) a film’s release, and the mix of content distributed each period.

Content revenue decreased 5% in 2024, primarily attributable to a 53% decrease in games revenue, and a 4% decrease in theatrical product revenue, partially offset by a 9% increase in television product revenue.

• The decrease in games revenue was primarily attributable to the strong performance of the 2023 slate, including Hogwarts Legacy , compared to the 2024 slate.

• The decrease in theatrical product revenue was attributable to lower film rental revenue and intra-segment licensing revenue, partially offset by higher home entertainment revenue.

Film rental revenue decreased due to the strong prior year performance of Barbie , which was released in 2023, partially offset by higher carryover releases from 2023 compared to 2022.

Home entertainment revenue increased due to the performance of Dune:

Part Two, Godzilla x Kong:

The New Empire, Wonka, Aquaman 2, and Beetlejuice Beetlejuice and higher catalog sales.

• The increase in television product revenue was attributable to higher intercompany content sales and higher initial telecast revenue due to the impact of the WGA and SAG-AFTRA strikes in the prior year, partially offset by lower third-party content sales.

Other revenue increased 9% in 2024, primarily attributable to the opening of Warner Bros.

Studio Tour Tokyo in June 2023.

Subscriber information (as defined under Item 1.

“Business”) consisted of the following (in millions).

December 31, 2025 December 31, 2024 % Change

Total Domestic subscribers 59.2 57.1 4 %

Total International subscribers 72.4 59.8 21 %

Total Streaming subscribers 131.6 116.9 13 %

Distribution revenue increased 5% in 2025, primarily attributable to a 13% increase year-over-year in subscribers as a result of continued growth and global expansion of HBO Max, including new distribution deals, partially offset by the impact of the previously disclosed domestic wholesale deal renewal that occurred in the second quarter of 2025.

Advertising revenue increased 20% in 2025, primarily attributable to an increase in ad-lite subscribers, partially offset by domestic pricing pressures.

Global ARPU consisted of the following.

Year Ended December 31,

2025 2024 % Change (ex-FX)

Domestic ARPU $ 10.79 $ 11.89 (9) %

International ARPU $ 3.80 $ 3.85 (1) %

Global ARPU 1 $ 6.92 $ 7.76 (11) %

Global ARPU decreased 11% in 2025, primarily attributable to broader wholesale distribution of HBO Max Basic with Ads, the impact of the previously disclosed domestic wholesale deal renewal that occurred in the second quarter of 2025, and growth in lower ARPU international markets.

Content revenue decreased 10% in 2025, primarily attributable to lower third-party licensing as a result of launching HBO Max in new international markets.

Costs of Revenues

Costs of revenues increased 3% in 2024, primarily attributable to a 4% increase in theatrical product content expense due to product mix and higher development costs, and a 1% increase in games content expense due to impairments of $384 million, partially offset by lower intra-segment licensing costs.

Television product content expense was flat in 2024, as higher content expense commensurate with higher revenues was offset by favorable product mix and lower development costs.

Selling, General and Administrative

Selling, general and administrative expenses decreased 11% in 2024, primarily attributable to lower theatrical marketing expenses due to fewer new releases and lower games marketing expenses.

Cost of revenues decreased 1% in 2025, primarily attributable to lower content costs due to lower sports costs and the timing of releases, partially offset by higher international content costs to support HBO Max launches.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses decreased 4% in 2025, primarily attributable to lower marketing costs, partially offset by higher overhead expenses.

Adjusted EBITDA

Adjusted EBITDA decreased 23% in 2024.

Networks Segment

The table below presents, for our Networks segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating (loss) income (in millions).

Adjusted EBITDA increased $693 million in 2025.

The Company defines Streaming Average Revenue Per User (“ARPU”) as total subscription revenue plus net advertising revenue for the period divided by the daily average number of paying subscribers for the period.

Where daily values are not available, the sum of beginning of period and end of period divided by two is used.

Excluded from the ARPU calculation are:

(i) Revenue and subscribers for streaming products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player), that may be offered by us or by certain joint venture partners or affiliated parties from time to time;

(ii) A limited amount of international discovery+ revenue and subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time;

(iii) Cinemax, Max/HBO hotel and bulk institution (i.e., subscribers billed on a bulk basis), and international basic HBO revenue and subscribers;

and (iv) Users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires.

Studios Segment

The following table presents, for our Studios segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (in millions).

Year Ended December 31,

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Selling, general and administrative 2,677 2,425 10 % 10 %

Adjusted EBITDA 8,149 9,063 (10) % (10) %

Adjusted EBITDA - Studios segment

2,545 1,652 54 % 52 %

Depreciation and amortization 690 702

Employee share-based compensation — (1)

Restructuring and other charges 18 263

Transaction and integration costs — 2

Facility consolidation costs — 1

Impairment and amortization of fair value step-up for content 124 96

Inter-segment eliminations — 90

Impairments and loss on dispositions 9,154 13

Operating (loss) income $ (5,759) $ 3,322

Amortization of capitalized interest for content 40 46

Impairments and (gain) loss on dispositions (1) 14

Operating income $ 1,674 $ 529

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

Distribution revenue decreased 6% in 2024, primarily attributable to an 8% decline in domestic linear subscribers for the year, partially offset by a 5% increase in domestic contractual affiliate rates.

In addition, the exit from the AT&T SportsNet business had an unfavorable impact of $225 million for the year.

Declines in linear subscribers are expected to continue.

Advertising revenue decreased 12% in 2024, primarily attributable to audience declines in domestic networks of 18% for the year, and continued softness in the U.S.

linear advertising market.

Content revenue increased by 83% in 2024, primarily attributable to the sublicensing of Olympic sports rights in Europe in the current year, which had a favorable impact of $576 million, and timing of third-party licensing deals.

Other revenue decreased 10% in 2024, primarily attributable to the timing of services provided to the unconsolidated TNT Sports UK joint venture.

Intra-segment revenue and expense are eliminated at the Studios segment level.

Content revenue increased 9% in 2025, primarily attributable to a 15% increase in theatrical product revenue and a 9% increase in television product revenue, partially offset by a 32% decrease in games revenue.

• The increase in theatrical product revenue was attributable to higher film rental revenue and higher content licensing.

The increase in film rental revenue was primarily due to the strong current year performance of A Minecraft Movie, Superman, F1, Conjuring:

Last Rites, Sinners, Final Destination Bloodlines, and Weapons .

• The increase in television product revenue was attributable to higher inter-segment content licensing, primarily due to the timing of renewals, partially offset by lower initial telecast revenue due to fewer deliveries.

• The decrease in games revenue was attributable to lower carryover and fewer releases in 2025.

Costs of Revenues

Costs of revenues was flat in 2024.

Sports-related content expense increased in 2024 primarily due to the broadcast of the Olympics in Europe in the current year and the acquisition of new sports rights, partially offset by our exit from the AT&T SportsNet business and the allocation of U.S.

sports costs to DTC.

The increase in sports-related content expense was further offset by lower entertainment content expense in 2024.

Our exit from the AT&T SportsNet business had a favorable impact to costs of revenues of $277 million and the broadcast of the Olympics in Europe had an unfavorable impact to costs of revenues of $664 million in the current year.

Costs of revenues decreased 2% in 2025, primarily attributable to a 55% decrease in games content expense, partially offset by a 6% increase in television product content expense and a 6% increase in theatrical product content expense.

• The decrease in games content expense was primarily due to impairments of $384 million in the prior year and lower content expense commensurate with lower revenue and fewer releases in 2025.

• The increase in television product content expense was due to higher costs commensurate with higher content licensing due to the timing of renewals.

• The increase in theatrical content expense was primarily due to higher film costs commensurate with higher theatrical product revenue.

Selling, General and Administrative

Selling, general and administrative expenses decreased 1% in 2024.

Selling, general and administrative expenses increased 10% in 2025, primarily attributable to higher overhead costs.

Adjusted EBITDA

Adjusted EBITDA decreased 10% in 2024.

The following table presents, for our DTC segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).

Adjusted EBITDA increased 52% in 2025.

Global Linear Networks Segment

The table below presents, for our Global Linear Networks segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (loss) (in millions).

Year Ended December 31,

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Selling, general and administrative 2,765 2,788 (1) % (2) %

Adjusted EBITDA 677 103 NM NM

Adjusted EBITDA - Global Linear Networks segment

6,412 8,149 (21) % (21) %

Depreciation and amortization 3,184 4,172

Employee share-based compensation (1) —

Restructuring and other charges 69 85

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Impairment and amortization of fair value step-up for content 440 495

Inter-segment eliminations — 72

Impairments and loss on dispositions 28 9,154

Operating loss $ (1,485) $ (2,565)

Operating income (loss) $ 2,692 $ (5,759)

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

Subscriber information (as defined under Item 1.

“Business”) consisted of the following (in millions).

December 31, 2024 December 31, 2023 % Change

Total Domestic subscribers 57.1 52.0 10 %

Total International subscribers 59.8 45.6 31 %

Total DTC subscribers 116.9 97.7 20 %

Distribution revenue increased 5% in 2024, primarily attributable to a 20% increase in subscribers and an increase in pricing following the launch of Max in Europe and Latin America in 2024, partially offset by continued domestic linear wholesale subscriber declines.

Advertising revenue increased 57% in 2024, primarily attributable to an increase in domestic ad-lite subscribers.

Global ARPU consisted of the following.

Year Ended December 31,

2024 2023 % Change (ex-FX)

Domestic ARPU $ 11.89 $ 11.20 6 %

International ARPU $ 3.85 $ 3.85 4 %

Global ARPU 1 $ 7.76 $ 7.78 1 %

Global ARPU increased 1% in 2024, primarily attributable to subscriber growth of the ad-lite tier domestically, higher pricing, and a continuing subscriber mix shift from linear wholesale, partially offset by growth in lower ARPU international markets.

Content revenue decreased 51% in 2024, primarily attributable to fewer third-party licensing deals.

Distribution revenue decreased 8% in 2025, primarily attributable to a 9% decline in domestic linear subscribers for the year, and to a lesser extent, lower international affiliate rates and international subscriber declines, partially offset by a 3% increase in domestic affiliate rates.

Declines in linear subscribers are expected to continue.

Advertising revenue decreased 14% in 2025, primarily attributable to audience declines in domestic networks of 25% for the year.

Content revenue decreased 35% in 2025, primarily attributable to the sublicensing of Olympic sports rights in Europe, which had a favorable impact of $576 million on content revenue in 2024.

Additionally, content revenue was negatively impacted by the timing of licensing renewals.

Costs of Revenues

Cost of revenues decreased 2% in 2024, primarily attributable to lower content expense commensurate with lower content revenue, partially offset by the allocation of U.S.

sports from the Networks segment.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses decreased 9% in 2024, primarily attributable to lower marketing costs due to the launch of Max in 2023 in the U.S., partially offset by higher overhead expenses and the continuation of Max launches internationally.

Costs of revenues decreased 8% in 2025, primarily attributable to the broadcast of the Olympics in 2024 and the timing of content, production, and news related spend.

The broadcast of the Olympics in Europe had an unfavorable impact to costs of revenues of $664 million in 2024.

Selling, General and Administrative

Selling, general and administrative expenses decreased 2% in 2025, primarily attributable to lower overhead costs, partially offset by higher marketing expenses.

Adjusted EBITDA

Adjusted EBITDA increased $574 million in 2024.

The broadcast of the Olympics in Europe negatively impacted Adjusted EBITDA by $33 million.

Adjusted EBITDA decreased 21% in 2025.

The following table presents our Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions):

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2025 2024 % Change % Change (ex-FX)

Adjusted EBITDA $ (1,260) $ (1,242) (1) % (3) %

Adjusted EBITDA - Corporate

$ (1,096) $ (1,260) 13 % 15 %

Employee share-based compensation 752 547

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Impairment and amortization of fair value step-up for content 1 2

Inter-segment eliminations — (193)

Operating loss $ (2,831) $ (2,867)

Corporate operations primarily consist of executive management and administrative support services, which are recorded in selling, general and administrative expense, as well as substantially all of our share-based compensation and third-party transaction and integration costs.

Adjusted EBITDA decreased 3% in 2024, primarily attributable to higher securitization expenses and overhead expenses, partially offset by lower facility costs due to office consolidations and closures and lower personnel costs.

The Company defines DTC Average Revenue Per User (“ARPU”) as total subscription revenue plus net advertising revenue for the period divided by the daily average number of paying subscribers for the period.

Where daily values are not available, the sum of beginning of period and end of period divided by two is used.

Excluded from the ARPU calculation are:

(i) Revenue and subscribers for DTC products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player and BluTV), that may be offered by us or by certain joint venture partners or affiliated parties from time to time;

(ii) A limited amount of international discovery+ revenue and subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time;

(iii) Cinemax, Max/HBO hotel and bulk institution (i.e., subscribers billed on a bulk basis), and international basic HBO revenue and subscribers;

Adjusted EBITDA improved 15% in 2025, primarily attributable to lower facility costs due to office consolidations and closures and the release of previously recorded non-income tax reserves, partially offset by higher securitization expenses.

Inter-segment Eliminations

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Inter-segment expense eliminations (3,370) (2,596)

Adjusted EBITDA (186) 93

Restructuring and other charges — (2)

Adjusted EBITDA - Inter-segment eliminations

Depreciation and amortization (4) —

Impairment and amortization of fair value step-up for content 50 264

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Generally, timing of revenue recognition is similar to the reporting of third-party transactions.

The segment distributing the content, e.g., via our DTC or linear services, capitalizes the cost of inter-segment content transactions, including “mark-ups” and amortizes the costs over the shorter of the license term, if applicable, or the expected period of use.

The segment distributing the content, e.g., via our streaming or linear services, capitalizes the cost of inter-segment content transactions, including “mark-ups” and amortizes the costs over the shorter of the license term, if applicable, or the expected period of use.

The content amortization expense related to the inter-segment profit is also eliminated on the separate “Eliminations” line when presenting our summary of segment results.

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During 2025, we funded our working capital needs primarily through cash flows from operations.

As of December 31, 2024, we had $5.3 billion of cash and cash equivalents on hand.

As of December 31, 2025, we had $4,566 million of cash and cash equivalents on hand.

We are a well-known seasoned issuer and have the ability to conduct registered offerings of securities, including debt securities, common stock and preferred stock, on short notice, subject to market conditions.

Access to sufficient capital from the public market is not assured.

We have a $6.0 billion revolving credit facility and commercial paper program described below.

We have a $4,000 million revolving credit facility and commercial paper program described below.

We also participate in a revolving receivables program and an accounts receivable factoring program described below.

During the year ended December 31, 2024, we issued €650 million of 4.302% fixed rate senior notes due January 2030 and €850 million of 4.693% fixed rate senior notes due May 2033.

After December 2029 and February 2033, respectively, the senior notes are redeemable at par plus accrued and unpaid interest.

Bridge Loan Facility

During the year ended December 31, 2025, we and DGH entered into a Bridge Loan Facility with JPMorgan Chase Bank, N.A., DGH drew $17,000 million of the available Bridge Loan Facility to finance the early settlement of the Tender Offers, Consent Solicitations, and the repayment in full and termination of our $1,500 million 364-day senior unsecured term loan facility, and the payment of fees and expenses therewith and for general corporate purposes.

The Bridge Loan Facility contains customary representations and warranties as well as affirmative and negative covenants.

As of December 31, 2025, we were in compliance with all applicable covenants and there were no events of default under the Bridge Loan Facility.

Revolving Credit Facility and Commercial Paper

We have a multicurrency revolving credit agreement (the “Credit Agreement”) and have the capacity to borrow up to $6.0 billion under the Credit Agreement (the “Credit Facility”).

We may also request additional commitments up to $1.0 billion from the lenders upon the satisfaction of certain conditions.

DCL and certain subsidiaries of the Company, as borrowers, have a multicurrency revolving credit agreement (the “Credit Agreement”) and have the capacity to borrow up to $4,000 million under the Credit Agreement (the “Credit Facility”).

DCL may also request additional commitments up to $1,000 million from the lenders upon the satisfaction of certain conditions.

In 2025, we amended the Credit Agreement to, among other things, decrease the borrowing capacity from $6,000 million to $4,000 million and provide for early termination of the Credit Agreement upon completion of the previously proposed Separation Transaction.

The Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants.

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Additionally, our commercial paper program is supported by the Credit Facility.

Under the commercial paper program, we may issue up to $1.0 billion.

Under the commercial paper program, we may issue up to $2,000 million.

In 2025, we increased the issuance capacity under the commercial paper program from $1,000 million to $2,000 million.

Borrowing capacity under the Credit Facility is effectively reduced by any outstanding borrowings under the commercial paper program.

During the year ended December 31, 2024, we borrowed and repaid $14,203 million under our Credit Facility and commercial paper program.

As of December 31, 2024 and 2023, we had no outstanding borrowings under the Credit Facility or the commercial paper program.

In January 2025, we entered into a new $1,500 million 364-day senior unsecured term loan credit facility.

The proceeds were used to the fund the redemption of $1,500 million aggregate principal amount of our 6.412% senior notes due 2026.

During the year ended December 31, 2025, we and DCL borrowed and repaid $4,228 million under our Credit Facility and commercial paper program.

As of December 31, 2025 and 2024, we and DCL had no outstanding borrowings under the Credit Facility or the commercial paper program.

During the year ended December 31, 2025, we entered into and repaid a $1,500 million 364-day senior unsecured term loan credit facility.

The proceeds were used to fund the redemption of $1,500 million aggregate principal amount outstanding of DGH’s senior notes due 2026.

• Revolving Receivables Program

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• Accounts Receivable Factoring

We have a factoring agreement to sell certain of our non-U.S.

We have factoring agreements to sell certain of our non-U.S.

trade accounts receivable on a limited recourse basis to a third-party financial institution.

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• Investments

In May 2024, we sold our 50% interest in All3Media, an equity method investment, for proceeds of $324 million.

In October 2024, we sold our minority interests in Formula E, which were recorded as an equity method investment and an investment without readily determinable fair value, to Liberty Global, a related party, for total proceeds of $217 million.

• Derivatives

We received investing proceeds of $136 million during the year ended December 31, 2024 from the unwind and settlement of derivative instruments.

(See Note 13 to the accompanying consolidated financial statements.)

Our primary uses of cash include the creation and acquisition of new content, business acquisitions, income taxes, personnel costs, costs to develop and market our enhanced streaming service Max, principal and interest payments on our outstanding senior notes, funding for various equity method and other investments, and repurchases of our capital stock.

In January 2025, we contributed a 70% interest in our music catalog to a joint venture with Cutting Edge Group

in exchange for net proceeds of $601 million.

Additionally, we received proceeds from the formation of a separate joint venture of $32 million and from the sale of investments of $54 million for the year ended December 31, 2025.

• Asset Dispositions

We received proceeds from asset dispositions of $60 million during the year ended December 31, 2025.

Our primary uses of cash include the creation and acquisition of new content, business acquisitions, income taxes, personnel costs, costs to develop and market our enhanced streaming service HBO Max, principal and interest payments on our outstanding senior notes, funding for various equity method and other investments, and repurchases of our capital stock.

• Content Acquisition

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Additional information regarding contractual commitments to acquire content is set forth in “Material Cash Requirements from Known Contractual and Other Obligations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Floating Rate Notes

During the year ended December 31, 2024, we repaid $40 million of aggregate principal amount of our floating rate notes due March 2024.

Bridge Loan Facility

During the year ended December 31, 2025, we repaid $2,000 million of aggregate principal amount outstanding of our Bridge Loan Facility.

The Bridge Loan Facility was amended in February 2026 to, among other things, extend the maturity to the earlier of (x) June 30, 2027 and (y) the date that the previously proposed Separation Transaction occurs.

The Bridge Loan Facility is expected to be refinanced prior to its maturity.

During the year ended December 31, 2025, we repurchased or repaid $23,475 million of aggregate principal amount outstanding of our senior notes.

In addition, we have $139 million of senior notes coming due in 2026.

In February 2025, we redeemed in full $1,500 million aggregate principal amount of our 6.412% senior notes due 2026.

The redemption was funded with the proceeds of borrowings pursuant to the new $1,500 million 364-day senior unsecured term loan credit facility entered into in January 2025.

We may from time to time seek to prepay, retire or purchase our other outstanding indebtedness through prepayments, redemptions, open market purchases, privately negotiated transactions, tender offers or otherwise.

Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, as well as applicable regulatory, legal and accounting factors.

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• Capital Expenditures

We effected capital expenditures of $948 million in 2024, including amounts capitalized to support Max.

In addition, we expect to continue to incur significant costs to develop and market Max.

We effected capital expenditures of $1,231 million in 2025, including amounts capitalized to support HBO Max.

We expect to continue to incur significant costs to develop and market HBO Max.

• Investments and Business Combinations

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Historically, we have funded our stock repurchases through a combination of cash on hand, cash generated by operations and the issuance of debt.

In February 2020, our board of directors authorized additional stock repurchases of up to $2 billion upon completion of our existing $1 billion authorization announced in May 2019.

In February 2020, our board of directors authorized additional stock repurchases of up to $2,000 million upon completion of our existing $1,000 million authorization announced in May 2019.

Under the new stock repurchase authorization, management is authorized to purchase shares from time to time through open market purchases at prevailing prices or privately negotiated purchases subject to market conditions and other factors.

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• Income Taxes and Interest

We expect to continue to make payments for income taxes and interest on our outstanding senior notes.

We expect to continue to make payments for income taxes and interest on our outstanding Bridge Loan Facility and senior notes.

During 2025 and 2024, we made cash payments of $1,926 million and $1,113 million for income taxes and $2,295 million and $1,996 million for interest on our outstanding debt, respectively.

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Cash provided by operating activities was $4,319 million and $5,375 million in 2025 and 2024, respectively.

The decrease in cash provided by operating activities was primarily attributable to a decrease in net income excluding non-cash items.

Cash flow for the year ended December 31, 2023 was also positively impacted by the WGA and SAG-AFTRA strikes.

The decrease in cash provided by operating activities was primarily attributable to a decrease in net income excluding non-cash items, partially offset by an improvement in working capital activity.

Investing Activities

Cash used in investing activities was $1,179 million and $349 million in 2025 and 2024, respectively.

The decrease in cash used in investing activities was primarily attributable to higher proceeds from the sale of investments and fewer purchases of property and equipment during the year ended December 31, 2024.

The increase in cash used in investing activities was primarily attributable to reduced proceeds from the sale of investments, increased purchases of property and equipment, and reduced proceeds from derivative instruments during the year ended December 31, 2025.

Financing Activities

Cash used in financing activities was $4,240 million and $3,749 million in 2025 and 2024, respectively.

The decrease in cash used in financing activities was primarily attributable to lower net debt activity and lower distributions to noncontrolling interests and redeemable noncontrolling interests during the year ended December 31, 2024.

The increase in cash used in financing activities was primarily attributable to higher net debt repayments, partially offset by proceeds received for the contribution of 70% of our music catalog to a joint venture.

Capital Resources

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Revolving credit facility and commercial paper program 4,000 — 4,000

Bridge loan 15,000 15,000 —

Senior notes (a)

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We expect that our cash balance, cash generated from operations, and availability under the Credit Agreement will be sufficient to fund our cash needs for both the short-term and the long-term.

We expect to refinance the Bridge Loan Facility prior to its maturity, though we may be unable to do so on favorable terms in a timely manner or at all.

Our borrowing costs and access to capital markets can be affected by short and long-term debt ratings assigned by independent rating agencies which are based, in part, on our performance as measured by credit metrics such as interest coverage and leverage ratios.

Credit rating agencies may continue to review and adjust our ratings or outlook.

For example, in 2024, S&P and Moody’s revised our ratings outlook from stable to negative in part due to declines in our linear business, including as a result of the weak operating environment for linear networks, and our leverage ratio.

For example, in 2025, S&P, Moody’s and Fitch downgraded certain of our ratings in part due to declines in our linear business, including as a result of the weak operating environment for linear networks, our leverage ratio, and an increase in secured debt and uncertainty in connection with the previously planned separation of Warner Bros.

The 2017 Tax Cuts and Jobs Act features a participation exemption regime with current taxation of certain foreign income and imposed a mandatory repatriation toll tax on unremitted foreign earnings.

Notwithstanding the U.S.

taxation of these amounts, we intend to continue to reinvest some of these funds outside of the U.S.

Our current plans do not demonstrate a need to repatriate them to the U.S.

However, if these funds were to be needed in the U.S., we would be required to accrue and pay non-U.S.

taxes to repatriate them.

The determination of the amount of unrecognized deferred income tax liability with respect to these undistributed foreign earnings is not practicable.

As of December 31, 2025, the Company intends to remit certain previously undistributed foreign earnings to the United States.

Accordingly, the Company has recorded deferred taxes for applicable foreign withholding associated with the expected remittance.

The Company may continue to reinvest other foreign earnings outside of the United States.

For those earnings, if any, that remain indefinitely reinvested, additional taxes would be recognized upon distribution.

Determination of the amount of any unrecognized deferred income tax liability related to such earnings is not practicable.

MATERIAL CASH REQUIREMENTS FROM KNOWN CONTRACTUAL AND OTHER OBLIGATIONS

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Long-term Debt

Principal payments on long-term debt reflect the repayment of our outstanding senior notes, at face value, assuming repayment will occur upon maturity.

Interest payments on our outstanding senior notes are projected based on their contractual interest rates and maturity dates.

Additionally, we have a multicurrency revolving Credit Agreement and have the capacity to borrow up to $6.0 billion under the Credit Facility.

We may also request additional commitments up to $1.0 billion from the lenders upon the satisfaction of certain conditions.

Principal payments on long-term debt reflect the repayment of our outstanding senior notes and bridge loan, at face value, assuming repayment will occur upon maturity.

Interest payments on our outstanding debt are projected based on their contractual interest rates and maturity dates.

Additionally, we have a multicurrency revolving Credit Agreement and have the capacity to borrow up to $4,000 million under the Credit Facility.

We may also request additional commitments up to $1,000 million from the lenders upon the satisfaction of certain conditions.

Additionally, our commercial paper program is supported by the Credit Facility.

Under the commercial paper program, we may issue up to $1.0 billion.

Under the commercial paper program, we may issue up to $2,000 million.

Borrowing capacity under the Credit Facility is effectively reduced by any outstanding borrowings under the commercial paper program.

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Purchase Obligations

Content purchase obligations include commitments associated with third-party producers and sports associations for content that airs on our television networks and DTC services.

Content purchase obligations include commitments associated with third-party producers and sports associations for content that airs on our television networks and streaming services.

Production and licensing contracts generally require the purchase of a specified number of episodes and payments during production or over the term of a license, and include both programs that have been delivered and are available for airing and programs that have not yet been produced or sporting events that have not yet taken place.

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The Company participates in and/or sponsors a qualified defined benefit pension plan that covers certain U.S.

based employees and several U.S.

nonqualified defined benefit pension plans that are noncontributory (“Pension Plans”).

based employees and several non-U.S.

defined benefit pension plans (“Pension Plans”).

The Company’s Pension Plans consist of both funded and unfunded plans.

Plan provisions vary by plan and by country, and all plans are noncontributory.

(See Note 17 to the accompanying consolidated financial statements.)

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Pursuant to the exercise of the option, all of such outstanding limited partnership interests will be redeemed, and Six Flags will also acquire certain related entity general partnership and managing member interests.

In January 2026, Six Flags declined to exercise its option related to the theme parks in Texas.

Based on the Company’s evaluation of the current facts and circumstances surrounding the Guaranteed Obligations and the Subordinated Indemnity Agreement, it is unable to predict the loss, if any, that may be incurred under the Guaranteed Obligations, and no liability for the arrangements has been recognized as of December 31, 2025.

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Other contingent commitments primarily include contingent payments for post-production term advance obligations on a certain co-financing arrangement, as well as operating lease commitment guarantees, letters of credit, bank guarantees, and surety bonds, which generally support performance and payments for a wide range of global contingent and firm obligations, including insurance, litigation appeals, real estate leases, and other operational needs.

Our other contingent commitments at December 31, 2024 were immaterial.

Our other contingent commitments at December 31, 2025 were $85 million.

We have granted put rights to certain consolidated subsidiaries, but we are unable to reasonably predict the ultimate amount or timing of any payment.

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As of December 31, 2025, the Company has outstanding senior notes issued by Discovery Communications, LLC (“DCL”), which are guaranteed by the Company, Scripps Networks Interactive, Inc.

(“Scripps Networks”), and WarnerMedia Holdings, Inc.

senior notes issued by WMH, which are guaranteed by the Company, Scripps Networks, and DCL;

senior notes issued by the legacy WarnerMedia Business (not guaranteed);

and senior notes issued by Scripps Networks (not guaranteed).

(See Note 11 to the accompanying consolidated financial statements.) DCL, Scripps Networks, and WMH are wholly owned by the Company.

(“Scripps Networks”), and Discovery Global Holdings, Inc.

(“DGH”) (formerly known as WarnerMedia Holdings, Inc.);

senior notes issued by DGH, which are guaranteed by the Company, Scripps Networks, and DCL;

and senior notes issued by the legacy WarnerMedia Business (not guaranteed).

(See Note 11 to the accompanying consolidated financial statements.) DCL, Scripps Networks, and DGH are wholly owned by the Company.

The tables below present the summarized financial information as combined for Warner Bros.

Discovery, Inc.

(the “Parent”), Scripps Networks, DCL, and WMH (collectively, the “Obligors”).

All guarantees of DCL and WMH’s senior notes (the “Note Guarantees”) are full and unconditional, joint and several and unsecured, and cover all payment obligations arising under the senior notes.

Note Guarantees issued by Scripps Networks, DCL or WMH, or any subsidiary of the Parent that in the future issues a Note Guarantee (each, a “Subsidiary Guarantor”) may be released and discharged (i) concurrently with any direct or indirect sale or disposition of such Subsidiary Guarantor or any interest therein, (ii) at any time that such Subsidiary Guarantor is released from all of its obligations under its guarantee of payment, (iii) upon the merger or consolidation of any Subsidiary Guarantor with and into DCL, WMH or the Parent or another Subsidiary Guarantor, as applicable, or upon the liquidation of such Subsidiary Guarantor and (iv) other customary events constituting a discharge of the Obligors’ obligations.

(the “Parent”), Scripps Networks, DCL, and DGH (collectively, the “Obligors”).

All guarantees of DCL and DGH’s senior notes (the “Note Guarantees”) are full and unconditional, joint and several and unsecured, and cover all payment obligations arising under the senior notes.

Note Guarantees issued by Scripps Networks, DCL or DGH, or any subsidiary of the Parent that in the future issues a Note Guarantee (each, a “Subsidiary Guarantor”) may be released and discharged (i) concurrently with any direct or indirect sale or disposition of such Subsidiary Guarantor or any interest therein, (ii) at any time that such Subsidiary Guarantor is released from all of its obligations under its guarantee of payment, (iii) upon the merger or consolidation of any Subsidiary Guarantor with and into DCL, DGH or the Parent or another Subsidiary Guarantor, as applicable, or upon the liquidation of such Subsidiary Guarantor and (iv) other customary events constituting a discharge of the Obligors’ obligations.

Summarized Financial Information

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Operating loss (696)

Net loss (1,080)

Net loss available to Warner Bros.

Net income 300

Net income available to Warner Bros.

Discovery, Inc.

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RELATED PARTY TRANSACTIONS

In the ordinary course of business, we enter into transactions with related parties, primarily the Liberty Entities and our equity method investees.

In the ordinary course of business, we enter into transactions with related parties, such as our equity method investees, entities that share common directorship, or minority partners of consolidated subsidiaries.

Information regarding transactions and amounts with related parties is discussed in Note 21 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

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Information regarding our adoption of new accounting and reporting standards is discussed in Note 2 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Supplemental Data for Results of Operations

The following table presents supplemental consolidating data for our Streaming & Studios division, Global Linear Networks reportable segment, Corporate, and consolidating adjustments.

Consolidated - Represents the consolidated results of operations of the Company and its subsidiaries.

Streaming & Studios - Represents the results of our Streaming & Studios division, which includes our Streaming and Studios reportable segments and eliminations between those two reportable segments.

Global Linear Networks - Represents the results of our Global Linear Networks reportable segment.

Corporate - Represents the results of our Corporate functions.

Consolidating adjustments - Represents eliminations between the Streaming & Studios division and the Global Linear Networks reportable segment, as well as other Corporate eliminations.

Supplemental Data for Results of Operations (in millions) Supplemental Consolidating Data

Consolidated Streaming & Studios Global Linear Networks Corporate Consolidating adjustments

For the year ended December 31, 2025 2024 2025 2024 2025 2024 2025 2024 2025 2024

Distribution $ 19,262 $ 19,701 $ 9,452 $ 9,030 $ 9,819 $ 10,680 $ — $ — $ (9) $ (9)

Advertising 7,306 8,090 1,027 856 6,332 7,306 — — (53) (72)

Content 9,647 10,297 9,119 9,016 1,195 1,848 — — (667) (567)

Other 1,081 1,233 773 889 310 341 2 8 (4) (5)

Total revenues 37,296 39,321 20,371 19,791 17,656 20,175 2 8 (733) (653)

Costs of revenues, excluding depreciation and amortization 20,885 22,970 12,432 13,487 8,919 9,733 106 93 (572) (343)

Selling, general and administrative 9,418 9,296 4,776 4,602 2,764 2,790 1,921 1,966 (43) (62)

Depreciation and amortization 5,684 7,037 2,101 2,533 3,184 4,172 399 332 — —

Restructuring and other charges 399 447 45 266 69 85 285 96 — —

Impairments and loss on dispositions 172 9,603 22 61 28 9,154 122 388 — —

Total costs and expenses 36,558 49,353 19,376 20,949 14,964 25,934 2,833 2,875 (615) (405)

Operating income (loss) $ 738 $ (10,032) $ 995 $ (1,158) $ 2,692 $ (5,759) $ (2,831) $ (2,867) $ (118) $ (248)

CRITICAL ACCOUNTING ESTIMATES

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Management considers an accounting estimate to be critical if it required assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate or different estimates could have a material effect on our results of operations.

The development and selection of these critical accounting estimates have been determined by management and the related disclosures have been reviewed with the Audit Committee of the board of directors of the Company.

The development and selection of these critical accounting estimates have been determined by management and the related disclosures have been reviewed with the Audit Committee.

We believe the following accounting estimates are critical to our business operations and the understanding of our results of operations and involve the more significant judgments and estimates used in the preparation of our consolidated financial statements.

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Components are aggregated into a single reporting unit if they share similar economic characteristics.

Our reporting units are Studios, Networks, and DTC.

Our reporting units are Streaming, Studios, and Global Linear Networks.

We evaluate our goodwill for impairment annually as of October 1 or earlier upon the occurrence of substantive unfavorable changes in economic conditions, industry trends, costs, cash flows, or ongoing declines in market capitalization.

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2025 Impairment Analysis

During the second quarter 2024, we performed goodwill and intangible assets impairment monitoring procedures for all of our reporting units and concluded the delta between market capitalization and book value, continued softness in the U.S.

linear advertising market, and uncertainty related to affiliate and sports rights renewals, including the NBA, represented a triggering event for the Networks reporting unit.

As a result, we elected to perform a quantitative impairment assessment for all of our reporting units in the second quarter of 2024.

For the Networks reporting unit, fair value was determined using a DCF method.

The key judgments and assumptions used in the DCF method to determine the fair value of the Networks reporting unit were as follows:

• The expected future cash flows in terms of their amount and timing.

These cash flows, utilized in the DCF analysis, are derived from the reporting unit’s budget and its strategic long-term plan, which reflect expectations based upon operating performance and assumptions consistent with those of a market participant with regards to affiliate revenue, sports rights, and continued softness in the U.S.

linear advertising market.

• Long-term growth rate of negative 3%.

• A discount rate of 10.5%.

This is reflective of the risks inherent in the future cash flows of the reporting unit and market conditions.

Given the inherent uncertainty in determining the assumptions underlying a DCF analysis, actual results may differ from those used in the valuations.

The carrying value of the Networks reporting unit exceeded its fair value and we recorded a pre-tax, non-cash goodwill impairment charge of $9.1 billion during the second quarter of 2024 in impairments and loss on dispositions in the consolidated statements of operations.

The goodwill impairment charge does not have an impact on the calculation of our financial covenants under our debt arrangements.

As of October 1, 2024, we performed a quantitative goodwill impairment assessment for all of our reporting units.

The estimated fair value of each reporting unit exceeded its carrying value and, therefore, no impairment was recorded.

The DTC reporting unit had headroom of 20%.

The Studios reporting unit, which had headroom of 16%, and the Networks reporting unit, which had headroom of 12%, both had fair values in excess of carrying value of less than 20%.

The fair values of the reporting units were determined using a combination of DCF and market valuation methodologies.

A 0.5% increase in the discount rate and a 1% decrease in the long-term growth rate would not result in an impairment loss across the reporting units.

For the 2025 annual impairment test, we performed a qualitative goodwill impairment assessment for all of our reporting units and determined that it was more likely than not that the fair value of each reporting unit exceeded its carrying value, therefore, no quantitative goodwill impairment analysis was performed.

We continue to monitor our reporting units for triggers that could impact the recoverability of goodwill.

Long-term trends and risks we are monitoring in our ongoing assessment include, but are not limited to, the following:

• the delta between market capitalization and book value;

• uncertainty related to affiliate rights renewals associated with our Networks and DTC reporting units;

• the delta between market capitalization and book value, as well as volatility or declines in the price of our common stock, including any impact from the PSKY Merger;

• uncertainty related to affiliate rights renewals associated with our Global Linear Networks and Streaming reporting units;

• declining levels of global GDP growth and continued softness in the U.S.

linear advertising market associated with our Networks reporting unit;

linear advertising market associated with our Global Linear Networks reporting unit;

• increased competition for advertising expenditures associated with our Global Linear Networks and Streaming reporting units as a result of an increase in digital advertising inventory available in the marketplace;

• uncertainty surrounding the impacts related to the imposition of tariffs by the U.S.

government and any retaliatory tariffs from foreign governments;

• content licensing trends and volatility related to the performance of theatrical film and game slates in our Studios reporting unit;

• risks in executing the projected growth strategies of our DTC reporting unit.

• risks in executing the projected growth strategies of our Streaming reporting unit.

Content Rights

We capitalize the costs to produce or acquire feature films and television programs, and we amortize costs and test for impairment based on whether the content is predominantly monetized individually, or as a group.

For films and television programs predominantly monetized individually, the amount of capitalized film and television production costs (net of incentives) amortized and the amount of participations and residuals to be recognized as expense in a particular period are determined using the individual film forecast method.

For films and television programs predominantly monetized individually, the amount of capitalized film and television production costs (net of incentives and co-financing partner contributions) amortized and the amount of participations and residuals to be recognized as expense in a particular period are determined using the individual film forecast method.

Under this method, the amortization of capitalized costs and the accrual of participations and residuals are based on the proportion of the film’s or television program’s revenues recognized for such period to the film’s or television program’s estimated remaining ultimate revenues (i.e., the total revenue to be received throughout a film’s or television program’s remaining life cycle).

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For television programs that are monetized on an individual basis, ultimate revenues are estimated based on factors including the performance of similar programs in each applicable market, firm commitments in hand from customers that license the program in the future, and the popularity of the program in its initial markets.

For a film or television program that is predominantly monetized on its own but also monetized with other films and/or programs (such as on our DTC or linear services), we make a reasonable estimate of the value attributable to the film or program’s exploitation while monetized with other films/programs, based on relative market rates, and expense such costs as the film or television program is exhibited.

For a film or television program that is predominantly monetized on its own but also monetized with other films and/or programs (such as on our streaming or linear services), we make a reasonable estimate of the value attributable to the film or program’s exploitation while monetized with other films/programs, based on relative market rates, and expense such costs as the film or television program is exhibited.

Ultimates for content monetized on an individual basis are reviewed and updated (as applicable) on a quarterly basis;

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We then consider the appropriate application of the quantitative assessment given forecasted content use, expected content investment and market trends.

Content use and future revenues may differ from estimates based on changes in expectations related to market acceptance, network affiliate fee rates, advertising demand, the number of cable and satellite television subscribers receiving our networks, the number of subscribers to our streaming services, and program usage.

Content use and future revenues may differ from estimates based on changes in expectations related to market acceptance, network affiliate fee rates, advertising demand, the number of subscribers receiving our networks, the number of subscribers to our streaming services, and program usage.

Accordingly, we review our estimates and planned usage at least quarterly and revise our assumptions if necessary.

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Significant estimates and judgments are applied in determining the timing of revenue recognition for certain types of transactions, such as bundled arrangements for advertising sales and content licensing arrangements.

A substantial portion of the advertising contracts in the U.S.

A substantial portion of the linear and digital advertising contracts in the U.S.

and certain international markets guarantee the advertiser a minimum audience level that either the program in which their advertisements are aired or the advertisement will reach.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis