What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-02-27 · 544 added, 539 removed, 1633 unchanged (40% of the section changed)

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Interim and Annual Goodwill Impairment Assessments – Networks and DTC Reporting Units

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $25.7 billion as of December 31, 2024, and the goodwill associated with the Networks and DTC reporting units was $8.4 billion and $8.1 billion, respectively.

Management evaluates goodwill for impairment annually as of October 1, or if an event or other circumstance indicates that it may not recover the carrying value of the asset.

If a qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit goodwill exceeds its fair value, a quantitative impairment test is performed.

If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, an impairment charge is recorded for the amount by which the carrying amount exceeds the fair value, not to exceed the amount of goodwill recorded for that reporting unit.

During the second quarter of 2024, management concluded that 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.

The carrying value of the Networks reporting unit exceeded its fair value and the Company recorded a goodwill impairment charge of $9.1 billion.

Fair value was determined using a discounted cash flow method.

Significant judgments and assumptions for the quantitative goodwill assessments performed include discount rates, control premiums, terminal growth rates, relevant comparable company earnings multiples, and the amount and timing of expected future cash flows, including the revenue projections and profit margins.

The principal considerations for our determination that performing procedures relating to the interim and annual goodwill impairment assessments of the Networks reporting unit and the annual goodwill impairment assessment of the DTC reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Networks and DTC reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue projections for both the Networks and DTC reporting units, as well as discount rates for the Networks reporting unit;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Amortization of Capitalized Production Costs

As described in Notes 2 and 9 to the consolidated financial statements, the Company capitalizes costs to produce television programs and feature films, including direct production costs, production overhead, interest, acquisition costs and development costs, as well as advances for live programming rights, such as sports.

For purposes of amortization and impairment, capitalized production costs are grouped based on their predominant monetization strategy:

individually or as a group.

The Company's amortization for content rights predominantly monetized individually and as part of a group was $11.65 billion for the year ended December 31, 2025.

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 programs monetized as a group, amortization for each period is recognized based on the application of a quantitative revenue forecast model or historical viewership model.

The principal consideration for our determination that performing procedures relating to the amortization of capitalized production costs is a critical audit matter is a high degree of auditor effort in performing procedures related to the amortization of capitalized production costs monetized individually or as part of a group.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Networks and DTC reporting units.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the Networks and DTC reporting units, (ii) evaluating the appropriateness of the discounted cash flow method used by management;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue projections for both the Networks and DTC reporting units, as well as discount rates for the Networks reporting unit.

Evaluating management’s assumptions related to revenue projections involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the Networks and DTC reporting units;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow method and (ii) the reasonableness of the discount rate assumptions.

These procedures included testing the effectiveness of controls relating to the amortization of capitalized production costs.

These procedures included, among others (i) recalculating the amortization of capitalized production costs on a sample basis;

(ii) evaluating, on a test basis, whether the method used to amortize capitalized production costs is appropriate by considering either (a) for content rights predominantly monetized individually, information related to historical performance of similar films, distribution plans, initial performance, executed contracts, and estimated film costs or (b) for content rights predominantly monetized as part of a group, information related to the grouping of content with similar characteristics and the application of a quantitative revenue forecast model or historical viewership model;

and (iii) testing the completeness and accuracy of data used by management in the amortization of production costs.

/s/ PricewaterhouseCoopers LLP

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Total costs and expenses 36,558 49,353 42,869

Operating loss ( 10,032 ) ( 1,548 ) ( 7,370 )

Operating income (loss) 738 ( 10,032 ) ( 1,548 )

Interest expense, net ( 2,085 ) ( 2,017 ) ( 2,221 )

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Other income (expense), net 65 150 ( 29 )

Loss before income taxes ( 11,388 ) ( 3,863 ) ( 8,960 )

Income (loss) before income taxes 1,639 ( 11,388 ) ( 3,863 )

Income tax (expense) benefit ( 890 ) ( 94 ) 784

Net loss ( 11,482 ) ( 3,079 ) ( 7,297 )

Net loss (income) attributable to noncontrolling interests 129 ( 38 ) ( 68 )

Net income (loss) 749 ( 11,482 ) ( 3,079 )

Net (income) loss attributable to noncontrolling interests ( 24 ) 129 ( 38 )

Net loss (income) attributable to redeemable noncontrolling interests 2 42 ( 9 )

Net loss available to Warner Bros.

Net income (loss) available to Warner Bros.

Discovery, Inc.

$ 727 $ ( 11,311 ) $ ( 3,126 )

Net loss per share available to Warner Bros.

Net income (loss) per share available to Warner Bros.

Discovery, Inc.

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2025 2024 2023

Net loss $ ( 11,482 ) $ ( 3,079 ) $ ( 7,297 )

Net income (loss) $ 749 $ ( 11,482 ) $ ( 3,079 )

Other comprehensive income (loss):

Currency translation

Change in net unrealized (losses) gains ( 358 ) 799 ( 651 )

Reclassification adjustment for net losses (gains) included in net income 49 — ( 2 )

Net change, net of income tax benefit (expense) of $ 3 , $ 30 and $( 53 )

Change in net unrealized gains (losses) 664 ( 358 ) 799

Reclassification adjustment for net losses included in net income 2 49 —

Net change, net of income tax (expense) benefit of $( 98 ), $ 3 and $ 30

666 ( 309 ) 799

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Change in net unrealized gains 16 32 16

Reclassification adjustment for net gains included in net income ( 35 ) ( 12 ) ( 18 )

Net change, net of income tax benefit (expense) of $ 2 , $( 2 ) and $ 2

( 3 ) 4 ( 14 )

Comprehensive loss ( 11,808 ) ( 2,297 ) ( 7,990 )

Comprehensive loss (income) attributable to noncontrolling interests 132 ( 38 ) ( 68 )

Reclassification adjustment for net losses (gains) included in net income 8 ( 35 ) ( 12 )

Net change, net of income tax (expense) benefit of $( 10 ), $ 2 and $( 2 )

Comprehensive income (loss) 1,409 ( 11,808 ) ( 2,297 )

Comprehensive (income) loss attributable to noncontrolling interests ( 24 ) 132 ( 38 )

Comprehensive loss (income) attributable to redeemable noncontrolling interests 2 42 ( 9 )

Comprehensive loss attributable to Warner Bros.

Comprehensive income (loss) attributable to Warner Bros.

Discovery, Inc.

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Operating Activities

Net loss $ ( 11,482 ) $ ( 3,079 ) $ ( 7,297 )

Net income (loss) $ 749 $ ( 11,482 ) $ ( 3,079 )

Adjustments to reconcile net income to cash provided by operating activities:

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Deferred income taxes ( 710 ) ( 1,732 ) ( 2,344 )

Preferred stock conversion premium — — 789

Equity in losses of equity method investee companies and cash distributions 75 167 157

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Purchases of property and equipment ( 1,231 ) ( 948 ) ( 1,316 )

Cash (used for) acquired from business acquisitions and working capital settlement — ( 50 ) 3,612

Cash used for business acquisitions — — ( 50 )

Investments in and advances to equity investments ( 100 ) ( 109 ) ( 112 )

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Other investing activities, net 72 31 98

Cash (used in) provided by investing activities ( 349 ) ( 1,259 ) 3,524

Cash used in investing activities ( 1,179 ) ( 349 ) ( 1,259 )

Financing Activities

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Purchase of redeemable noncontrolling interest — — ( 49 )

Proceeds from the formation of music catalog joint venture and other joint ventures 633 — —

Borrowings under commercial paper program and revolving credit facility 4,228 14,203 5,207

Repayments under commercial paper program and revolving credit facility ( 4,228 ) ( 14,203 ) ( 5,214 )

Principal repayments of finance and other lease obligations ( 202 ) ( 142 ) ( 132 )

Other financing activities, net ( 115 ) 12 16

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Discovery, Inc.

Preferred Stock Discovery, Inc.

Common Stock Warner Bros.

Discovery, Inc.

Common Stock Additional

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Interests Total

Shares Par Value Shares Par Value Shares Par Value

Shares Par Value

December 31, 2022 2,660 $ 27 $ 54,630 $ ( 8,244 ) $ 2,205 $ ( 1,523 ) $ 47,095 $ 1,254 $ 48,349

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and attributable to noncontrolling interests — — — — ( 3,126 ) — ( 3,126 ) 38 ( 3,088 )

Other comprehensive loss — — — — — — — — — ( 693 ) ( 693 ) — ( 693 )

Other comprehensive income — — — — — 782 782 — 782

Share-based compensation — — 452 — — — 452 — 452

Conversion and issuance of common stock and noncontrolling interest in connection with the acquisition of the WarnerMedia Business ( 12 ) — ( 739 ) ( 7 ) 2,658 27 43,173 — — — 43,193 2 43,195

Reclassification of redeemable noncontrolling interest to noncontrolling interest and change in noncontrolling interest ownership (See Note 19) — — 2 — — — 2 60 62

Tax settlements associated with share-based plans — — ( 70 ) — — — ( 70 ) — ( 70 )

Redemption of redeemable noncontrolling interest — — 73 — — — 73 — 73

Dividends paid to noncontrolling interests — — — — — — — ( 271 ) ( 271 )

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Redeemable noncontrolling interest adjustments to redemption value — — 1 — ( 5 ) — ( 4 ) — ( 4 )

Other adjustments to stockholders' equity — — ( 2 ) — ( 2 ) — ( 4 ) — ( 4 )

December 31, 2023 2,669 27 55,112 ( 8,244 ) ( 928 ) ( 741 ) 45,226 1,081 46,307

Net (loss) income available to Warner Bros.

Net loss available to Warner Bros.

Discovery, Inc.

and attributable to noncontrolling interests — — — — ( 11,311 ) — ( 11,311 ) ( 129 ) ( 11,440 )

Other comprehensive income — — — — — — — — — 782 782 — 782

Other comprehensive loss — — — — — ( 326 ) ( 326 ) ( 3 ) ( 329 )

Share-based compensation — — 497 — — — 497 — 497

Reclassification of redeemable noncontrolling interest to noncontrolling interest and change in noncontrolling interest ownership (See Note 19) — — — — — — 2 — — — 2 60 62

Tax settlements associated with share-based plans — — ( 71 ) — — — ( 71 ) — ( 71 )

Redemption of redeemable noncontrolling interest — — — — — — 73 — — — 73 — 73

Dividends paid to noncontrolling interests — — — — — — — ( 157 ) ( 157 )

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Redeemable noncontrolling interest adjustments to redemption value — — ( 21 ) — — — ( 21 ) — ( 21 )

Other adjustments to stockholders' equity — — — — — — ( 2 ) — ( 2 ) — ( 4 ) — ( 4 )

December 31, 2024 2,684 27 55,560 ( 8,244 ) ( 12,239 ) ( 1,067 ) 34,037 792 34,829

Net loss available to Warner Bros.

Net income available to Warner Bros.

Discovery, Inc.

and attributable to noncontrolling interests — — — — 727 — 727 24 751

Other comprehensive loss — — — — — — — — — ( 326 ) ( 326 ) ( 3 ) ( 329 )

Other comprehensive income — — — — — 660 660 — 660

Share-based compensation — — 629 — — — 629 — 629

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Redeemable noncontrolling interest adjustments to redemption value — — 2 — — — 2 — 2

Reclassification associated with the expiration of put rights — — — — — — — 74 74

Formation of music catalog joint venture and other joint ventures — — ( 13 ) — — — ( 13 ) 646 633

Tax gain on formation of music catalog joint venture — — — — — — — ( 123 ) ( 123 )

December 31, 2025 2,710 $ 27 $ 56,055 $ ( 8,244 ) $ ( 11,512 ) $ ( 407 ) $ 35,919 $ 1,228 $ 37,147

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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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Games, Adult Swim, Turner Classic Movies, and others.

As of December 31, 2024, 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.

In December 2024, the Company announced that its board of directors had authorized the Company to implement a new corporate structure.

There were no changes to the Company’s reportable segments as a result of this announcement.

Merger with the WarnerMedia Business of AT&T

On April 8, 2022 (the “Closing Date”), Discovery, Inc.

(“Discovery”) completed its merger (the “Merger”) with the WarnerMedia business (the “WarnerMedia Business”, “WM Business” or “WM”) of AT&T, Inc.

(“AT&T”) and changed its name to Warner Bros.

In the first quarter of 2025, the Company renamed its DTC reportable segment to Streaming and its Networks reportable segment to Global Linear Networks.

In June 2025, the Company announced its plans to separate the Company into two publicly traded companies, Warner Bros.

and Discovery Global, and in October 2025, the Company announced that the board of directors would evaluate a broad range of strategic options, including continuing to advance the separation of the Company, a transaction for the entire company or separate transactions for Warner Bros.

and/or Discovery Global, as well as an alternative separation structure that would enable a merger of Warner Bros.

and spin-off of Discovery Global.

Termination of Netflix Merger

In January 2026, the Company entered into an amended and restated agreement and plan of merger, by and among the Company, Netflix, Inc.

(“Netflix”), Nightingale Sub, Inc., a wholly owned subsidiary of Netflix, and New Topco 25, Inc., a wholly owned subsidiary of WBD (the “Netflix Merger Agreement”), under which Netflix would have acquired the Streaming and Studios segments (subject to certain deviations) and certain other assets and liabilities, including the Company’s film and television studios, HBO Max, and HBO, following the separation and distribution of Discovery Global to the Company’s stockholders (the “Separation Transaction”).

Following the board of directors’ determination that it had received a “Company Superior Proposal,” as defined in the Netflix Merger Agreement, from Paramount Skydance Corporation (“PSKY”) and Netflix’s waiver of its right to propose revisions to the Netflix Merger Agreement, on February 27, 2026, in accordance with the terms of the Netflix Merger Agreement, the Company terminated the Netflix Merger Agreement in connection with entering into the PSKY Merger Agreement (as defined below).

In connection with the termination of the Netflix Merger Agreement, PSKY, on behalf of the Company, paid Netflix a termination fee of $ 2.8 billion in cash (the “Netflix Termination Fee”) as required by the terms of the Netflix Merger Agreement.

On February 27, 2026, the Company entered into an agreement and plan of merger, by and among the Company, PSKY and Prince Sub Inc., a wholly owned subsidiary of PSKY (“Merger Sub”) (as may be amended from time to time, the “PSKY Merger Agreement”), pursuant to which and subject to the terms and conditions therein, at the effective time, Merger Sub will merge with and into WBD, with WBD surviving as a wholly owned subsidiary of PSKY (the “PSKY Merger”).

Upon completion of the PSKY Merger, each issued and outstanding share of WBD common stock (subject to certain exceptions) will be converted into the right to receive an amount in cash equal to $ 31.00 , without interest, plus, if the closing date of the PSKY Merger occurs after September 30, 2026, the Ticking Consideration (the “Merger Consideration”).The “Ticking Consideration” will be an amount in cash equal to $ 0.00277778 multiplied by the number of calendar days elapsed after September 30, 2026 to and including the closing date (which, for the avoidance of doubt, will not exceed $ 0.25 per 90 calendar day period).

Concurrently with the execution of the PSKY Merger Agreement, Larry J.

Ellison and an associated trust entered into a guarantee in favor of WBD to, among other things, jointly and severally guarantee certain payments by PSKY under the PSKY Merger Agreement, including $ 45.72 billion of the Merger Consideration, and assist WBD with the consummation of the PSKY Merger.

The completion of the PSKY Merger is subject to the receipt of required regulatory approvals, the approval of WBD shareholders, and other customary closing conditions.

In addition, PSKY’s obligation to consummate the PSKY Merger is subject to WBD not having completed the separation of its Streaming & Studios business from its Global Linear Networks business nor having declared or made any dividend to WBD’s stockholders to effectuate the separation.

There can be no assurance that the PSKY Merger will occur in accordance with the expected plans or anticipated timeline, or at all.

DISCOVERY, INC.

On April 11, 2022, the Company’s shares started trading on Nasdaq under the trading symbol WBD.

The Merger was executed through a Reverse Morris Trust type transaction, under which WM was distributed to AT&T’s shareholders via a pro rata distribution, and immediately thereafter, combined with Discovery.

(See Note 3 and Note 4).

Prior to the Merger, WMH distributed $ 40.5 billion to AT&T (subject to working capital and other adjustments) in a combination of cash, debt securities, and WM’s retention of certain debt.

Discovery transferred purchase consideration of $ 42.4 billion in equity to AT&T shareholders in the Merger.

In August 2022, the Company and AT&T finalized the post-closing working capital settlement process, which resulted in the Company receiving a $ 1.2 billion payment from AT&T in the third quarter of 2022 in lieu of adjusting the equity issued as purchase consideration in the Merger.

AT&T shareholders received shares of WBD Series A common stock (“WBD common stock”) in the Merger representing 71 % of the combined Company and the Company’s pre-Merger shareholders continued to own 29 % of the combined Company, in each case on a fully diluted basis.

Discovery was deemed to be the accounting acquirer of the WM Business for accounting purposes under U.S.

therefore, Discovery is considered the Company’s predecessor and the historical financial statements of Discovery prior to April 8, 2022, are reflected in this Annual Report on Form 10-K as the Company’s historical financial statements.

Accordingly, the financial results of the Company as of and for any periods prior to April 8, 2022 do not include the financial results of the WM Business and current and future results will not be comparable to results prior to the Merger.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The PSKY Merger Agreement contains certain customary termination rights for WBD and PSKY, including, without limitation, a right for either party to terminate if the PSKY Merger is not completed on or before March 4, 2027, subject to an extension to June 4, 2027 specified in the PSKY Merger Agreement.

Termination under specified circumstances will require WBD to pay PSKY a termination fee of $ 3.0 billion and reimburse PSKY for (i) any payment made by PSKY, which will in no event be more than $ 1,528 million, in connection with WBD’s obligation to complete the Junior Lien Exchange Offer by December 30, 2026 and (ii) the Netflix Termination Fee, or PSKY to pay WBD a termination fee of $ 7.0 billion.

Reportable Segments

There have been no changes to the Company’s reportable segments or the composition of the Company’s reportable segments as a result of these actions.

Any differences in the composition of our reportable segments as a result of the previously proposed Separation Transaction have not been reflected as our chief operating decision maker (“CODM”), the Chief Executive Officer (“CEO”), has not implemented any corresponding changes to the way our business was managed through December 31, 2025.

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

• 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 aligns 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.

Labor Disruption

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The Company experienced content completion and delivery delays in the first quarter of 2024 due to the pause in television and theatrical productions in 2023, but did not experience any material impacts for the remainder of 2024.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Consolidation

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Actual results may differ from these estimates.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant estimates and judgments inherent in the preparation of the consolidated financial statements include accounting for asset impairments, revenue recognition, estimated credit losses, content rights, leases, depreciation and amortization, the determination of ultimate revenues as they relate to amortization of capitalized content rights and accruals of participations and residuals, business combinations, share-based compensation, income taxes, other financial instruments, contingencies, estimated defined benefit plan liabilities, and the determination of whether the Company should consolidate certain entities.

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The Company does not require collateral with respect to trade receivables.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revolving Receivables Program

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The Company services the sold receivables for the financial institution for a fee and pays fees to the financial institution in connection with this revolving agreement.

The agreement is a continuation of the agreement the WarnerMedia Business had in place prior to the Merger.

This agreement is subject to renewal on an annual basis and the transfer limit may be expanded or reduced from time to time.

As customers pay their balances, the Company’s available capacity under this revolving agreement increases and typically the Company transfers additional receivables into the program.

The gross value of the proceeds received results in derecognition of receivables and the obligations assumed are recorded at fair value.

The Company derecognizes receivables by the amount of the gross value of the proceeds received and the obligations assumed are recorded at fair value.

Cash received is reflected as cash provided by operating activities in the consolidated statements of cash flows.

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In some cases, the Company may have collections that have not yet been remitted to the bank, resulting in a liability.

Increases to accounts payable and subsequent payments are reported as financing activities in the consolidated statements of cash flows.

Increases to accounts payable related to program costs and subsequent payments are reported as financing activities in the consolidated statements of cash flows.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable Factoring

The Company has a factoring agreement to sell certain of its non-U.S.

The Company has factoring agreements to sell certain of its non-U.S.

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

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Cash received is also reflected as cash provided by operating activities in the consolidated statements of cash flows.

The accounts receivable factoring program is separate and distinct from the revolving receivables program.

Film and Television Content Rights

The accounts receivable factoring programs are separate and distinct from the revolving receivables program.

Film and Television Content Rights and Games

The Company capitalizes costs to produce television programs and feature films, including direct production costs, production overhead, interest, acquisition costs and development costs, as well as advances for live programming rights, such as sports.

Costs to acquire licensed television series and feature film programming rights are capitalized when the license period has begun and the program is accepted and available for airing.

Production incentives received from various jurisdictions where the Company produces content are recorded as a reduction to capitalized production costs.

Production incentives received from various jurisdictions where the Company produces content and co-financing partner contributions are recorded as reductions to capitalized production costs.

All capitalized content and prepaid license fees are classified as noncurrent assets, with the exception of content acquired with an initial license period of 12 months or less and prepaid sports rights expected to air within 12 months.

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Content Monetized Individually

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).

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The process of estimating ultimate revenues requires us to make a series of judgments related to future revenue-generating activities associated with a particular film.

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Subsequent to release, ultimate revenues are updated to reflect initial performance, which is often predictive of future performance.

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 the Company’s DTC or linear services), the Company makes a reasonable estimate of the value attributable to the film or program’s exploitation while monetized with other films/programs and expenses such costs as the film or television program is exhibited.

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 the Company’s streaming or linear services), the Company makes 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 expenses such costs as the film or television program is exhibited.

For theatrical films, the period over which ultimate revenues from all applicable sources and exhibition windows are estimated does not exceed 10 years from the date of the film’s initial release.

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any adjustments are applied prospectively as of the beginning of the fiscal year of the change.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Content Monetized as a Group

For programs monetized as a group, including licensed programming, the Company’s film groups are generally aligned along the Company’s networks and digital content offerings, except for certain international territories wherein content assets are grouped by genre or territory.

For programs monetized as a group, including licensed programming, the Company’s film groups are generally aligned along the Company’s networks and digital content service offerings, except for certain international territories wherein content assets are grouped by genre or territory.

Adjustments for projected usage are applied prospectively in the period of the change.

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Amortization of sports rights takes place when the content airs.

Quarterly, the Company prepares analyses to support its content amortization expense.

Annually, the Company prepares analyses to support its content amortization expense, and performs quarterly reviews to ensure no changes are required.

Critical assumptions used in determining content amortization for programming predominantly monetized as a group include:

1 unchanged sentence

The Company then considers 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 the Company’s networks, the number of subscribers to its 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 the Company’s networks, the number of subscribers to its streaming services, and program usage.

Accordingly, the Company reviews its estimates and planned usage at least quarterly and revises its assumptions if necessary.

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Game Development Costs

Game development costs are expensed as incurred before the applicable game reaches technological feasibility, or for online hosted arrangements, before the preliminary project phase is complete and it is probable the project will be completed and the software will be used to perform the function intended.

Game development costs are expensed as incurred before the applicable game reaches technological feasibility, or for online hosted arrangements, before the preliminary project phase is complete and it becomes probable that the project will be completed and the software will be used to perform the function intended.

Commencing upon a title’s release, the capitalized game development costs are amortized based on the proportion of the game’s revenues recognized for such period to the game’s total current and anticipated revenues, or, if greater, for non-hosted games, on a straight-line basis over the title’s estimated economic life.

Unamortized capitalized game production and development costs are stated at the lower of cost, less accumulated amortization, or net realizable value and reported in “Film and television content rights and games” on the consolidated balance sheets.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company holds investments in equity method investees and equity investments with and without readily determinable fair values.

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Cash payments to equity method investees such as additional investments, loans and advances and expenses incurred on behalf of investees, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances are recorded as adjustments to investment balances.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.

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dollar denominated senior unsecured borrowing curves using public credit ratings adjusted down to a collateralized basis using a combination of recovery rate and credit notching approaches and translated into major contract currencies as applicable.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

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based employees and several U.S.

nonqualified defined benefit pension plans that are noncontributory.

defined benefit pension plans that are noncontributory.

Defined benefit plan obligations are based on various assumptions used by the Company’s actuaries in calculating these amounts.

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Actual results that differ from the assumptions and changes in assumptions could affect future expenses and obligations.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Asset Impairment Analysis

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If declines in the value of the equity method investments are determined to be other-than-temporary, a loss is recorded in earnings in the current period as a component of loss from equity investees, net on the consolidated statements of operations.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For equity investments without readily determinable fair value, investments are recorded at cost and adjusted for subsequent observable price changes as of the date that an observable transaction takes place.

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Derivative Instruments

The Company uses derivative financial instruments to modify its exposure to market risks from changes in foreign currency exchange rates, interest rates, and from market volatility related to certain investments measured at fair value.

The Company uses derivative financial instruments to mitigate its exposure to market risks from changes in foreign currency exchange rates, interest rates, and from market volatility related to certain investments measured at fair value.

At the inception of a derivative contract, the Company designates the derivative based on the Company’s intentions and expectations as to the likely effectiveness as a hedge (see Note 13), as follows:

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• a hedge of the foreign currency exposure from net investments in foreign operations (“net investment hedge”);

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• a hedge of the exposure to changes in fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”);

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The Company may designate derivative instruments as cash flow hedges to mitigate foreign currency risk arising from third-party revenue agreements, intercompany licensing agreements, production expenses and rebates, or to hedge the interest rate risk for certain senior notes and forecasted debt issuances.

For instruments accounted for as cash flow hedges, the change in the fair value of the forward contract is recorded in other comprehensive loss and reclassified into the statements of operations in the same line item in which the hedged item is recorded and in the same period as the hedged item affects earnings.

For instruments accounted for as cash flow hedges, the change in the fair value of the forward contract is recorded in other comprehensive income (loss) and reclassified into the statements of operations in the same line item in which the hedged item is recorded and in the same period as the hedged item affects earnings.

Net Investment Hedges

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These instruments are intended to mitigate economic exposures due to exogenous events and changes in foreign currency exchange rates, interest rates, and from market volatility related to certain investments measured at fair value.

The changes in fair value of derivatives not designated as hedges are recorded in the statements of operations in the same line item where the hedged risk occurs.

The changes in fair value of derivatives not designated as hedges are recorded in the statements of operations in the same line item where the risk occurs.

Financial Statement Presentation

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Cash flows from periodic settlement of interest on cross currency swaps and derivative contracts not designated as hedges are reported as investing activities in the consolidated statements of cash flows.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Treasury Stock

When stock is acquired for purposes other than formal or constructive retirement, the purchase price of the acquired stock is recorded in a separate treasury stock account, which is separately reported as a reduction of equity.

Treasury stock held by Discovery prior to the Merger was not retired.

When stock is retired or purchased for formal or constructive retirement, the purchase price is initially recorded as a reduction to the par value of the shares repurchased, with any excess purchase price over par value recorded as a reduction to additional paid-in capital related to the series of shares repurchased and any remaining excess purchase price recorded as a reduction to retained earnings.

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If the proceeds from re-issuance of treasury stock are less than the cost, the excess cost first reduces any additional paid-in capital arising from previous treasury stock transactions for that class of stock, and any additional excess is recorded as a reduction of retained earnings.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

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Revenue recognition for each source of revenue is also based on the following policies.

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).

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

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Actual audience and delivery information is published by independent ratings services.

Digital advertising contracts typically contain promises to deliver guaranteed impressions in specific markets against a targeted demographic during a stipulated period of time.

If the specified number of impressions is not delivered, the transaction price is reduced by the number of impressions not delivered multiplied by the contractually stated price per impression.

Each promise is considered a separate performance obligation.

For digital contracts with an audience guarantee, advertising revenues are recognized as impressions are delivered.

Actual audience delivery is typically reported by independent third parties.

For contracts without an audience guarantee, advertising revenues are recognized as each spot airs.

The airing of individual spots without a guaranteed audience level are each distinct, individual performance obligations.

The Company allocates the consideration to each spot based on its relative standalone selling price.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Distribution revenues are generated from fees charged to network distributors, which include cable, direct-to-home (“DTH”) satellite, telecommunications and digital service providers, and DTC subscribers.

Cable operators, DTH satellite operators and telecommunications service providers typically pay royalties via a per-subscriber fee for the right to distribute the Company’s programming under the terms of distribution contracts.

For digital advertising contracts, advertising revenues are recognized as the advertising impressions are delivered.

Each impression is considered a distinct, individual performance obligation.

The Company allocates the consideration to each impression based on its relative standalone selling price.

Distribution revenues are generated from fees charged to distributors, which include cable, direct-to-home (“DTH”) satellite, telecommunications and digital service providers, and DTC subscribers.

Distributors typically pay royalties via a per-subscriber fee for the right to distribute the Company’s programming under the terms of distribution contracts.

The majority of the Company’s distribution fees are collected monthly throughout the year and distribution revenue is recognized over the term of the contracts based on contracted programming rates and reported subscriber levels.

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Therefore, the Company recognizes revenue for licensing arrangements as the license fee is earned and based on continuous delivery for fixed fee contracts.

Revenues associated with digital distribution arrangements are recognized when the Company transfers control of the programming and the rights to distribute the programming to the customer.

For DTC subscription services, the Company recognizes revenue as the service fee is earned over the subscription period.

Revenues associated with digital distribution arrangements are recognized when the Company transfers control of the programming or service to the customer.

For DTC streaming subscription services, the Company recognizes revenue as the service fee is earned over the subscription period.

When linear and DTC distribution arrangements are offered in a bundle deal, consideration is allocated to each deliverable based on its relative standalone selling price, and revenue is recognized as described above.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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Revenues from the licensing of television programs and films for electronic sell-through or video-on-demand are recognized when the product has been purchased by and made available to the consumer to either download or stream.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues from sales of console games generally follow the same recognition methods as film and television programs in the home entertainment market.

Revenues from digital sales of in-game purchases are assessed for deferral based on type of digital item purchased (e.g., consumable vs.

durable) and estimated life of consumer game play and recognized upon purchase or

over time as applicable.

durable) and estimated life of consumer game play and recognized upon purchase or over time as applicable.

Revenues from the licensing of intellectual property such as characters or brands (e.g., for merchandising or theme parks) are

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A contract liability, such as deferred revenue, is recorded when the Company has recorded billings in conjunction with its contractual right or when cash is received in advance of the Company’s performance.

Deferred revenue primarily consists of TV/SVOD content licensing arrangements where the content has not yet been made available to the customer, consumer products and themed experience licensing arrangements with fixed payments, advance payment for DTC subscriptions, cash billed/received for television advertising in advance or for which the guaranteed viewership has not been provided, and advance fees related to the sublicensing of Olympic rights.

Deferred revenue primarily consists of TV/SVOD content licensing arrangements where the content has not yet been made available to the customer, consumer products and themed experience licensing arrangements with fixed payments, advance payment for DTC streaming subscriptions, and cash billed/received for television advertising in advance or for which the guaranteed viewership has not been provided.

The amounts classified as current are expected to be earned within the next year.

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For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation Expense

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RSU awards generally provide for accelerated vesting upon termination from the Company if the employee has reached a specified age and years of service and if the grant has been held at least six months from the grant date.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

Stock options are granted with an exercise price equal to or in excess of the closing market price of WBD common stock on the date of grant and vest ratably over three or four years from the grant date based on continuous service and expire seven years from the date of grant.

Stock options are granted with an exercise price equal to or in excess of the closing market price of WBD common stock on the date of grant and vest ratably over three to five years from the grant date based on continuous service and expire seven years from the date of grant.

In 2025, certain stock options were granted that vest upon achievement of a market condition in addition to a time-based vesting requirement.

Compensation expense for stock options is based on the fair value of the award on the date of grant and is recognized ratably during the vesting period.

Stock options generally provide for accelerated vesting upon termination from the Company if the employee has reached a specified age and years of service and if the grant has been held at least six months from the grant date.

The fair values of stock options are estimated using the Black-Scholes option-pricing model.

Because the Black-Scholes option-pricing model requires the use of subjective assumptions, changes in these assumptions can materially affect the fair value of awards.

For stock options the simplified method is utilized to calculate the expected term, since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The fair value of stock options that have time-based vesting requirements is estimated using the Black-Scholes option-pricing model, and the fair value of stock options that have a market condition is estimated using a Monte Carlo simulation.

Because the Black-Scholes option-pricing model and the Monte Carlo simulation require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of awards.

For stock options valued using the Black-Scholes option-pricing model, the simplified method is utilized to calculate the expected term, since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The simplified method considers the period from the date of grant through the mid-point between the vesting date and the end of the contractual term of the award.

For stock options valued using the Monte Carlo simulation, the expected term represents the time period covered by the market condition.

Expected volatility is based on a combination of implied volatilities from traded options on WBD common stock and historical realized volatility of WBD and peer group common stock.

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The Company recognizes the fair value of the discount associated with shares purchased under the ESPP as share-based compensation expense.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising Costs

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The Company’s collaborative arrangements primarily relate to arrangements entered into with third parties to jointly finance and distribute certain theatrical and television productions, arrangements entered into with third parties to bundle streaming services, and an arrangement entered into with CBS Broadcasting, Inc.

(“CBS”) surrounding The National Collegiate Athletic Association (the “NCAA”).

Co-financing arrangements generally represent the assignment of an economic interest in a film or television series to a producing partner.

(“CBS”) surrounding the NCAA.

Co-financing arrangements generally represent the assignment of a partial copyright interest in a film or television series to a partner.

The Company generally records the amounts received for the assignment of an interest as a reduction of production cost, as the partner assumes the risk for their share of the film or series asset.

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therefore, in each period, based on the terms of the arrangement, the Company reflects the estimate of the third-party partner’s interest in the profits or losses incurred on the film or series, using the individual film forecast method, in cost of revenues, excluding depreciation and amortization in the consolidated statements of operations.

On occasion, the Company acquires the economic interest in a film from a producing partner;

On occasion, the Company acquires the economic interest in a film from a producing partner and is the distributor;

in this case, the Company capitalizes the acquisition cost as a content asset in film and television content rights and games and accounts for the third-party partner’s share in applicable distribution results as described above.

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However, if the amount paid for the programming rights fee and production costs in any given year exceeds advertising and sponsorship revenues for that year, CBS’ share of such shortfall is limited to specified annual caps.

The amounts recorded pursuant to the loss cap were not material during the years ended December 31, 2024 and 2023.

The amount recorded pursuant to the loss cap was $ 73 million during the year ended December 31, 2025 and was no t material during the years ended December 31, 2024 and 2023.

In accounting for this arrangement, the Company records advertising revenue for the advertisements aired on its networks and amortizes its share of the programming rights fee based on the estimated relative value of each season over the term of the arrangement.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For our collaborative arrangements entered into with third parties to jointly finance and distribute certain theatrical and television productions, net participation costs of $ 632 million and $ 393 million were recorded in cost of revenues, excluding depreciation and amortization for the years ended December 31, 2024 and 2023, respectively.

For our collaborative arrangements entered into with third parties to jointly finance and distribute certain theatrical and television productions, net participation costs of $ 506 million , $ 632 million, and $ 393 million were recorded in cost of revenues, excluding depreciation and amortization for the years ended December 31, 2025, 2024 and 2023, respectively.

Income taxes are recorded using the asset and liability method of accounting for income taxes.

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Such examinations may result in future tax and interest assessments by these taxing authorities.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for unrecognized tax benefits unless the Company determines that such positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigation processes.

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The Company adjusts its unrecognized tax benefits periodically because of ongoing examinations by, and settlements with, various taxing authorities, as well as changes in tax laws, regulations and interpretations.

In connection with the Merger, the Company entered into a tax matters agreement (“TMA”) with AT&T.

Pursuant to the TMA, the Company is responsible for tax liabilities of the WM Business related to the periods prior to AT&T’s ownership of the WM Business (June 14, 2018), and AT&T is responsible for tax liabilities of the WM Business related to the period for which they owned the WM Business (June 15, 2018 through April 8, 2022).

In connection with the WarnerMedia Merger, the Company entered into a tax matters agreement (“TMA”) with AT&T.

Pursuant to the TMA, the Company is responsible for tax liabilities of the WarnerMedia Business related to the periods prior to AT&T’s ownership of the WarnerMedia Business (June 14, 2018), and AT&T is responsible for tax liabilities of the WarnerMedia Business related to the period for which they owned the WarnerMedia Business (June 15, 2018 through April 8, 2022).

With respect to unrecognized tax benefits related to jurisdictions that have joint and several liability among members of the AT&T tax filing group during the AT&T ownership period, the Company has not recorded any liabilities for unrecognized tax benefits or indemnification receivables related to matters that were attributable to jurisdictions that have joint and several liability among members of the AT&T filing group since AT&T was determined to be the primary obligor.

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No individual customer accounted for more than 10% of total consolidated revenues for 2025, 2024 or 2023.

The Company had one customer that represented more than 10% of distribution revenue in 2024, which totaled 13 %.

As of December 31, 2024 and 2023, the Company’s trade receivables do not represent a significant concentration of credit risk as the customers and markets in which the Company operates are varied and dispersed across many geographic areas.

The Company had one customer that represented more than 10% of content revenue in 2025, which totaled 12 %.

The Company had one customer that represented more than 10% of distribution revenue in 2024, which totaled 13 %, and two customers that each represented more than 10% of distribution revenue in 2023, which in aggregate totaled 24 %.

One customer accounted for 10 % of trade receivables as of December 31, 2025 and no individual customer accounted for more than 10% of trade receivables as of December 31, 2024.

Financial Institutions

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Additionally, the Company may be required to post collateral related to its revolving receivables program.

As of December 31, 2024, the Company had posted $ 105 million of collateral under these arrangements.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2025, collateral posted under these arrangements was not material.

Accounting and Reporting Pronouncements Adopted

Segment Reporting

In November 2023, the FASB issued guidance updating the disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively to all prior periods presented in the financial statements.

The Company adopted the guidance effective January 1, 2024 and has provided the required annual disclosures in Note 23.

Accounting and Reporting Pronouncements Not Yet Adopted

In December 2023, the FASB issued guidance updating the disclosure requirements for income taxes, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”) updating the disclosure requirements for income taxes, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

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however, retrospective application is permitted.

The Company did not early adopt the amendments as of December 31, 2024.

The Company is currently evaluating the impact of this guidance and will update its tax disclosures upon adoption.

The Company prospectively adopted the guidance effective January 1, 2025 and has provided the required annual disclosures in Note 16 and Note 18.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting and Reporting Pronouncements Not Yet Adopted

Disaggregation of Income Statement Expenses

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The Company is currently evaluating the impact this guidance will have on its disclosures.

Credit Losses

In July 2025, the FASB issued guidance which provides a practical expedient to simplify the estimation of expected credit losses by assuming that current conditions as of the balance sheet do not change for the remaining life of the asset.

This guidance is effective for interim and annual periods beginning after December 15, 2025.

Early adoption is permitted, and the standard is to be applied prospectively.

The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures.

Accounting for Internal-Use Software

In September 2025, the FASB issued guidance which amends the existing standard for internal-use software to remove all references to prescriptive and sequential software development project stages.

Under this guidance, eligible software development costs will begin capitalization when management has authorized and committed to funding the software project, and it is probable that the project will be completed, and the software will be used to perform the function intended.

This guidance may be applied prospectively, retrospectively, or with a modified transition approach, and is effective for all annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods.

Early adoption is permitted.

The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and disclosures.

Derivatives and Hedging and Revenue from Contracts with Customers

In September 2025, the FASB issued guidance that amends existing standards for derivatives and hedging (“Topic 815”) and revenue from contracts with customers (“Topic 606”).

The guidance refines the scope of Topic 815 to clarify which contracts are subject to derivative accounting.

The guidance also provides clarification under Topic 606 for share-based payments from a customer in a revenue contract.

This guidance may be applied prospectively or with a modified retrospective approach, and is effective for all annual periods beginning after December 15, 2026, and for interim periods within those annual reporting periods.

Early adoption is permitted.

The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and disclosures.

Derivatives and Hedging:

Hedge Accounting Improvements

In November 2025, the FASB issued guidance that improves hedge accounting guidance by clarifying certain aspects and aligning hedge accounting more closely with the economics of an entity’s risk management activities.

The update is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within those annual reporting periods, with early adoption permitted.

The updates should be applied prospectively for all hedging relationships as of the date of adoption.

The Company does not expect a material impact on our financial statements.

EQUITY AND EARNINGS PER SHARE

Common Stock Issued in Connection with the WarnerMedia Merger

In connection with the Merger, each issued and outstanding share of Discovery Series A common stock, Discovery Series B convertible common stock, and Discovery Series C common stock, was reclassified and automatically converted into one share of WBD common stock, and each issued and outstanding share of Discovery Series A-1 convertible preferred stock (“Series A-1 Preferred Stock”) and Series C-1 convertible preferred stock was reclassified and automatically converted into 13.1135 and 19.3648 shares of WBD common stock, respectively.

The Merger required the consent of Advance/Newhouse Programming Partnership under Discovery’s certificate of incorporation as the sole holder of the Series A-1 Preferred Stock.

In connection with Advance/Newhouse Programming Partnership’s entry into the consent agreement and related forfeiture of the significant rights attached to the Series A-1 Preferred Stock in the reclassification of the shares of Series A-1 Preferred Stock into common stock, it received an increase to the number of shares of common stock of the Company into which the Series A-1 Preferred Stock converted.

The impact of the issuance of such additional shares of common stock was $ 789 million and was recorded as a transaction expense in selling, general and administrative expense upon the closing of the Merger in the year ended December 31, 2022.

On April 8, 2022, the Company issued 1.7 billion shares of WBD common stock as consideration paid for the acquisition of WM.

(See Note 4).

Repurchase Programs

Under the Company’s stock repurchase program, management is authorized to purchase shares of WBD common stock from time to time through open market purchases, privately negotiated transactions at prevailing prices, pursuant to one or more accelerated stock repurchase agreements, or other derivative arrangements as permitted by securities laws and other legal requirements, and subject to stock price, business and market conditions and other factors.

In February 2020, the Company’s board of directors authorized additional stock repurchases of up to $ 2,000 million upon completion of its existing $ 1,000 million repurchase authorization announced in May 2019.

All common stock repurchases have been made through open market transactions and have been recorded as treasury stock on the consolidated balance sheets.

During the years ended December 31, 2025, 2024 and 2023, the Company did no t repurchase any of its common stock.

Over the life of the Company’s repurchase programs and prior to the Merger and conversion of Discovery common stock to WBD common stock, the Company had repurchased 3 million and 229 million shares of Discovery Series A and Discovery Series C common stock, respectively, for the aggregate purchase price of $ 171 million and $ 8,168 million, respectively.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February 2020, the Company’s board of directors authorized additional stock repurchases of up to $ 2 billion upon completion of its existing $ 1 billion repurchase authorization announced in May 2019.

All common stock repurchases, including prepaid common stock repurchase contracts, have been made through open market transactions and have been recorded as treasury stock on the consolidated balance sheets.

During the years ended December 31, 2024, 2023 and 2022, the Company did no t repurchase any of its common stock.

Earnings Per Share

All share and per share amounts have been retrospectively adjusted to reflect the reclassification and automatic conversion into WBD common stock, except for Series A-1 Preferred Stock, which has not been recast because the conversion of Series A-1 Preferred Stock into WBD common stock in connection with the Merger was considered a discrete event and treated prospectively.

The table below sets forth the Company’s calculated earnings per share (in millions).

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2025 2024 2023

Net loss $ ( 11,482 ) $ ( 3,079 ) $ ( 7,297 )

Allocation of undistributed income to Series A-1 convertible preferred stock — — ( 49 )

Net loss (income) attributable to noncontrolling interests 129 ( 38 ) ( 68 )

Net income (loss) $ 749 $ ( 11,482 ) $ ( 3,079 )

Net (income) loss attributable to noncontrolling interests ( 24 ) 129 ( 38 )

Net loss (income) attributable to redeemable noncontrolling interests 2 42 ( 9 )

Redeemable noncontrolling interest adjustments of carrying value to redemption value (redemption value does not equal fair value) 1 ( 3 ) —

Net loss available to Warner Bros.

Net income (loss) available to Warner Bros.

Discovery, Inc.

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Denominator — weighted average:

Common shares outstanding — basic and diluted 2,450 2,436 1,940

Basic net loss per share allocated to common stockholders $ ( 4.62 ) $ ( 1.28 ) $ ( 3.82 )

Diluted net loss per share allocated to common stockholders $ ( 4.62 ) $ ( 1.28 ) $ ( 3.82 )

Common shares outstanding — basic 2,475 2,450 2,436

Dilutive effect of share-based awards 55 — —

Common shares outstanding — diluted 2,530 2,450 2,436

Basic net income (loss) per share allocated to common stockholders $ 0.29 $ ( 4.62 ) $ ( 1.28 )

Diluted net income (loss) per share allocated to common stockholders $ 0.29 $ ( 4.62 ) $ ( 1.28 )

The table below presents the details of share-based awards that were excluded from the calculation of diluted earnings per share (in millions).

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ACQUISITIONS AND DISPOSITIONS

On April 8, 2022, the Company completed its Merger with the WarnerMedia Business of AT&T.

The Merger was executed through a Reverse Morris Trust type transaction, under which WM was distributed to AT&T’s shareholders via a pro-rata distribution, and immediately thereafter, combined with Discovery.

Discovery was deemed to be the accounting acquirer of WM.

The Merger combined WM’s content library and valuable intellectual property with Discovery’s global footprint, collection of local-language content and deep regional expertise across more than 220 countries and territories.

The Company expects this broad, worldwide portfolio of brands, coupled with its DTC potential and the attractiveness of the combined assets, to result in increased market penetration globally.

The Merger is also expected to create significant cost synergies for the Company.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Purchase Price

The following table summarizes the components of the aggregate purchase consideration paid to acquire WM (in millions).

Fair value of WBD common stock issued to AT&T shareholders (1)

Estimated fair value of share-based compensation awards attributable to pre-combination services (2)

Settlement of preexisting relationships (3)

Purchase consideration $ 42,376

(1) The fair value of WBD common stock issued to AT&T shareholders represents approximately 1,732 million shares of WBD common stock multiplied by the closing share price for Discovery Series A common stock of $ 24.43 on Nasdaq on the Closing Date.

The number of shares of WBD common stock issued in the Merger was determined based on the number of fully diluted shares of Discovery, Inc.

common stock immediately prior to the closing of the Merger, multiplied by the quotient of 71 %/ 29 %.

(2) This amount represents the value of AT&T restricted stock unit awards that were not vested and were replaced by WBD restricted stock unit awards with similar terms and conditions as the original AT&T awards.

The conversion was based on the ratio of the volume-weighted average per share closing price of AT&T common stock on the ten trading days prior to the Closing Date and the volume-weighted average per share closing price of WBD common stock on the ten trading days following the Closing Date.

The fair value of replacement equity-based awards attributable to pre-Merger service was recorded as part of the consideration transferred in the Merger.

See Note 15 for additional information.

(3) The amount represents the effective settlement of outstanding payables and receivables between the Company and WM.

No gain or loss was recognized upon settlement as amounts were determined to be reflective of fair market value.

Balances reflect rounding of dollar and share amounts to millions, which may result in differences for recalculated standalone amounts compared with the amounts presented above.

AT&T has raised certain claims associated with the Merger that the Company believes are without merit.

In connection with the dispute, the Company established an immaterial accrual in the first quarter of 2024.

Purchase Price Allocation

The Company applied the acquisition method of accounting to WM, whereby the excess of the fair value of the purchase price paid over the fair value of identifiable net assets acquired and liabilities assumed was allocated to goodwill.

Goodwill reflects the assembled workforce of WM as well as revenue enhancements, cost savings and operating synergies that are expected to result from the Merger.

The goodwill recorded as part of the Merger was allocated to the Studios, Networks and DTC reportable segments in the amounts of $ 9,308 million, $ 7,074 million and $ 5,727 million, respectively, and is not deductible for tax purposes.

During 2023, the Company finalized the fair value of assets acquired and liabilities assumed.

Measurement period adjustments were reflected in the period in which the adjustments occurred.

Adjustments recorded in 2023 were $ 368 million, primarily related to taxes, and were recorded in other noncurrent assets, deferred income taxes, and other noncurrent liabilities, with an offset to goodwill.

The allocation of the purchase price to the assets acquired and liabilities assumed, measurement period adjustments, and a reconciliation to total consideration transferred is presented in the table below (in millions).

April 8, 2022 Measurement Period

Adjustments Final

April 8, 2022

Cash $ 2,419 $ ( 10 ) $ 2,409

Accounts receivable 4,224 ( 60 ) 4,164

Other current assets 4,619 ( 133 ) 4,486

Film and television content rights and games 28,729 ( 344 ) 28,385

Property and equipment 4,260 13 4,273

Goodwill 21,513 596 22,109

Intangible assets 44,889 100 44,989

Other noncurrent assets 5,206 283 5,489

Current liabilities ( 10,544 ) 12 ( 10,532 )

Debt assumed ( 41,671 ) ( 9 ) ( 41,680 )

Deferred income taxes ( 13,264 ) 492 ( 12,772 )

Other noncurrent liabilities ( 8,004 ) ( 940 ) ( 8,944 )

Total consideration paid $ 42,376 $ — $ 42,376

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair values of the assets acquired and liabilities assumed were determined using several valuation approaches including, but not limited to, various cost approaches and income approaches, such as relief from royalty, multi-period excess earnings, and with-or-without methods.

The table below presents a summary of intangible assets acquired, exclusive of content assets, and the weighted average useful life of these assets.

Fair Value Weighted Average Useful Life in Years

Trade names $ 21,084 34

Affiliate, advertising and subscriber relationships 14,800 6

Franchises 7,900 35

Other intangible assets 1,205

Total intangible assets acquired $ 44,989

The Company incurred acquisition-related costs of $ 162 million and $ 406 million for the years ended December 31, 2023 and 2022, respectively.

These costs were associated with legal and professional services and integration activities and were recognized as operating expenses on the consolidated statements of operations.

Additionally, the expense related to the issuance of additional shares of common stock in connection with the conversion of Advance/Newhouse Programming’s Series A-1 Preferred Stock was $ 789 million and was recorded as a transaction expense in selling, general and administrative expense upon the closing of the Merger.

(See Note 3.)

As a result of the Merger, WM’s assets, liabilities, and operations were included in the Company’s consolidated financial statements from the Closing Date.

The following table presents WM revenue and earnings as reported within the consolidated financial statements (in millions).

Year Ended December 31, 2022

Advertising $ 2,849

Distribution 10,980

Content 10,001

Total revenues 24,550

Inter-segment eliminations ( 2,225 )

Net revenues $ 22,325

Net loss available to Warner Bros.

Discovery, Inc.

Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information presents the combined results of the Company and WM as if the Merger had been completed on January 1, 2021.

The unaudited pro forma combined financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the Merger had occurred on January 1, 2021, nor is it indicative of future results.

The following table presents the Company’s pro forma combined revenues and net loss (in millions).

Year Ended December 31, 2022

Revenues $ 43,095

Net loss available to Warner Bros.

Discovery, Inc.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma combined financial information includes, where applicable, adjustments for (i) additional costs of revenues from the fair value step-up of film and television library, (ii) additional amortization expense related to acquired intangible assets, (iii) additional depreciation expense from the fair value of property and equipment, (iv) transaction costs and other one-time non-recurring costs, (v) additional interest expense for borrowings related to the Merger and amortization associated with fair value adjustments of debt assumed, (vi) changes to align accounting policies, (vii) elimination of intercompany activity, and (viii) associated tax-related impacts of adjustments.

These pro forma adjustments are based on available information as of the date hereof and upon assumptions that the Company believes are reasonable to reflect the impact of the Merger with WM on the Company’s historical financial information on a supplemental pro forma basis.

Adjustments do not include costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined business.

The Company previously held a 35 % interest in BluTV, a SVOD platform entity and content distributor in Turkey that was accounted for as an equity method investment.

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In May 2024, the Company sold its 50 % interest in All3Media, an equity method investment, for proceeds of $ 324 million and recorded a gain of $ 203 million in other income (expense), net in the consolidated statements of operations.

In October 2024, the Company sold its 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 and recorded a gain of $ 61 million in other income (expense), net in the consolidated statements of operations.

(“Liberty Global”), a related party, for total proceeds of $ 217 million and recorded a gain of $ 61 million in other income (expense), net in the consolidated statements of operations.

During 2023, the Company sold or exited all of the AT&T SportsNets.

In October 2022, the Company sold its 49 % stake in Golden Maple Limited (known as Tencent Video VIP) for proceeds of $ 143 million and recorded a gain of $ 55 million, and in April 2022 completed the sale of its minority interest in Discovery Education for proceeds of $ 138 million and recorded a gain of $ 133 million.

In September 2022, the Company sold 75 % of its interest in The CW Network to Nexstar Media Inc.

(“Nexstar”), in exchange for Nexstar agreeing to fund a majority of The CW Network’s expenses and the retention of the Company’s share of certain receivables that existed prior to the transaction.

There was no cash consideration exchanged in the transaction.

The Company recorded an immaterial gain and retained a 12.5 % ownership interest in The CW Network, which is accounted for as an equity method investment.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying value of goodwill attributable to each business unit were as follows (in millions).

Studios Networks DTC Total

Streaming Studios Global Linear Networks Total

December 31, 2023 $ 8,067 $ 9,272 $ 17,630 $ 34,969

Acquisitions (See Note 4)

245 ( 24 ) 127 348

Impairment of goodwill — — ( 9,147 ) ( 9,147 )

Foreign currency translation and other adjustments ( 16 ) ( 75 ) ( 64 ) ( 155 )

December 31, 2024 $ 8,051 $ 9,197 $ 8,419 $ 25,667

Impairment of goodwill — ( 9,147 ) — ( 9,147 )

Dispositions — — ( 16 ) ( 16 )

Foreign currency translation and other adjustments 20 155 107 282

December 31, 2025 $ 8,071 $ 9,352 $ 8,510 $ 25,933

The carrying amount of goodwill at the Networks segment included accumulated impairments of $ 10.8 billion and $ 1.6 billion as of December 31, 2024 and 2023, respectively.

The Studios and DTC segments did not include any accumulated impairments as of December 31, 2024 and 2023.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying amount of goodwill at the Global Linear Networks segment included accumulated impairments of $ 10,770 million as of December 31, 2025 and 2024.

The Streaming and Studios segments did not include any accumulated impairments as of December 31, 2025 and 2024.

Intangible Assets

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Amortization expense related to finite-lived intangible assets was $ 4,605 million, $ 5,935 million and $ 6,854 million for the years ended December 31, 2025, 2024 and 2023, respectively.

During 2024, as a result of the goodwill impairment charge discussed below and recorded in the second quarter of 2024, and the long-term trends and risks associated with the Company’s Networks reporting unit, the Company reassessed and shortened the useful lives for certain of its linear networks trade names.

During 2024, as a result of the goodwill impairment charge discussed below and recorded in the second quarter of 2024, and the long-term trends and risks associated with the Company’s Global Linear Networks reporting unit, the Company reassessed and shortened the useful lives for certain of its linear networks trade names.

This change was considered a change in estimate, was accounted for prospectively, and resulted in incremental amortization expense of $ 184 million for the year ended December 31, 2024.

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This change was considered a change in estimate, was accounted for prospectively, and resulted in incremental amortization expense of $ 368 million for the year ended December 31, 2023.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization expense relating to intangible assets subject to amortization for each of the next five years and thereafter is estimated to be as follows (in millions).

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2025 Impairment Analysis

For the 2025 annual impairment test, the Company performed a qualitative goodwill impairment assessment for all of its 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.

The Company continues to monitor its reporting units for triggers that could impact the recoverability of goodwill.

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

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

• uncertainty related to affiliate rights renewals associated with the Company’s 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 the Company’s Global Linear Networks reporting unit;

• increased competition for advertising expenditures associated with the Company’s 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 the Company’s Studios reporting unit;

• risks in executing the projected growth strategies of the Company’s Streaming reporting unit.

2024 Impairment Analysis

During the second quarter of 2024, the Company performed goodwill and intangible assets impairment monitoring procedures for all of its 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.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As a result, the Company elected to perform a quantitative impairment assessment for all of its 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:

For the Global Linear 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 Global Linear Networks reporting unit were as follows:

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

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

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 the Company 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 carrying value of the Global Linear Networks reporting unit exceeded its fair value and the Company recorded a non-cash goodwill impairment charge of $ 9,147 million 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 the Company’s financial covenants under the Company’s debt arrangements.

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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.

The Company continues to monitor its reporting units for triggers that could impact the recoverability of goodwill.

Long-term trends and risks the Company is monitoring in its 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 the Company’s Networks and DTC reporting units;

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

linear advertising market associated with the Company’s Networks reporting unit;

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

• risks in executing the projected growth strategies of the Company’s DTC reporting unit.

2023 and 2022 Impairment Analysis

For the 2023 and 2022 annual impairment tests, the Company performed a quantitative goodwill impairment assessment for all reporting units.

2023 Impairment Analysis

For the 2023 annual impairment test, the Company performed a quantitative goodwill impairment assessment for all reporting units.

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

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RESTRUCTURING AND OTHER CHARGES

In connection with the completion of its Merger with the WarnerMedia Business of AT&T on April 8, 2022, the Company has announced and has taken actions to implement projects to achieve cost synergies for the Company, which include, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities, and other contract termination costs.

While the Company’s restructuring efforts are ongoing, the merger-related restructuring program was considered to be substantially completed as of December 31, 2024.

The Company periodically initiates restructuring programs, which may include, among other things, strategic content programming assessments, organizational restructuring, facility consolidation activities, and other contract termination costs.

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

During 2024, the Company initiated two restructuring initiatives;

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

During 2023, the Company initiated a strategic realignment plan associated with its Warner Bros.

Pictures Animation group.

During 2024, the Company initiated two additional restructuring initiatives;

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

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring and other charges by reportable segment and corporate and inter-segment eliminations were as follows (in millions).

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2025 2024 2023

Streaming $ 27 $ 3 $ 66

Studios 18 263 225

Networks 85 201 1,003

DTC 3 66 1,551

Global Linear Networks 69 85 201

Corporate and inter-segment eliminations 285 96 93

Total restructuring and other charges $ 399 $ 447 $ 585

During the year ended December 31, 2025, restructuring and other charges primarily related to organizational and personnel restructuring costs and consulting fees.

During the year ended December 31, 2024, restructuring and other charges primarily included organization restructuring costs of $ 246 million, content impairments and other content development costs and write-offs of $ 165 million, and contract terminations and other restructuring costs of $ 36 million.

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During the year ended December 31, 2023, restructuring and other charges primarily included content impairments and other content development costs and write-offs of $ 115 million, contract terminations and facility consolidation activities of $ 111 million, and organization restructuring costs of $ 359 million.

During the year ended December 31, 2022, restructuring and other charges primarily included charges related to strategic content programming initiatives, inclusive of content impairments, content development costs and write-offs, content contract terminations, and other content related charges of $ 3,133 million.

In addition, there were restructuring charges related to organization restructuring of $ 607 million and facility consolidation activities and other contract terminations of $ 17 million.

Changes in restructuring liabilities recorded in accrued liabilities and other noncurrent liabilities by major category and by reportable segment and corporate were as follows (in millions).

Studios Networks DTC Corporate Total

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in restructuring liabilities recorded in accounts payable, accrued liabilities, and other noncurrent liabilities by major category and by reportable segment and corporate were as follows (in millions).

Streaming Studios Global Linear Networks Corporate Total

December 31, 2023

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December 31, 2025 $ 23 $ 58 $ 69 $ 127 $ 277

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated Revenue

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Year Ended December 31, 2025

Studios Networks DTC Corporate and Inter-segment Eliminations Total

Streaming Studios Global Linear Networks Corporate and Inter-segment Eliminations Total

Distribution $ 9,444 $ 8 $ 9,819 $ ( 9 ) $ 19,262

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Year Ended December 31, 2024

Studios Networks DTC Corporate and Inter-segment Eliminations Total

Streaming Studios Global Linear Networks Corporate and Inter-segment Eliminations Total

Distribution $ 9,022 $ 8 $ 10,680 $ ( 9 ) $ 19,701

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Totals $ 10,313 $ 11,607 $ 20,175 $ ( 2,774 ) $ 39,321

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2023

Studios Networks DTC Corporate and Inter-segment Eliminations Total

Streaming Studios Global Linear Networks Corporate and Inter-segment Eliminations Total

Distribution $ 8,703 $ 17 $ 11,521 $ ( 4 ) $ 20,237

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Contract assets were not material as of December 31, 2025 and 2024.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transaction Price Allocated to Remaining Performance Obligations

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Total $ 12,378

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The value of unsatisfied performance obligations disclosed above does not include:

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The outstanding portfolio of receivables derecognized from our consolidated balance sheets was $ 3,700 million and $ 4,637 million as of December 31, 2025 and 2024, respectively.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 116 million, $ 79 million, and $ 256 million, respectively, in selling, general and administrative expenses from the revolving receivables program in the consolidated statements of operations (net of non-designated derivatives in 2024 and 2023).

For the years ended December 31, 2025, 2024 and 2023, the Company recognized $ 145 million, $ 116 million, and $ 79 million, respectively, in selling, general and administrative expenses from the revolving receivables program in the consolidated statements of operations (net of non-designated derivatives).

(See Note 13.)

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Obligations recorded (Level 3) $ 380 $ 361

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a summary of the amounts transferred or pledged (in millions).

The following table presents a summary of the amounts transferred or pledged, which were held at the Company’s bankruptcy-remote consolidated subsidiary (in millions).

December 31, 2025 December 31, 2024

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Accounts Receivable Factoring

Total trade accounts receivable sold under the Company’s factoring arrangement was $ 313 million and $ 383 million for the years ended December 31, 2024 and 2023, respectively.

Total trade accounts receivable sold under the Company’s factoring arrangements was $ 257 million and $ 313 million for the years ended December 31, 2025 and 2024, respectively.

The impact to the consolidated statements of operations was immaterial for the years ended December 31, 2025, 2024 and 2023.

This accounts receivable factoring agreement is separate and distinct from the revolving receivables program.

The accounts receivable factoring agreements is separate and distinct from the revolving receivables program.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENT RIGHTS

For purposes of amortization and impairment, capitalized content costs are grouped based on their predominant monetization strategy:

For purposes of amortization and impairment, capitalized production costs are grouped based on their predominant monetization strategy:

individually or as a group.

Programming rights are presented as two separate captions:

licensed content and advances and live programming and advances.

Live programming includes licensed sports rights and related advances.

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Predominantly Monetized as a Group

Theatrical film production costs:

Released, less amortization $ 1,478 $ — $ 1,478

Completed and not released 480 — 480

In production and other 1,308 — 1,308

Television production costs:

Production costs:

Released, less amortization $ 3,006 $ 5,686 $ 8,692

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In production and other 1,782 2,544 4,326

Total theatrical film and television production costs $ 5,442 $ 8,453 $ 13,895

Licensed content and advances, net 4,369

Live programming and advances, net 1,375

Total production costs $ 5,897 $ 8,751 $ 14,648

Licensed content, live programming, and advances, net 4,478

Game development costs, less amortization 310

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Total noncurrent film and television content rights and games $ 19,114

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

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Predominantly Monetized as a Group

Theatrical film production costs:

Released, less amortization $ 2,823 $ — $ 2,823

Completed and not released 107 — 107

In production and other 1,300 — 1,300

Television production costs:

Production costs:

Released, less amortization $ 2,948 $ 5,678 $ 8,626

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In production and other 1,700 2,008 3,708

Total theatrical film and television production costs $ 6,498 $ 8,547 $ 15,045

Licensed content and advances, net 4,519

Live programming and advances, net 1,943

Total production costs $ 5,442 $ 8,453 $ 13,895

Licensed content, live programming, and advances, net 5,744

Game development costs, less amortization 247

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Content expense includes amortization, impairments, and development expense and is generally a component of costs of revenues on the consolidated statements of operations.

For the year ended December 31, 2024, total content impairments were $ 558 million, of which content impairments and other content development costs and write-offs of $165 million were primarily due to the abandonment of certain titles in connection with the fourth quarter 2024 restructuring initiative associated with the Warner Bros.

Games group and are reflected in restructuring and other charges in the Studios segment.

For the year ended December 31, 2023, total content impairments were $ 326 million, of which content impairments and other content development costs and write-offs of $115 million were primarily due to the abandonment of certain films in connection with the third quarter 2023 strategic realignment plan associated with the Warner Bros.

Pictures Animation group and are reflected in restructuring and other charges in the Studios segment.

For the year ended December 31, 2025, total content impairments were $ 203 million.

Content impairments of $ 2,756 million and content development write-offs of $ 377 million were due to the abandonment of certain content categories in connection with the strategic realignment of content following the Merger and are reflected in restructuring and other charges in the Studios, Networks and DTC segments.

For the year ended December 31, 2024, total content impairments were $ 558 million, of which content impairments and other content development costs and write-offs of $ 165 million were primarily due to the abandonment of certain titles in connection with the fourth quarter 2024 strategic realignment plan associated with the Warner Bros.

Games group, and are reflected in restructuring and other charges in the Studios segment.

(See Note 6.)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2023, total content impairments were $ 326 million, of which content impairments and content development costs and write-offs of $ 115 million were primarily due to the abandonment of certain films in connection with the third quarter 2023 strategic realignment plan associated with the Warner Bros.

Pictures Animation group and are reflected in restructuring and other charges in the Studios segment.

(See Note 6.)

The table below presents the expected future amortization expense of the Company’s film and television content rights, licensed content and advances, live programming rights and advances, and games as of December 31, 2025 (in millions).

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Monetized as a group 2,150 1,225 849

Licensed content and advances 1,394 812 603

Live programming and advances 1,136 33 25

Licensed content, live programming, and advances 1,695 894 624

Completed and not released investment in films and television content:

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(a) Investments without readily determinable fair values included $ 17 million as of December 31, 2025 and December 31, 2024 that were included in prepaid expenses and other current assets.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity Method Investments

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The Company’s maximum estimated exposure excludes the non-contractual future funding of VIEs.

The aggregate carrying values of these VIE investments were $ 550 million and $ 697 million as of December 31, 2024 and 2023, respectively.

The Company recognized its portion of VIE operating results with losses of $ 24 million, $ 75 million, and $ 87 million for the years ended December 31, 2024, 2023 and 2022, respectively, in loss from equity investees, net, on the consolidated statements of operations.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The aggregate carrying values of these VIE investments were $ 481 million and $ 550 million as of December 31, 2025 and December 31, 2024, respectively.

The Company recognized its portion of VIE operating results with income of $ 33 million for the year ended December 31, 2025, and losses of $ 24 million and $ 75 million for the years ended December 31, 2024 and 2023, respectively, in loss from equity investees, net, on the consolidated statements of operations.

During the year ended December 31, 2025, the TNT Sports joint venture had an impairment of $ 79 million, recognized in loss from equity investees, net on the consolidated statements of operations.

Impairments were immaterial for years ended December 31, 2024 and 2023.

Equity Investments Without Readily Determinable Fair Values Assessed Under the Measurement Alternative

The Company recorded impairments and upward adjustments for its other equity investments without readily determinable fair values of $ 17 million and $ 1 million during the year ended December 31, 2025, respectively, as a result of observable price changes in orderly transactions for the identical or similar investment of the same issuer.

The changes in fair value as a result of observable price changes is recorded in other income (expense), net on the consolidated statements of operations.

The changes in fair value as a result of observable price changes are recorded in other income (expense), net on the consolidated statements of operations.

(See Note 18.) As of December 31, 2025, the Company had recorded cumulative impairments of $ 274 million and cumulative upward adjustments of $ 23 million for its equity method investments without readily determinable fair values.

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Interest Rate as of

Floating rate senior notes with maturities of 5 years or less — % $ — $ 40

Bridge loan with maturity of 18 months

7.22 % $ 15,000 $ —

Senior notes with maturities of 5 years or less

3.92 % 6,659 13,744

Senior notes with maturities between 5 and 10 years

4.37 % 3,509 7,853

Senior notes with maturities greater than 10 years

5.17 % 7,677 17,930

Total debt 32,845 39,527

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Noncurrent portion of debt $ 32,428 $ 36,757

During the year ended December 31, 2024, the Company commenced a tender offer to purchase for cash up to $ 2.61 billion in aggregate purchase price (excluding accrued and unpaid interest) of (i) DCL’s outstanding 3.900 % Senior Notes due 2024, 4.000 % Senior Notes due 2055, 4.650 % Senior Notes due 2050, 4.950 % Senior Notes due 2042, 4.875 % Senior Notes due 2043, 5.200 % Senior Notes due 2047, and 5.300 % Senior Notes due 2049;

During the year ended December 31, 2025, the Company repaid $ 2,000 million of aggregate principal amount outstanding of its Bridge Loan Facility, repaid in full at maturity $ 97 million of aggregate principal amount outstanding of its senior notes due July 2025, completed open market repurchases for $ 59 million of aggregate principal amount outstanding of its senior notes, and purchased $ 2 million of aggregate principal amount outstanding of its senior notes to finalize the Tender Offers further described below.

During the year ended December 31, 2025, the Company’s wholly-owned subsidiaries, Discovery Communications, LLC (“DCL”), Discovery Global Holdings, Inc.

(“DGH”) (formerly known as WarnerMedia Holdings, Inc.), Warner Media, LLC (“WML”), and Historic TW Inc.

(“TWI”), commenced cash tender offers to purchase (the “Tender Offers”) up to approximately $ 14,600 million in aggregate purchase price of their outstanding notes and debentures.

In conjunction with the Tender Offers, DCL, DGH and TWI also commenced solicitations of consents (the “Consent Solicitations”) from holders of substantially all of its outstanding notes and debentures to adopt certain proposed amendments to the indentures governing such notes and debentures, to, among other things, remove substantially all of the restrictive covenants and certain events of defaults under such indentures.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

To fund the Tender Offers and Consent Solicitations, as well as repay in full and terminate its $ 1,500 million 364-day senior unsecured term loan facility, the Company and DGH entered into a non-investment grade leveraged bridge loan facility (“Bridge Loan Facility”) with JPMorgan Chase Bank, N.A.

in June 2025, which was amended and extended in February 2026.

(See Note 24.) The obligations under the Bridge Loan Facility are secured by a lien on substantially all of the personal property assets of the Company, DGH, and certain of its wholly owned domestic subsidiaries and are guaranteed by the Company and certain of its wholly-owned domestic subsidiaries.

Borrowings under the Bridge Loan Facility will bear interest at the SOFR rate plus (i) until March 30, 2026, 3.50 % per annum and (ii) from March 31, 2026 until the termination date of the Bridge Loan Facility, 4.00 %.

Borrowings under the Bridge Loan Facility, net of any prepayments, will become payable in full on the earlier of (i) June 30, 2027 and (ii) the date the previously proposed Separation Transaction occurs.

In addition, the Company will pay JPMorgan Chase Bank, N.A.

as the administrative agent a duration fee equal to the applicable percentage of the aggregate principal amount of the loan outstanding on the following dates:

on each of March 31, 2026 and June 30, 2026, a fee rate of 0.50 %;

and on each of September 30, 2026, December 31, 2026 and March 31, 2027, a fee rate of 1.00 %.

On June 30, 2025, 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 its $ 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 is expected to be refinanced prior to its maturity.

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

The Bridge Loan Facility does not contain any financial maintenance covenant.

The Company substantially completed the Tender Offers in June 2025 by purchasing senior notes and debentures in the aggregate principal amount of $ 17,665 million validly tendered and accepted for purchase pursuant to the Tender Offers and recorded a gain on extinguishment of approximately $ 2,959 million.

The Company also paid $ 293 million for the Consent Solicitations.

Additionally, the Company repaid in full at maturity $ 487 million of aggregate principal amount outstanding of its senior notes due June 2025.

During the year ended December 31, 2025, the Company repaid in full at maturity $ 2,165 million of aggregate principal amount outstanding of its senior notes due March 2025, and redeemed in full $ 1,500 million aggregate principal amount outstanding of its senior notes due March 2026.

The redemption was funded with the proceeds of borrowings pursuant to a $ 1,500 million 364 -day senior unsecured term loan credit facility.

During the year ended December 31, 2024, the Company commenced a tender offer to purchase for cash up to $ 2,610 million in aggregate purchase price (excluding accrued and unpaid interest) of (i) DCL’s outstanding 3.900 % Senior Notes due 2024, 4.000 % Senior Notes due 2055, 4.650 % Senior Notes due 2050, 4.950 % Senior Notes due 2042, 4.875 % Senior Notes due 2043, 5.200 % Senior Notes due 2047, and 5.300 % Senior Notes due 2049;

(ii) Scripps Networks Interactive, Inc.’s (“Scripps Networks”) outstanding 3.900 % Senior Notes due 2024;

(iii) the legacy WarnerMedia Business’s outstanding 4.650 % Senior Notes due 2044, 4.850 % Senior Notes due 2045, 4.900 % Senior Notes due 2042, and 5.350 % Senior Notes due 2043;

and (iv) WMH’s outstanding 5.050 % Senior Notes due 2042, which was funded using the aggregate net proceeds from debt financing transactions together with available cash on hand and other available sources of liquidity.

and (iv) DGH’s outstanding 5.050 % Senior Notes due 2042, which was funded using the aggregate net proceeds from debt financing transactions together with available cash on hand and other available sources of liquidity.

The Company completed the tender offer in June 2024 by purchasing senior notes in the aggregate principal amount of $ 3,399 million validly tendered and accepted for purchase pursuant to the offer and recorded a gain on extinguishment of $ 542 million.

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

We are obligated to cause certain of our subsidiaries to conduct one or more offers to exchange (collectively, the “Junior Lien Exchange Offer”) certain of the senior notes issued by DGH and DCL, as applicable, for new junior lien secured notes with the same economic terms (including denominations, interest rate, interest payment dates, maturity date and redemption provisions) to be issued by DGH or DCL, as applicable (the “junior lien notes”).

If the Junior Lien Exchange Offer is not completed by December 30, 2026, WBD will be required to pay to each holder of the applicable senior notes entitled to participate in the Junior Lien Exchange Offer a one-time cash payment in the amount of $100 per $1,000 principal amount or €100 per €1,000 principal amount, as applicable, of the applicable senior notes held by such holder, equal to an aggregate amount of approximately $ 1.5 billion.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2023, the Company’s wholly-owned subsidiaries, Warner Media, LLC (“WML”), Historic TW Inc.

(“TWI”), DCL, and WMH, commenced cash tender offers to purchase for cash any and all of (i) WML’s outstanding 4.050 % Senior Notes due 2023 and 3.550 % Senior Notes due 2024;

(ii) TWI’s outstanding 7.570 % Senior Notes due 2024;

(iii) DCL’s outstanding 3.800 % Senior Notes due 2024;

and (iv) WMH’s outstanding 3.528 % Senior Notes due 2024 and 3.428 % Senior Notes due 2024.

The Company completed the tender offers in August 2023 by purchasing senior notes in the amount of $ 1.9 billion validly tendered and accepted for purchase pursuant to the offers.

During the year ended December 31, 2023, the Company also commenced a tender offer to purchase for cash any and all of its outstanding Floating Rate Notes due in 2024.

The Company completed the tender offer in June 2023 by purchasing Floating Rate Notes in the amount of $ 460 million validly tendered and accepted for purchase pursuant to the offer.

During the year ended December 31, 2023, the Company also repaid $ 4.0 billion of aggregate principal amount outstanding of its term loan prior to the due date of April 2025;

repaid in full at maturity $ 42 million of aggregate principal amount outstanding of its senior notes due December 2023, $ 178 million of aggregate principal amount outstanding of its senior notes due September 2023, and $ 106 million of aggregate principal amount outstanding of its senior notes due February 2023;

and completed open market repurchases for $ 183 million of aggregate principal amount outstanding of its senior notes.

During the year ended December 31, 2023, the Company issued $ 1.5 billion of 6.412 % fixed rate senior notes due March 2026.

After March 2024, the senior notes are redeemable at par plus accrued and unpaid interest.

As of December 31, 2024, all senior notes are fully and unconditionally guaranteed by the Company, Scripps Networks, DCL (to the extent it is not the primary obligor on such senior notes), and WMH (to the extent it is not the primary obligor on such senior notes), except for $ 1,043 million of senior notes of the legacy WarnerMedia Business assumed by the Company in connection with the Merger and $ 11 million of un-exchanged senior notes issued by Scripps Networks.

The PSKY Merger Agreement provides that, prior to October 15, 2026, PSKY may deliver one formal request (a “Specified Request”) in writing to WBD requesting that WBD either, subject to certain exceptions, (i) commence and use reasonable best efforts to effectuate a consent solicitation (on terms mutually determined by PSKY and WBD in good faith) to eliminate the obligation to commence the Junior Lien Exchange Offer or otherwise modify the required terms of the Junior Lien Exchange Offer, (ii) commence and use reasonable best efforts to effectuate the Junior Lien Exchange Offer (on terms mutually determined by PSKY and WBD in good faith, subject to certain conditions) or (iii) make a payment in the amount of $100 per $1,000 principal amount or €100 per €1,000 principal amount of such outstanding senior notes in lieu of effectuating the Junior Lien Exchange Offer (the “Amended Notes Payment Amount”);

provided that, if the Amended Notes Payment Amount becomes due and payable pursuant to the above, PSKY shall timely and fully pay such amount (such amount not to exceed $ 1,528 million in the aggregate).

If PSKY does not make a Specified Request by October 15, 2026, WBD may, after such date, commence one or more consent solicitations with respect to the outstanding senior notes or commence the Junior Lien Exchange Offer, in each case, on terms determined by WBD in its sole discretion, or pay the Amended Notes Payment Amount;

provided that, if the Amended Notes Payment Amount becomes due and payable pursuant to the above, PSKY shall timely and fully pay such amount (subject to the aggregate limit described above).

As of December 31, 2025, all senior notes are fully and unconditionally guaranteed by the Company, Scripps Networks, DCL (to the extent it is not the primary obligor on such senior notes), and DGH (to the extent it is not the primary obligor on such senior notes), except for $ 192 million of senior notes of the legacy WarnerMedia Business.

Revolving Credit Facility and Commercial Paper Programs

In October 2024, DCL and certain subsidiaries of the Company, as borrowers, entered into a multicurrency revolving credit agreement (the “Credit Agreement”), replacing the existing $ 6.0 billion multicurrency revolving credit agreement dated June 9, 2021 (as amended).

The Credit Agreement provides for a senior revolving credit facility (the “Credit Facility”) with aggregate commitments of $ 6.0 billion and includes a $ 150 million sublimit for the issuance of standby letters of credit.

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

The obligations of the borrowers under the Credit Agreement are unsecured and are guaranteed by the Company, Scripps Networks, and WMH.

The Credit Agreement is available on a revolving basis until October 2029, with an option for up to two additional 364 -day renewal periods subject to the lenders’ consent.

DCL and certain subsidiaries of the Company, as borrowers, have a multicurrency revolving credit agreement, which was amended in June 2025 (the “Credit Agreement”).

The Credit Agreement provides for a senior revolving credit facility (the “Credit Facility”) with aggregate commitments of $ 4,000 million and includes a $ 150 million sublimit for the issuance of standby letters of credit.

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

The obligations of the borrowers under the Credit Agreement are secured by the same collateral and have the benefit of the same guarantees as provided in respect of the Bridge Loan Facility, as described above.

The Credit Agreement is available on a revolving basis until October 2029, with an option for up to two additional 364 -day renewal periods subject to the lenders’ consent, and provides for an early termination of the Credit Agreement upon completion of the previously proposed Separation Transaction.

Additionally, the Company’s commercial paper program is supported by the Credit Facility.

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

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

In March 2025, the Company 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.

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

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

The Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants, and also requires maintenance of a minimum consolidated interest coverage ratio of 3.00 to 1.00 and a maximum consolidated leverage ratio of 4.50 to 1.00.

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The impairment charges were recorded in impairment and loss on dispositions in the consolidated statements of operations.

As of December 31, 2024, the Company has additional leases that have not yet commenced with total minimum lease payments of approximately $ 66 million.

Sublease income, primarily related to the Hudson Yards, New York office, was $ 55 million for the year ended December 31, 2025 and was no t material for the years ended December 31, 2024 and 2023.

As of December 31, 2025, the Company’s total minimum lease payments for additional leases that have not yet commenced were not material.

DERIVATIVE FINANCIAL INSTRUMENTS

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Notional Prepaid expenses and other current assets Other non-

current assets Accrued liabilities Other non-

current assets Accounts payable and accrued liabilities Other non-

current liabilities Notional Prepaid expenses and other current assets Other non-

current assets Accrued liabilities Other non-

current assets Accounts payable and accrued liabilities Other non-

current liabilities

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452 7 — — 21 421 6 — — 4

Fair value hedges:

Interest rate swaps — — — — — 1,500 7 — — 5

No hedging designation:

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Total return swaps 501 — — — — 454 — — 16 —

Credit contracts 2,000 8 — — — — — — — —

$ 81 $ 60 $ 50 $ 149 $ 73 $ 21 $ 55 $ 155

(a) Excludes € 1,500 million of euro-denominated notes ($ 1,558 million equivalent at December 31, 2024) and £ 402 million of sterling notes ($ 513 million equivalent at December 31, 2023) designated as net investment hedges.

(a) Excludes € 781 million and € 1,500 million of euro-denominated notes ($ 919 million and $ 1,558 million equivalent at December 31, 2025 and December 31, 2024, respectively ) designated as net investment hedges.

(See Note 11.)

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These cash flow hedges are carried at fair market value on the Company’s consolidated balance sheets.

Hedge effectiveness is assessed using the spot method, with fair market value changes recorded in other comprehensive loss until the hedged item affects earnings.

Hedge effectiveness is assessed using the spot method, with fair market value changes recorded in other comprehensive income (loss) until the hedged item affects earnings.

Excluded components, including forward points, are included in current earnings.

The Company is exposed to foreign currency risk associated with its British Pound Sterling denominated debt and executed a fixed-to-fixed cross-currency swap in 2022 to mitigate this risk.

During the year ended December 31, 2023, the Company unwound the cross-currency swaps related to its Sterling debt and recognized a gain of $ 76 million as an adjustment to other comprehensive income.

The Company is exposed to interest rate risk associated with future issuances of debt and unwound the forward starting swap derivatives designated as hedging instruments to mitigate this risk in 2022.

Realized gains from these derivatives will remain in other comprehensive loss until the debt is issued during the hedging window or the hedging window expires, which extends through 2025, and interest payments are made.

An immaterial portion of the realized gain was released in 2024 since no debt was issued during this period of the hedging window.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the pre-tax impact of derivatives designated as cash flow hedges on income and other comprehensive loss (in millions).

The following table presents the pre-tax impact of derivatives designated as cash flow hedges on income and other comprehensive income (loss) (in millions).

Year Ended December 31,

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Interest rate - interest expense, net ( 3 ) ( 5 ) ( 1 )

Interest rate - gain (loss) on extinguishment of debt ( 4 ) 1 —

Interest rate - gain on extinguishment of debt ( 1 ) ( 4 ) 1

Interest rate - other income (expense), net

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If current fair values of designated cash flow hedges as of December 31, 2025 remained static over the next twelve months, the amount the Company would reclassify from accumulated other comprehensive loss into income in the next twelve months would not be material for the current fiscal year.

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During the year ended December 31, 2024, the Company de-designated £ 255 million of the Sterling debt, repaid the Sterling debt in full at maturity, and settled the remaining £ 145 million designated as a net investment hedge.

The Company is also exposed to foreign currency risk stemming from foreign denominated debt.

During the year ended December 31, 2023, the Company settled its Euro denominated debt that was acquired in connection with the Merger and was designated as the hedging instrument in a net investment hedge.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the pre-tax impact of derivatives designated as net investment hedges on other comprehensive loss (in millions).

The following table presents the pre-tax impact of derivatives and other instruments designated as net investment hedges on other comprehensive income (loss) (in millions).

Other than amounts excluded from effectiveness testing, there were no other material gains (losses) reclassified from accumulated other comprehensive loss to income during the years ended December 31, 2025, 2024 and 2023.

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Total $ ( 228 ) $ 143 $ 35 $ 11 $ 4 $ 24

Fair Value Hedges

During the year ended December 31, 2023, the Company issued $ 1.5 billion of 6.412 % fixed rate senior notes due March 2026.

Simultaneously, the Company entered into a fixed-to-floating interest rate swap designated as a fair value hedge to allow the Company to mitigate the variability in the fair value of its senior notes due to fluctuations in the benchmark interest rate.

Changes in the fair value of the senior note and the interest rate swap were recorded in interest expense, net.

The fair value hedge was settled during the year ended December 31, 2024.

Derivatives Not Designated for Hedge Accounting

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The gains and losses associated with these swaps are recorded to selling, general and administrative expenses, offsetting the deferred compensation investment gains and losses.

The Company is exposed to risk of secured overnight financing rate changes in connection with securitization interest paid on the receivables securitization program.

To mitigate this risk, the Company entered into and unwound and settled $ 3.0 billion notional of non-designated interest rate swaps for an immaterial realized gain during the year ended December 31, 2024.

The Company entered into and unwound and settled $ 6.0 billion notional of non-designated interest rate swaps for a total realized gain of $ 63 million during the year ended December 31, 2023.

The gains and losses on these derivatives are recorded to selling, general and administrative expenses, offsetting securitization interest expense.

The Company is exposed to risk of secured overnight financing rate changes in connection with securitization fees on the receivables securitization program.

To mitigate this risk, the Company entered into and unwound and settled $ 2.5 billion notional of non-designated interest rate swaps for an immaterial gain during the year ended December 31, 2025.

The Company entered into and unwound and settled $ 3.0 billion notional of non-designated interest rate swaps for an immaterial gain during the year ended December 31, 2024.

The gains and losses on these derivatives are recorded to selling, general and administrative expenses, offsetting securitization fees.

In June 2025, the Company unwound foreign exchange forward contracts with a notional value of € 450 million associated with the Company’s euro-denominated debt that was partially repaid in association with the Tender Offers.

The Company also entered into and subsequently unwound and settled foreign exchange forward contracts with a notional value of € 450 million to hedge the tender payment for the Company’s euro-denominated debt and recorded a gain of $ 9 million to other income (expense), net.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2025, the Company entered $ 2 billion notional amount of credit contract swaptions to mitigate the interest rate risk related to future issuances of debt related to the previously proposed Separation Transaction.

(See Note 1.)

The following table presents the pre-tax gains (losses) on derivatives not designated as hedges and recognized in selling, general and administrative expense and other income (expense), net in the consolidated statements of operations (in millions).

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Foreign exchange derivatives 32 ( 27 ) 7

Credit contracts ( 17 ) — —

Total in other income (expense), net

( 29 ) 28 475

Total $ 57 $ 21 $ 137

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Level 1 - Quoted prices for identical instruments in active markets.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Level 2 - Quoted prices for similar instruments in active markets;

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Total $ 748 $ — $ — $ 748

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

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Company-owned life insurance contracts are recorded at their cash surrender value, which approximates fair value (Level 2).

In addition to the financial instruments listed in the tables above, the Company holds other financial instruments, including cash deposits, accounts receivable, accounts payable, and senior notes.

In addition to the financial instruments listed in the tables above, the Company holds other financial instruments, including cash deposits, accounts receivable, accounts payable, senior notes, and a bridge loan.

The carrying values for such financial instruments, other than the senior notes, each approximated their fair values as of December 31, 2025 and 2024.

The estimated fair value of the Company’s outstanding senior notes, including accrued interest, using quoted prices from over-the-counter markets, considered Level 2 inputs, was $ 34.9 billion and $ 40.5 billion as of December 31, 2024 and 2023, respectively.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair value of the Company’s outstanding senior notes, including accrued interest, using quoted prices from over-the-counter markets, considered Level 2 inputs, was $ 15,205 million and $ 34,876 million as of December 31, 2025 and 2024, respectively.

The Company’s derivative financial instruments are discussed in Note 13, its investments with readily determinable fair value are discussed in Note 10, and the obligation for its revolving receivable program is discussed in Note 8.

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The current portion of the liability for cash-settled and other liability-classified awards was $ 108 million and $ 27 million as of December 31, 2025 and 2024, respectively.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Award Activity

The table below presents PRSU activity (in millions, except years and weighted-average grant price).

The table below presents PRSU activity (in millions, except years and weighted-average grant date fair value).

PRSUs Weighted-

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Converted ( 4.3 ) $ 9.57 $ 48

Forfeited ( 0.1 ) $ 10.06

Outstanding as of December 31, 2025 12.8 $ 11.87 1.0 $ 370

2 unchanged sentences

As of December 31, 2025, there was $ 73 million of unrecognized compensation cost related to PRSUs.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below presents RSU activity (in millions, except years and weighted-average grant price).

The table below presents RSU activity (in millions, except years and weighted-average grant date fair value).

RSUs Weighted-

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Stock settled RSUs are expected to be recognized over a weighted-average period of 1.2 years, and cash settled RSUs are expected to be recognized over a weighted-average period of 1.0 years.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

5 unchanged sentences

Granted 25.1 $ 10.31

Exercised ( 2.1 ) $ 13.96 $ 12

Forfeited ( 12.9 ) $ 30.02

4 unchanged sentences

As of December 31, 2025, there was $ 139 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 2.4 years.

The fair value of stock options is estimated using the Black-Scholes option-pricing model.

The fair value of stock options is estimated using the Black-Scholes option-pricing model or a Monte Carlo Simulation.

The weighted-average assumptions used to determine the fair value of stock options as of the date of grant during 2025, 2024 and 2023 were as follows.

1 unchanged sentence

2025 2024 2023

Black-Scholes option-pricing model

Risk-free interest rate 3.97 % 4.19 % 4.35 %

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Expected volatility 54.49 % 54.37 % 54.80 %

Monte Carlo simulation

Risk-free interest rate 4.11 % N/A N/A

Expected term (years) (1)

Expected volatility 55.34 % N/A N/A

(1) The expected term represents the period from the grant date through the performance period.

The weighted-average grant date fair value of options granted during 2025, 2024 and 2023 was $ 5.29 , $ 4.30 and $ 7.43 , respectively, per option.

The total intrinsic value of options exercised during 2024, 2023 and 2022 was $ 0 million.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The domestic and foreign components of loss before income taxes were as follows (in millions).

The total intrinsic value of options exercised during 2025, 2024 and 2023 was $ 12 million, $ 0 million, and $ 0 million, respectively.

The domestic and foreign components of income (loss) before income taxes were as follows (in millions).

Year Ended December 31,

2 unchanged sentences

Foreign 895 455 839

Loss before income taxes $ ( 11,388 ) $ ( 3,863 ) $ ( 8,960 )

Income (loss) before income taxes $ 1,639 $ ( 11,388 ) $ ( 3,863 )

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of the provision for income taxes were as follows (in millions).

10 unchanged sentences

Income tax expense (benefit) $ 890 $ 94 $ ( 784 )

The following table reconciles the Company’s effective income tax rates to the U.S.

federal statutory income tax rates.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We adopted ASU 2023-09 on a prospective basis beginning with the year ended December 31, 2025.

A reconciliation of the Company’s effective income tax rate to the 21% U.S.

federal statutory income tax rate for the year ended December 31, 2025, reflecting the adoption of ASU 2023-09, is presented below (in millions):

Year Ended December 31, 2025

federal statutory tax rate $ 344 21 %

State and local income taxes, net of federal income tax effects (1)

( 14 ) ( 1 ) %

Foreign tax effects:

Statutory tax rate differential 25 1 %

Tax incentives ( 102 ) ( 6 ) %

Canada withholding taxes 61 4 %

Withholding taxes from other foreign jurisdictions (2)

Other foreign jurisdictions 75 5 %

Effect of cross-border tax laws:

Foreign branch income 62 4 %

Other ( 19 ) ( 1 ) %

Foreign tax credits ( 270 ) ( 16 ) %

Research and development credit ( 46 ) ( 3 ) %

Changes in valuation allowances 242 15 %

Nontaxable or nondeductible items:

Compensation 89 5 %

Indemnification costs 47 3 %

Transaction costs 42 2 %

Change in unrecognized tax benefits 84 5 %

Other adjustments ( 18 ) ( 1 ) %

Income tax expense $ 890 54 %

(1) State taxes in California contributed to the majority (greater than 50%) of the tax effect in this category.

(2) The majority of tax effect in this category is from Brazil ( 2 %), China ( 2 %), Mexico ( 2 %), Spain (- 1 %), Italy ( 1 %), Chile ( 1 %), Australia ( 1 %) and Argentina ( 1 %).

A reconciliation of the Company’s effective income tax rate to the 21% U.S.

federal statutory income tax rate for the years prior to the adoption of ASU 2023-09, is presented below:

Year Ended December 31,

Pre-tax income at U.S.

3 unchanged sentences

Effect of foreign operations 331 ( 3 ) % 342 ( 9 ) %

Preferred stock conversion premium charge — — % — — % 166 ( 2 ) %

Change in unrecognized tax benefits 153 ( 1 ) % 33 ( 1 ) %

1 unchanged sentence

Income tax expense (benefit) $ 94 ( 1 ) % $ ( 784 ) 20 %

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 (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.

In 2024, the Company recorded a non-cash goodwill impairment charge of $ 9,147 million, the majority of which was not deductible for tax purposes.

(See Note 5.) 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.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax benefit was $( 784 ) million and $( 1,663 ) million, and the Company’s effective tax rate was 20 % and 19 % for 2023 and 2022, respectively.

The decrease in tax benefit for the year ended December 31, 2023 was primarily attributable to a decrease in pre-tax book loss and the effect of foreign operations, including taxation and allocation of income and losses across various foreign jurisdictions.

These decreases were partially offset by an unrecognized state tax benefit remeasurement following a multi-year tax settlement and a favorable state deferred tax adjustment recorded in the year ended December 31, 2023.

The decrease for the year ended December 31, 2023 was further offset by a one-time expense incurred in 2022 related to a preferred stock conversion transaction expense that was not deductible for tax purposes.

(See Note 3.)

Components of deferred income tax assets and liabilities were as follows (in millions).

Deferred income tax assets:

Accounts receivable $ — $ ( 86 )

Tax attribute carry-forward $ 2,894 $ 2,661

8 unchanged sentences

Right-of-use assets ( 756 ) ( 636 )

Property and equipment ( 567 ) ( 273 )

Content rights ( 272 ) ( 342 )

9 unchanged sentences

Net deferred income tax liabilities $ ( 5,761 ) $ ( 6,372 )

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s loss carry-forwards were reported on the consolidated balance sheets as follows (in millions).

4 unchanged sentences

Earliest expiration date of loss carry-forwards 2028 2026 2026

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amounts of unrecognized tax benefits (without related interest and penalty amounts) is as follows (in millions).

13 unchanged sentences

and various state and foreign jurisdictions.

The Company is currently under audit by the Internal Revenue Service for its 2012 to 2019 consolidated federal income tax returns.

The Company is currently under audit by the Internal Revenue Service for its 2015 to 2017 and 2023 consolidated federal income tax returns.

It is difficult to predict the final outcome or timing of resolution of any particular tax matter.

1 unchanged sentence

Adjustments that arose from the completion of audits for certain tax years have been included in the change in unrecognized tax benefits in the table above.

It is reasonably possible that the total amount of unrecognized tax benefits related to certain of the Company’s unrecognized tax benefits could decrease by as much as $ 67 million within the next twelve months as a result of ongoing audits, foreign judicial proceedings, lapses of statutes of limitations, or regulatory developments.

As of December 31, 2025, 2024, and 2023, the Company had accrued approximately $ 856 million, $ 732 million, and $ 571 million, respectively, of total interest and penalties payable related to unrecognized tax benefits.

1 unchanged sentence

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.

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.

RETIREMENT SAVINGS PLANS

The Company has defined contribution, defined benefit, and other savings plans for the benefit of its employees that meet eligibility requirements.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States, introducing a broad range of tax reform provisions.

The impact of the OBBBA primarily affected the Company’s deferred tax liabilities and has been reflected in the Company’s financial statements for the period ended December 31, 2025.

The Company continues to monitor regulatory guidance related to the implementation of the OBBBA and will update its tax positions as necessary in future periods.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RETIREMENT SAVINGS PLANS

The Company has defined contribution, defined benefit, and other savings plans for the benefit of its employees that meet eligibility requirements.

Defined Contribution Plans

30 unchanged sentences

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.

based employees and several non-U.S.

defined benefit pension plans.

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

The Company also holds net assets and net liabilities on behalf of other U.S.

pension plans.

The plan provisions vary by plan and by country.

Some of these plans are unfunded and all are noncontributory.

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

At a plan level, net asset positions are recorded in other noncurrent assets, and net liability positions are recorded in accrued liabilities and/or other noncurrent liabilities on the consolidated balance sheets.

24 unchanged sentences

Benefits paid ( 40 ) ( 45 )

Actuarial gains ( 48 ) —

Actuarial losses (gains) 18 ( 48 )

Curtailments ( 1 ) —

Settlement charges ( 14 ) ( 2 )

15 unchanged sentences

Amounts recognized in accumulated other comprehensive loss consist of:

Prior service cost $ 3 $ —

Net loss 149 104

Total $ 152 $ 104

The weighted average assumptions used to determine benefit obligations of the pension plans were as follows.

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Real assets 13

Hedge funds 44

Total assets held at net asset value practical expedient $ 60

Derivatives ( 190 )

Total plan assets $ 493

2 unchanged sentences

Fair value at beginning of year $ 66

Unrealized losses ( 5 )

Unrealized gains 8

Purchases, issuances, sales and settlements, net 315

Effects of foreign currency exchange rate changes and other 5

Balance at end of year $ 394

3 unchanged sentences

Total Level 1 Level 2 Level 3

Debt securities $ 19 $ 19 $ — $ —

Equity securities 55 25 30 —

11 unchanged sentences

Fair value at beginning of year $ 76

Unrealized gains 9

Transfers out ( 5 )

Unrealized losses ( 5 )

Purchases, issuances, sales and settlements, net ( 5 )

Balance at end of year $ 66

37 unchanged sentences

Accrued payroll and related benefits 1,588 1,495

Accrued withholding taxes 668 644

Other accrued liabilities 2,899 3,588

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other noncurrent liabilities

Other noncurrent liabilities consisted of the following (in millions).

Operating lease liabilities $ 3,226 $ 2,731

Other noncurrent liabilities 8,382 7,339

Total other noncurrent liabilities $ 11,608 $ 10,070

Other Income (Expense), net

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Supplemental Cash Flow Information

We adopted ASU 2023-09 on a prospective basis beginning with the year ended December 31, 2025.

Cash paid for taxes, reflecting the adoption of ASU 2023-09 for the year ended December 31, 2025, cash paid for taxes for the years ended December 31, 2024 and 2023, and other supplemental cash flow information is presented below (in millions):

Year Ended December 31,

1 unchanged sentence

Cash paid for taxes, net

Federal taxes $ 1,287

State taxes 76

Foreign taxes 563

Total $ 1,926 $ 1,113 $ 1,440

Cash paid for interest $ 2,295 $ 1,996 $ 2,237

3 unchanged sentences

Non-cash settlement of PRSU awards 115 59 35

Accrued advances for Venu Sports 11 — —

Non-cash consideration related to the sale and purchase of the Ranch and Burbank Studios Lots — — 350

Non-cash consideration related to the transaction agreements with JCOM — — 70

Non-cash consideration related to MegaMedia put exercise — 36 —

Equity issued for the acquisition of WarnerMedia — — 42,309

Non-cash consideration related to the sale of The CW Network — — 126

Accrued consideration for the joint venture with BT — — 90

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents, and Restricted Cash

4 unchanged sentences

(a) Restricted cash at December 31, 2024 primarily included cash posted as collateral related to the Company’s revolving receivables program.

Restricted cash at December 31, 2023 primarily included cash posted as collateral related to the Company’s revolving receivables and hedging programs.

(See Note 8 and Note 13.)

Assets Held for Sale

In 2022, the Company classified its Ranch Lot and Knoxville office building and land as assets held for sale.

The Company reclassified $ 209 million to prepaid expenses and other current assets on the consolidated balance sheet during 2022 and stopped recording depreciation on the assets.

The Knoxville office building and land and the Ranch Lot were sold during 2023.

The Burbank Studios Lot was purchased during 2023 in exchange for the Ranch Lot and cash.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(See Note 8.)

Supplier Finance Programs

16 unchanged sentences

Obligations outstanding at the end of the year $ 260 $ 307

On February 6, 2024, the Company announced that it would enter into a joint venture with ESPN, a subsidiary of The Walt Disney Company (“Disney”), and Fox Corporation (“Fox”) to form Venu Sports, a sports-centric streaming service in the United States.

On February 20, 2024, FuboTV Inc.

and FuboTV Media Inc.

(collectively, “Fubo”) filed a lawsuit against Disney, including certain affiliates, Fox, and WBD (collectively, the “Defendants”) in the U.S.

District Court for the Southern District of New York alleging claims under federal and New York antitrust laws.

The Defendants reached a settlement with Fubo related to Fubo’s antitrust claims and collectively paid $ 220 million to Fubo in January 2025, of which the Company’s share was $ 55 million.

On January 10, 2025, the Defendants announced their decision to discontinue the Venu Sports joint venture and not launch its streaming service effective immediately.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Loss

16 unchanged sentences

Reclassifications from accumulated other comprehensive loss to net income

49 ( 35 ) — 14

Other comprehensive income (loss) 666 24 ( 30 ) 660

December 31, 2025 $ ( 342 ) $ 39 $ ( 104 ) $ ( 407 )

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REDEEMABLE NONCONTROLLING INTERESTS

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Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption values remeasured at the period end foreign exchange rates.

Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value as a result of changes in exchange rates are reflected in currency translation adjustments, a component of other comprehensive loss.

Such currency translation adjustments to redemption value are allocated to the Company’s stockholders only.

4 unchanged sentences

Total $ 19 $ 109

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below presents the reconciliation of changes in redeemable noncontrolling interests (in millions).

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Comprehensive income adjustments:

Net income attributable to redeemable noncontrolling interests

Net (loss) income attributable to redeemable noncontrolling interests ( 2 ) ( 42 ) 9

Currency translation on redemption values — — ( 3 )

9 unchanged sentences

In December 2022, Hasbro and WBD signed an amendment to the previous agreement extending the put-call election to the period January 31, 2025 to March 31, 2025.

Upon the exercise of the put or call options, the price to be paid for the redeemable noncontrolling interest is a function of the then-current fair market value of the redeemable noncontrolling interest, to which certain discounts and redemption floor values may apply in specified situations depending upon the party exercising the put or call and the basis for the exercise of the put or call.

Hasbro did not exercise its right by the election period expiration date of March 31, 2025 and Hasbro’s noncontrolling interest was reclassified from redeemable noncontrolling interest to noncontrolling interest outside of stockholders’ equity on the Company’s consolidated balance sheets.

GoldenTree acquired a put right that required the Company to either purchase all of GoldenTree’s noncontrolling 32.5 % interest in the joint venture at fair value or participate in an initial public offering for the joint venture.

In 2022, GoldenTree exercised its put right and in 2023, the Company finalized its purchase of GoldenTree’s 32.5 % noncontrolling interest for $ 49 million.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In August 2023, the Company and JCOM Co., Ltd.

3 unchanged sentences

As the terms of the agreement no longer incorporate JCOM’s option to put its noncontrolling interest to the Company, JCOM’s noncontrolling interest was reclassified from redeemable noncontrolling interest to noncontrolling interest outside of stockholders’ equity on the Company’s consolidated balance sheet.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NONCONTROLLING INTEREST

In 2025, the Company contributed a 70 % interest in its music catalog to a joint venture (the “Joint Venture”) with Cutting Edge Group in exchange for net proceeds of $ 601 million.

The Company retained a controlling financial interest and consolidated the Joint Venture as a VIE.

The Company has determined that it is the primary beneficiary of the Joint Venture as the Company has certain operational rights that significantly impact the economic performance of the business including exploitation of the catalog works and selection of the administrator.

As the primary beneficiary, the Company includes the Joint Venture’s assets, liabilities and results of operations in the Company’s consolidated financial statements.

As of December 31, 2025, the carrying amounts of assets and liabilities of the consolidated VIE were not material.

In addition to the initial equity ownership, Cutting Edge Group may receive up to an additional 10 % economic interest in the venture based on the results of certain operational metrics.

Ownership interests attributable to the noncontrolling owner are presented as noncontrolling interests on the Company’s consolidated financial statements.

Under the terms of the agreement, the noncontrolling owner cannot force a redemption outside of the Company’s control.

As such, the noncontrolling interests in the Joint Venture are reflected as a component of permanent equity in the Company’s consolidated financial statements.

The Company has a controlling interest in the TV Food Network Partnership (the “Partnership”), which includes the Food Network and Cooking Channel.

9 unchanged sentences

In the normal course of business, the Company enters into transactions with related parties.

Related parties include entities that share common directorship, such as Liberty Global plc (“Liberty Global”), Liberty Broadband Corporation (“Liberty Broadband”) and their subsidiaries and affiliates (collectively the “Liberty Group”).

The Company’s board of directors includes Dr.

John Malone, who is Chairman of the Board of Liberty Global and Liberty Broadband and beneficially owns approximately 30 % and 48 % of the aggregate voting power with respect to the election of directors of Liberty Global and Liberty Broadband, respectively.

The majority of the revenue earned from the Liberty Group relates to multi-year network distribution arrangements.

Related party transactions also include revenues and expenses for content and services provided to or acquired from equity method investees, or minority partners of consolidated subsidiaries.

Related party transactions include revenues and expenses for content and services provided to or acquired from equity method investees, entities that share common directorship, or minority partners of consolidated subsidiaries.

The table below presents a summary of the transactions with related parties (in millions).

5 unchanged sentences

Distributions to noncontrolling interests and redeemable noncontrolling interests $ 198 $ 193 $ 301

(a) The decrease in revenue and service charges in 2024 is primarily attributable to transactions with certain entities that are no longer considered related parties, as such entities and the Company ceased to share common directorship in 2024.

(a) The decrease in revenue and service charges in 2025 and 2024 is primarily attributable to transactions with certain entities that are no longer considered related parties, as such entities and the Company ceased to share common directorship in 2025 and 2024 .

The table below presents receivables due from and payables due to related parties (in millions).

1 unchanged sentence

Payables $ 17 $ 13

In October 2024, the Company sold its minority interests in Formula E to Liberty Global and recorded a $ 61 million gain not included in the table above.

(See Note 4.)

In September 2022, the Company sold 75 % of its interest in The CW Network to Nexstar, a related party, and recorded an immaterial gain not included in the table above.

In October 2024, the Company sold its minority interests in Formula E to Liberty Global, a related party, and recorded a $ 61 million gain not included in the table above.

(See Note 4.)

12 unchanged sentences

The commitments disclosed above exclude liabilities recognized on the consolidated balance sheets.

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.

15 unchanged sentences

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.

DISCOVERY, INC.

7 unchanged sentences

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.

The Company’s other contingent commitments at December 31, 2024 were immaterial.

The Company’s other contingent commitments at December 31, 2025 were $ 85 million.

The Company has granted put rights to non-controlling interest holders in certain consolidated subsidiaries, but the Company is unable to reasonably predict the ultimate amount or timing of any payment.

1 unchanged sentence

Legal Matters

From time to time, in the normal course of its operations, the Company is subject to various litigation matters and claims, including claims related to employees, stockholders, vendors, other business partners, government regulations, or intellectual property, as well as disputes and matters involving counterparties to contractual agreements, such as disputes arising out of definitive agreements entered into in connection with the Merger.

A determination as to the amount of the accrual required for such contingencies is highly subjective and requires judgment about future events.

In connection with a contract dispute arising out of definitive agreements entered into in connection with the Merger, the Company established an immaterial accrual in the first quarter of 2024.

At this time, the Company is not able to estimate the reasonably possible range of loss or any loss in excess of the accrual associated with such matter.

There can be no assurance that any settlement of such dispute will be reached and, if a settlement is reached, what the total dollar amount will be of any such settlement.

The Company may not currently be able to estimate the reasonably possible loss or range of loss for certain matters until developments in such matters have provided sufficient information to support an assessment of such loss.

In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual for such contingencies is made and no loss or range of loss is disclosed.

Although the outcome of these matters cannot be predicted with certainty and the impact of the final resolution of these matters on the Company’s results of operations in a particular subsequent reporting period is not known, management does not currently believe that the resolution of these matters will have a material adverse effect on the Company’s future consolidated financial position, future results of operations, or cash flows.

PSKY Complaint.

On January 12, 2026, PSKY filed a complaint in the Delaware Court of Chancery against our board of directors (and our Chair Emeritus, Dr.

Malone) and the Company.

The suit asserts a claim for breach of fiduciary duty against the directors, alleging that our board of directors failed to disclose material information in both the Solicitation/Recommendation Statement on Schedule 14D-9, filed on December 17, 2025, and the amendment to that Schedule 14D-9, filed on January 7, 2026.

PSKY also requested that the court expedite the case in light of the then-current expiration date of PSKY’s tender offer on January 21, 2026.

On January 15, 2026, the Delaware Court of Chancery denied PSKY’s request for expedition, stating that PSKY failed to demonstrate that it would suffer any irreparable harm in its capacity as a stockholder of the Company if the litigation was not expedited, among other reasons.

On February 2, 2026, the Company moved to dismiss the complaint.

Pursuant to the PSKY Merger Agreement, PSKY will file a voluntary notice of dismissal with prejudice with respect to the complaint, within one business day of the execution of the PSKY Merger Agreement, and promptly take any further actions required to dismiss with prejudice the complaint.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Securities Class Action.

On November 25, 2024, a securities class action complaint was filed in the United States District Court for the Southern District of New York ( Collura v.

Discovery, Inc.

1:24-cv-09027-KPF).

The complaint named WBD, Gunnar Wiedenfels, and David M.

Zaslav as defendants and asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder.

On February 21, 2025, the court appointed co-lead plaintiffs (Anthony Yuson and Michael Steinberg) and co-lead counsel (Pomerantz LLP and The Rosen Law Firm, P.A.) to represent the putative class.

On May 7, 2025, the lead plaintiffs filed a First Amended Complaint against WBD, Gunnar Wiedenfels, and David M.

The First Amended Complaint generally alleges that, between February 23, 2024 and August 7, 2024, defendants made false and misleading statements in SEC filings and other public disclosures relating to WBD’s negotiations with the National Basketball Association (“NBA”) concerning its contractual rights to broadcast the NBA’s content and the potential impact of a failure to renew the contract on its business, in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5, and seeks damages and other relief.

The defendants moved to dismiss on July 11, 2025.

As of September 24, 2025, the motion has been fully briefed and is pending before the court.

Consolidated Derivative Action.

Between December 20, 2024 and January 14, 2025, four shareholder derivative complaints were filed in the United States District Court for the Southern District of New York ( Roy v.

Zaslav et al., No.

1:24-cv-09856-AT, Hollin v.

Zaslav et al., No.

1:24-cv-09885-AT, KO v.

Zaslav et al., No.

1:25-cv-00114-AT, and Herman, III v.

Chen et al., No.

1:25-cv-00352-AT).

Each complaint names certain current and former directors and officers of WBD as defendants and WBD as nominal defendant, and each complaint seeks damages and other relief.

The complaints generally assert claims against the defendants, derivatively on behalf of WBD, for alleged breaches of fiduciary duty based on the same facts alleged in the Collura securities case described above.

The complaints assert various common law causes of action, including breach of fiduciary duties, aiding and abetting breach of fiduciary duties, abuse of control, unjust enrichment, gross mismanagement, and waste of corporate assets, as well claims for violations of Sections 14(a), 10(b), and 21D of the Exchange Act.

On January 21, 2025, the court consolidated the four actions for all purposes under Case No.

1:24-cv-09856-AT, captioned as In re Warner Bros.

Discovery, Inc.

Derivative Litigation (the “Consolidated Derivative Action”).

On February 19, 2025, the Court stayed the Consolidated Derivative Action pending resolution of a final decision on all motions to dismiss the operative complaint in the Collura securities action.

There were no guarantees recorded under ASC 460 as of December 31, 2025 and 2024.

5 unchanged sentences

The Company’s operating segments are determined based on:

(i) financial information reviewed by its chief operating decision maker (“CODM”), the Chief Executive Officer (“CEO”), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(i) financial information reviewed by its CODM, the CEO, (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions.

The accounting policies of the reportable segments are the same as the Company’s, except that certain inter-segment transactions that are eliminated for consolidation are not eliminated at the segment level.

1 unchanged sentence

The Company generally records inter-segment transactions of content licenses at market value.

The Company does not report assets by segment because it is not used to allocate resources or evaluate segment performance.

The Company evaluates the operating performance of its operating segments based on financial measures such as revenues and Adjusted EBITDA.

The Company does not report assets by segment because it is not used by the CODM to allocate resources or evaluate segment performance.

The Company evaluates the operating performance of its segments based on financial measures such as revenues and Adjusted EBITDA.

Adjusted EBITDA is defined as operating income excluding:

6 unchanged sentences

• amortization of purchase accounting fair value step-up for content;

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• amortization of capitalized interest for content;

7 unchanged sentences

The impact to prior periods was immaterial.

The tables below present summarized financial information for each of the Company’s reportable segments, corporate, and inter-segment eliminations, and other (in millions).

The tables below present summarized financial information for each of the Company’s reportable segments, corporate, and inter-segment eliminations (in millions).

Year Ended December 31,

2025 2024 2023

Streaming $ 10,876 $ 10,313 $ 10,154

Studios 12,619 11,607 12,192

Networks 20,175 21,244 19,348

DTC 10,313 10,154 7,274

Global Linear Networks 17,656 20,175 21,244

Corporate 2 8 —

1 unchanged sentence

Total revenues $ 37,296 $ 39,321 $ 41,321

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of Revenues to Segment Adjusted EBITDA

Year Ended December 31, 2025

Studios Networks DTC

Streaming Studios Global Linear Networks

Revenues $ 10,876 $ 12,619 $ 17,656

7 unchanged sentences

Segment Adjusted EBITDA $ 1,370 $ 2,545 $ 6,412

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2024

Studios Networks DTC

Streaming Studios Global Linear Networks

Revenues $ 10,313 $ 11,607 $ 20,175

8 unchanged sentences

Year Ended December 31, 2023

Studios Networks DTC

Streaming Studios Global Linear Networks

Revenues $ 10,154 $ 12,192 $ 21,244

12 unchanged sentences

(c) Other segment expenses include distribution costs, other direct costs, software and hardware costs, IT services, professional and consulting fees, commissions, and certain other overhead costs.

Other segment items exclude depreciation and amortization, amortization of purchase accounting fair value step-up for content, amortization of capitalized interest for content, employee share-based compensation, third-party transaction and integration costs, and other items impacting comparability as these items are excluded from the calculation of Adjusted EBITDA.

Other segment expenses exclude depreciation and amortization, amortization of purchase accounting fair value step-up for content, amortization of capitalized interest for content, employee share-based compensation, third-party transaction and integration costs, and other items impacting comparability as these items are excluded from the calculation of Adjusted EBITDA.

DISCOVERY, INC.

3 unchanged sentences

2025 2024 2023

Streaming $ 1,370 $ 677 $ 103

Studios 2,545 1,652 2,183

Networks 8,149 9,063 8,725

DTC 677 103 ( 1,596 )

Global Linear Networks 6,412 8,149 9,063

Segment Adjusted EBITDA $ 10,327 $ 10,478 $ 11,349

9 unchanged sentences

Inter-segment eliminations 487 186 ( 93 )

Operating loss ( 10,032 ) ( 1,548 ) ( 7,370 )

Other (income) expense, net ( 65 ) ( 150 ) 29

2 unchanged sentences

Interest expense, net 2,085 2,017 2,221

Loss before income taxes $ ( 11,388 ) $ ( 3,863 ) $ ( 8,960 )

Income (loss) before income taxes $ 1,639 $ ( 11,388 ) $ ( 3,863 )

Content Amortization and Impairment Expense

1 unchanged sentence

2025 2024 2023

Streaming $ 5,464 $ 6,416 $ 6,138

Studios 3,106 5,692 5,074

Networks 4,250 6,630 6,171

DTC 6,416 6,138 6,800

Global Linear Networks 6,093 4,250 6,630

Corporate 1 3 ( 6 )

17 unchanged sentences

SUBSEQUENT EVENTS

On February 20, 2024, FuboTV Inc.

and FuboTV Media Inc.

(collectively, “Fubo”) filed a lawsuit against Disney, including certain affiliates, Fox, and WBD (collectively, the “Defendants”) in the U.S.

District Court for the Southern District of New York alleging claims under federal and New York antitrust laws.

On January 6, 2025, Disney announced that it had entered into a definitive agreement to combine certain of Hulu Live TV’s assets with Fubo (the “Fubo Transaction”) and provide Fubo a senior unsecured term loan of up to $ 145 million in January 2026 (the “Fubo Loan”).

If Disney funds the Fubo Loan prior to the consummation of the Fubo Transaction, the Company and Fox will participate in a portion of the Fubo Loan by providing loans to Disney with substantially the same economic terms as the Fubo Loan.

A $ 130 million termination fee will be payable by Disney to Fubo if the transaction is terminated under certain circumstances.

The Company and Fox have agreed to reimburse a portion of the termination fee to Disney if it becomes payable.

In addition, the Defendants reached a settlement with Fubo related to Fubo’s antitrust claims and collectively paid $ 220 million to Fubo in January 2025, of which the Company’s share was $ 55 million.

On January 10, 2025, the Defendants announced their decision to discontinue the Venu Sports joint venture and not launch its streaming service effective immediately.

On January 28, 2025, WMH issued a conditional notice for the redemption in full of all $ 1,500 million aggregate principal amount of its outstanding 6.412 % Senior Notes due 2026 (the “Notes”), in accordance with the terms of the indenture governing the Notes.

Such redemption was funded with the proceeds of borrowings pursuant to a new $ 1,500 million 364 -day senior unsecured term loan credit facility entered into on January 28, 2025 by DCL, WBD, certain wholly-owned subsidiaries of WBD party thereto, the lenders party thereto, and Mizuho Bank, Ltd.

The Notes were redeemed on February 7, 2025.

Joint Venture

On January 31, 2025, the Company contributed a 70 % interest in its music catalog to a joint venture with Cutting Edge Group in exchange for net proceeds of $ 601 million.

The Company will retain a controlling financial interest and consolidate the joint venture as a VIE.

On February 18, 2026, DGH (formerly WarnerMedia Holdings, Inc., the “Borrower”), together with JPMorgan Chase Bank, N.A., in its capacities as Administrative Agent and Collateral Agent, executed Amendment No.

1 to the Non-Investment Grade Leveraged Bridge Loan Agreement dated June 26, 2025.

Amendment No.

1 extends the maturity of the Borrower’s outstanding bridge loans from the earlier of (i) December 30, 2026 and (ii) the completion of the previously proposed Separation Transaction to the earlier of (x) June 30, 2027 and (y) the date that the previously proposed Spin-Off (as defined in the Bridge Loan Agreement) occurs.

Under Amendment No.

1, all previously scheduled duration fees through June 30, 2026 remain unchanged, however, the duration fees payable on September 30, 2026 and December 31, 2026 were increased from 0.75 % to 1.00 % of the principal amount of outstanding loans on such dates.

In addition, a new duration fee of 1.00 % of the principal amount of outstanding loans will be payable on March 31, 2027.

Amendment No.

1 does not modify the mandatory prepayment provisions, guarantee structure, or collateral securing the bridge facility, all of which remain consistent with the Existing Bridge Agreement.

The amendment also maintains the original representations and warranties, affirmative and negative covenants, events of default and continues to include no financial maintenance covenants.

Equity Awards

On January 2, 2026, pursuant to the Amended and Restated Employment Agreement dated June 12, 2025 between the Company and its CEO, the Company granted 3,052,734 stock options with a fair value of $ 10.47 per share and an exercise price equal to the $ 28.51 closing price of WBD common stock on January 2, 2026.

In addition, on January 5, 2026, the Company granted its CEO RSUs covering 1,963,465 shares of WBD common stock, with a grant date fair value of $ 56 million.

The RSUs were granted pursuant to the employment agreement to compensate for the higher exercise price of the January 2, 2026 stock option grant relative to prior option awards.

The RSUs vest subject to the same terms and conditions applicable to the related option awards.

Termination of Netflix Merger

On February 27, 2026, in accordance with the terms of the Netflix Merger Agreement, the Company terminated the Netflix Merger Agreement in connection with entering into the PSKY Merger Agreement.

In connection with the termination of the Netflix Merger Agreement, PSKY, on behalf of the Company, paid Netflix a termination fee of $ 2.8 billion in cash as required by the terms of the Netflix Merger Agreement.

On February 27, 2026, the Company entered into the PSKY Merger Agreement, pursuant to which PSKY will acquire the Company.

The “Ticking Consideration” will be an amount in cash equal to $ 0.00277778 multiplied by the number of calendar days elapsed after September 30, 2026 to and including the closing date (which, for the avoidance of doubt, will not exceed $ 0.25 per 90 calendar day period).

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data