AT&T Earnings: WarnerMedia Revenue Rises 30% in Quarter of Ad-Supported HBO Max Launch

HBO and HBO Max added 2.8 million subscribers in Q2

Warner Bros.

Perhaps Netflix and Disney+ should look into adding ad-supported options. In the second quarter of 2021, the one in which HBO Max launched an ad-supported version, WarnerMedia’s revenue rose by 30.7% and parent company AT&T comfortably beat Wall Street’s financial forecasts.

Wall Street had forecast earnings per share (EPS) of 79 cents on $42.64 billion in revenue, according to a consensus estimate of analysts as compiled by Yahoo Finance. AT&T actually reported adjusted EPS of 89 cents on $44 billion in revenue.

That adjusted earnings number was up 7.2% and revenue up 7.6% from the second quarter of 2020, when COVID-19 had a greater impact on business.

HBO and HBO Max added a combined 2.8 million subscribers in Q2, bringing the U.S. sum to 47. Globally, the tally is now 67.5 million. WarnerMedia now expects between 70 and 73 million global HBO/HBO Max subscribers by the end of 2021.

WarnerMedia’s direct-to-consumer subscription revenue was up nearly 40% from the comparable quarter last year.

“We’re pleased with our performance and our momentum is strong,” John Stankey, AT&T CEO, said in prepared remarks accompanying the company’s financials. “For the fourth consecutive quarter, we saw good subscriber growth across wireless, fiber and HBO Max. Mobility delivered strong service revenue, EBITDA and postpaid phone growth. Our fiber business, which leads on customer satisfaction, grew subscribers and penetration. HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform, with both subscriber- and ad-supported choices. As a result, we’re raising our global HBO Max year-end forecast to 70 million to 73 million subscribers. Also, we’re updating full-year guidance for consolidated revenue, wireless service revenue, adjusted EPS and free cash flow.” 

AT&T stock closed Wednesday afternoon at $27.88 per share. The U.S. stock markets will reopen for their regular trading day at 9:30 a.m. ET. AT&T executives will host a conference call at 8:30 a.m. ET to discuss the quarter in greater detail.

AT&T said on May 17 it was spinning off WarnerMedia into an independent company that will merge with Discovery, Inc. The full valuation of the newly combined company is estimated to be $130 billion.

Discovery chief David Zaslav will lead the new company as its CEO after the deal closes, which is expected to occur in mid-2022. No position has been designated within Warner Bros. Discovery for Jason Kilar, who was named CEO of WarnerMedia in 2020. Kilar told WarnerMedia employees last week that he intends to remain CEO of WarnerMedia into next year.

Under the terms of the all-stock agreement, AT&T will receive $43 billion (a figure subject to adjustment) in a combination of cash, debt securities and WarnerMedia’s retention of certain debt, and AT&T’s shareholders will receive stock representing 71% of the new company. Discovery shareholders will own 29% of Warner Bros. Discovery. The boards of directors at both companies have approved the merger, which now awaits regulatory approval.

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