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Discovery Posts Strong Q2 Earnings, as Advertising Revenue Grows After Discovery+ Launch

Discovery's strong Q2 2021 earnings were not enough to stop Wall Street's caginess about the company's proposed merger with WarnerMedia.

Discovery

An exterior view of the headquarters of Discovery Communications

Kris Tripplaar/Sipa USA

Discovery reported strong Q2 2021 financial results on Tuesday and handily beat Wall Street’s estimates.

The media company, which owns major television networks ranging from HGTV and TLC to Food Network and the Discovery Channel, reported $3.06 billion in revenue — a 21 percent increase from Discovery’s Q2 results last year. The company surpassed Wall Street expectations; analysts only predicted Discovery to report $2.97 billion in revenue, according to Yahoo Finance data.

Discovery announced its Q2 earnings several months after the company rolled out its Discovery+ streaming service in the United States, which features a $4.99 ad-supported tier and an ad-free $9.99 subscription option. The company’s United States advertising revenue increased 12 percent in Q2, while its international advertising revenue shot up 88 percent. Discovery said it had 18 million direct-to-consumer subscribers and though the company said that the majority of those customers were Discovery+ subscribers, it did not offer a specific breakdown of the statistics.

“Advertising revenue increased in every region of the globe and accelerated throughout the quarter, particularly in our international segment as revenue increased 70 percent,” David Zaslav, Discovery president and CEO, said in a statement on Tuesday. “Indeed, many key markets such as the UK, Italy, Germany, as well as a number of Latam and APAC markets, all demonstrated a marked resurgence and finished ahead of 2019. We continued to steadily execute in our emerging next generation businesses, with 17 million paying direct-to-consumer subscribers at the end of the quarter, and 18 million as of today. This contributed to 130 percent revenue growth in the second quarter.”

Although Discovery’s Q2 earnings exceeded Wall Street’s expectations, the company’s stock was nonetheless down 4.19 percent at press time. The fall is likely attributed to Wall Street’s continued caginess about the company’s proposed merger with WarnerMedia, which was announced in May. The deal is expected to close in mid-2022, pending regulatory approval. Discovery’s stock has dropped sharply since March 2021 and AT&T’s stock dropped sharply following the announcement of the intended WarnerMedia deal in May.

Zaslav said on Tuesday that Washington politicians have not offered pushback to the proposed merger but Discovery’s Q2 earnings did not include new specific details about the plan. If approved, Zaslav is expected to lead the combined entity, which will be renamed Warner Bros. Discovery.

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