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10-K – 2026-02-27 – wbd-20251231.htm
Tax settlements associated with share-based plans — — ( 71 ) — — — ( 71 ) — ( 71 ) Dividends paid to noncontrolling interests — — — — — — — ( 157 ) ( 157 ) Issuance of stock in connection with share-based plans 15 — 43 — — — 43 — 43 Redeemable noncontrolling interest adjustments to redemption value — — ( 21 ) — — — ( 21 ) — ( 21 ) December 31, 2024 2,684 27 55,560 ( 8,244 ) ( 12,239 ) ( 1,067 ) 34,037 792 34,829 Net income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests — — — — 727 — 727 24 751 Other comprehensive income — — — — — 660 660 — 660 Share-based compensation — — 629 — — — 629 — 629 Tax settlements associated with share-based plans — — ( 146 ) — — — ( 146 ) — ( 146 ) Dividends paid to noncontrolling interests — — — — — — — ( 185 ) ( 185 ) Issuance of stock in connection with share-based plans 26 — 23 — — — 23 — 23 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 The accompanying notes are an integral part of these consolidated financial statements. 69 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business Warner Bros. 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, HBO Max, CNN, DC Studios, TNT Sports, HBO, Food Network, TLC, TBS, Warner Bros. Motion Picture Group, Warner Bros. Television Group, Warner Bros. Games, Adult Swim, Turner Classic Movies, and others. 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. PSKY Merger 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. 70 WARNER BROS. DISCOVERY, INC. 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 The WGA and SAG-AFTRA went on strike in May and July 2023, respectively, following the expiration of their respective collective bargaining agreements with the AMPTP. The WGA strike ended on September 27, 2023, and a new collective bargaining agreement was ratified on October 9, 2023. The SAG-AFTRA strike ended on November 9, 2023, and a new collective bargaining agreement was ratified on December 5, 2023. As a result of the strikes, we paused certain theatrical and television productions, which resulted in delayed production spending amongst other impacts. The strikes had a material impact on the operations and results of the Company in 2023. This included a positive impact on cash flow from operations attributed to delayed production spend, and a negative impact on the results of operations attributed to timing and performance of the 2023 film slate, as well as the Company’s ability to produce, license, and deliver content. 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. Basis of Consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries in which a controlling interest is maintained, including variable interest entities (“VIE”) for which the Company is the primary beneficiary. For each non-wholly owned subsidiary, the Company evaluates its ownership and other interests to determine whether it should consolidate the entity or account for its ownership interest as an unconsolidated investment. As part of its evaluation, the Company makes judgments in determining whether the entity is a VIE and, if so, whether it is the primary beneficiary of the VIE and is thus required to consolidate the entity. (See Note 10.) If it is concluded that an entity is not a VIE, then the Company considers its proportional voting interests in the entity. The Company consolidates majority-owned subsidiaries in which a controlling financial interest is maintained. A controlling financial interest is determined by majority ownership and the absence of significant third-party participating rights. Ownership interests in entities for which the Company has significant influence that are not consolidated are accounted for as equity method investments. Intercompany accounts and transactions between consolidated entities have been eliminated. Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates. 71 WARNER BROS. 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. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Foreign Currency The reporting currency of the Company is the U.S. dollar. Financial statements of subsidiaries whose functional currency is not the U.S. dollar are translated at exchange rates in effect at the balance sheet date for assets and liabilities and at average exchange rates for revenues and expenses for the respective periods. Translation adjustments are recorded in accumulated other comprehensive loss. Cash flows from the Company’s operations in foreign countries are generally translated at the weighted average rate for the respective periods. The Company is exposed to foreign currency risk to the extent that it enters into transactions denominated in currencies other than its subsidiaries’ respective functional currencies. Transactions denominated in currencies other than subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Such transactions include affiliate and ad sales arrangements, content licensing arrangements, equipment and other vendor purchases and intercompany transactions. Changes in exchange rates with respect to amounts recorded in the Company’s consolidated balance sheets related to these items will result in unrealized foreign currency transaction gains and losses based upon period-end exchange rates. The Company also records realized foreign currency transaction gains and losses upon settlement of the transactions. Foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency are included in other income (expense), net. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of 90 days or less. Receivables The Company’s accounts receivable balances and the related credit losses arise primarily from distribution, advertising and content revenue. Receivables include amounts billed and currently due from customers and are presented net of an estimate for credit losses. To assess collectability, the Company analyzes market trends, economic conditions, the aging of receivables and customer specific risks, and records a provision for estimated credit losses expected over the lifetime of receivables. The corresponding expense for the expected credit losses is reflected in selling, general and administrative expenses. The Company does not require collateral with respect to trade receivables. Revolving Receivables Program The Company has a revolving agreement to transfer up to $ 5,000 million of certain receivables through its bankruptcy-remote subsidiary, Warner Bros. Discovery Receivables Funding, LLC, to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. 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. 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 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. The obligations assumed when proceeds are received relate to expected credit losses on sold receivables and estimated fee payments made on outstanding sold receivables already transferred. The obligations are subsequently adjusted for changes in estimated expected credit losses and interest rates, which are considered Level 3 fair value measurements since the inputs are unobservable (See Note 8). 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 related to program costs and subsequent payments are reported as financing activities in the consolidated statements of cash flows. 72 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounts Receivable Factoring 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. The Company accounts for these transactions as sales in accordance with ASC 860, “Transfers and Servicing”, as its continuing involvement subsequent to the transfer is limited to providing certain servicing and collection actions on behalf of the purchaser of the designated trade accounts receivable. Proceeds from amounts factored are recorded as an increase to cash and cash equivalents and a reduction to receivables, net in the consolidated balance sheets. Cash received is also reflected as cash provided by operating activities in the consolidated statements of cash flows. 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 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. The Company groups its film and television content rights by monetization strategy: content that is predominantly monetized individually and content that is predominantly monetized as a group. Content Monetized Individually 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). 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. Prior to the theatrical release of a film, the Company’s estimates are based on factors such as the historical performance of similar films, the star power of the lead actors, the rating and genre of the film, pre-release market research (including test market screenings), international distribution plans, and the expected number of theaters in which the film will be released. Subsequent to release, ultimate revenues are updated to reflect initial performance, which is often predictive of future performance. 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. For television programs, the ultimate period does not exceed 10 years from delivery of the first episode, or, if still in production, five years from delivery of the most recent episode, if later. For games, the ultimate period does not exceed two years from the date of the game’s initial release. Ultimates for produced content monetized on an individual basis are reviewed and updated (as applicable) on a quarterly basis; any adjustments are applied prospectively as of the beginning of the fiscal year of the change. 73 WARNER BROS. 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 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. Participations and residuals are generally expensed in line with the pattern of usage. Streaming content and premium pay-TV amortization for each period is recognized based on estimated viewing patterns as there are generally little to no direct revenues to associate to the individual content assets. As such, viewership is most representative of the use of the title. Licensed rights to film and television programming are typically amortized over the useful life of the program’s license period on a straight-line or accelerated basis. The Company allocates the cost of multi-year sports programming arrangements over the contract period to each event or season based on its projected advertising revenue and an allocation of distribution revenue (estimated relative value). If annual contractual payments related to each season approximate each season’s estimated relative value, the Company expenses the related contractual payments during the applicable season. Amortization of sports rights takes place when the content airs. 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: (i) the grouping of content with similar characteristics, (ii) the application of a quantitative revenue forecast model or historical viewership model based on the adequacy of historical data, and (iii) determining the appropriate historical periods to utilize and the relative weighting of those historical periods in the forecast model. 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 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. Any material adjustments from the Company’s review of the amortization rates for assets in film groups are applied prospectively in the period of the change. Unamortized Film Costs Impairment Assessment Unamortized film costs are tested for impairment whenever events or changes in circumstances indicate that the fair value of a film (or television program) predominantly monetized on its own, or a film group, may be less than its unamortized costs. In addition, a change in the predominant monetization strategy is considered a triggering event for impairment testing before a title is accounted for as part of a film group. If the carrying value of an individual feature film or television program, or film group, exceeds the estimated fair value, an impairment charge will be recorded in the amount of the difference. For content that is predominantly monetized individually, the Company utilizes estimates including ultimate revenues and additional costs to be incurred (including exploitation and participation costs), in order to determine whether the carrying value of a film or television program is impaired. 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 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. Investments The Company holds investments in equity method investees and equity investments with and without readily determinable fair values. (See Note 10.) Equity Method Investments Investments in equity method investees are those for which the Company has the ability to exercise significant influence but does not control and is not the primary beneficiary or the entity is not a VIE and the Company does not have a controlling financial interest. Under this method of accounting, the Company typically records its proportionate share of the net earnings or losses of equity method investees in loss from equity investees, net and a corresponding increase or decrease to the investment balances. 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. 74 WARNER BROS. 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. (See “Asset Impairment Analysis” below.) Equity Investments with Readily Determinable Fair Values Investments in entities or other securities in which the Company has no control or significant influence and is not the primary beneficiary, and have a readily determinable fair value are recorded at fair value based on quoted market prices and are classified as equity securities or equity investments with readily determinable fair value. The investments are measured at fair value based on a quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs (Level 1). Gains and losses are recorded in other income (expense), net on the consolidated statements of operations. (See Note 10 and Note 18.) Equity Investments without Readily Determinable Fair Values Equity investments without readily determinable fair values include ownership rights that either (i) do not meet the definition of in-substance common stock or (ii) do not provide the Company with control or significant influence and these investments do not have readily determinable fair values. Equity investments without readily determinable fair values are recorded at cost and adjusted for subsequent observable price changes as of the date that an observable transaction takes place. Adjustments for observable price changes are recorded in other income (expense), net. (See Note 10 and Note 18.) Property and Equipment Property and equipment are stated at cost less accumulated depreciation and impairments. Internal use software costs are capitalized during the application development stage; software costs incurred during the preliminary project and post implementation stages are expensed as incurred. Repairs and maintenance expenditures that do not enhance the use or extend the life of property and equipment are expensed as incurred. Depreciation for most property and equipment is recognized using the straight-line method over the estimated useful lives of the assets. (See Note 18.) Leases The Company determines if an arrangement is a lease at its inception. Operating lease right-of-use (“ROU”) assets are included in other noncurrent assets. Finance lease ROU assets are included in property and equipment, net. Operating and finance lease liabilities are included in accrued liabilities and other noncurrent liabilities in the consolidated balance sheets. The Company elected the short-term lease recognition exemption and leases with initial terms of one year or less are not recorded in the consolidated balance sheets. A rate implicit in the lease when readily determinable is used in arriving at the present value of lease payments. As most of the Company’s leases do not provide sufficient information to determine an implicit rate, the Company uses an incremental borrowing rate based on information available at lease commencement date for most of its leases. The incremental borrowing rate is based on the Company's U.S. 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. 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. The Company does not separate lease components from non-lease components across all lease categories. Instead, each separate lease component and non-lease component are accounted for as a single lease component. In addition, variable lease payments that are based on an index or rate are included in the measurement of ROU assets and lease liabilities at lease inception. All other variable lease payments are expensed as incurred and are not included in the measurement of ROU assets and lease liabilities. Lease expense for operating leases and short-term leases is recognized on a straight-line basis. For finance leases, the Company recognizes interest expense on lease liabilities using the effective interest method and amortization of ROU assets on a straight-line basis. Defined Benefit Plans The Company participates in and/or sponsors a qualified defined benefit pension plan that covers certain U.S. based employees and several U.S. and non-U.S. 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. These assumptions include discount rates, compensation rate increases, expected return on plan assets, retirement rates and mortality rates. Actual results that differ from the assumptions and changes in assumptions could affect future expenses and obligations. 75 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Asset Impairment Analysis Goodwill Goodwill is allocated to the Company’s reporting units, which are its operating segments or one level below its operating segments. The Company evaluates goodwill for impairment annually as of October 1, or earlier if an event or other circumstance indicates that it may not recover the carrying value of the asset. If the Company believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a quantitative impairment test is not required. If a qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its fair value, a quantitative impairment test is performed. If the carrying amount of the reporting unit exceeds its fair value, 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. The Company typically performs a quantitative impairment test at least every three years, irrespective of the outcome of the Company’s qualitative assessment. Long-lived Assets Long-lived assets such as amortizing trademarks and trade names; affiliate, advertising, and subscriber relationships; franchises and other intangible assets; lease ROU assets; and property and equipment are not required to be tested for impairment annually, but rather whenever circumstances indicate that the carrying amount of the asset may not be recoverable. If an impairment analysis is required, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. • If the intent is to hold the asset for continued use, the impairment test requires a comparison of undiscounted future cash flows to the carrying value of the asset group. If the carrying value of the asset group exceeds the undiscounted cash flows, an impairment loss would be recognized equal to the excess of the asset group’s carrying value over its fair value, which is typically determined by discounting the future cash flows associated with that asset group. • If the intent is to hold the asset for sale and certain other criteria are met, the impairment test involves comparing the asset’s carrying value to its estimated fair value less costs to sell. If the carrying value of the asset exceeds the fair value, an impairment loss would be recognized equal to the difference. Significant judgments used for long-lived asset impairment assessments include identifying the appropriate asset groupings that represent the lowest level for which cash flows are largely independent and primary assets within those groupings, determining whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining the future cash flows for the assets involved and assumptions applied in determining fair value, which include reasonable discount rates, growth rates, market risk premiums and other assumptions about the economic environment. Equity Method Investments and Equity Investments Without Readily Determinable Fair Value Equity method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis and are written down to fair value if there is evidence of a loss in value that is other-than-temporary. The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions. 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. 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. The Company performs a qualitative assessment on a quarterly basis to determine if any observable price changes have occurred. If the qualitative assessment indicates that an observable price change has occurred, a gain or loss is recorded equal to the difference between the fair value and carrying value in the current period as a component of other income (expense), net. (See Note 10.) Derivative Instruments 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: • a hedge of a forecasted transaction or the exposure to variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”); • a hedge of the foreign currency exposure from net investments in foreign operations (“net investment hedge”); 76 WARNER BROS. 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”); or • an instrument with no hedging designation. Cash Flow Hedges 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 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 The Company may designate derivative instruments as hedges of net investments in foreign operations. The Company assesses the effectiveness of net investment hedges utilizing the spot-method. The entire change in the fair value of derivatives that qualify as net investment hedges is initially recorded in the currency translation adjustment component of other comprehensive loss. While the change in fair value attributable to hedge effectiveness remains in accumulated other comprehensive loss until the net investment is sold or liquidated, the change in fair value attributable to components excluded from the assessment of hedge effectiveness (e.g., forward points, cross currency basis, etc.) is reflected as a component of interest expense, net in the current period. Fair Value Hedges The Company may designate derivative instruments as fair value hedges to mitigate the variability in the fair value of a recognized asset or liability or of an unrecognized firm commitment. For those derivative instruments designated as fair value hedges, the changes in fair value of the derivative instruments, including offsetting changes in fair value of the hedged items are recorded in the statements of operations in the same line item where the hedged risk occurs. No Hedging Designation The Company may also enter into derivative instruments that do not qualify for hedge accounting or are not designated as hedges. 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 risk occurs. Financial Statement Presentation Unsettled derivative contracts are recorded at their gross fair values on the consolidated balance sheets. The portion of the fair value that represents cash flows occurring within one year is classified as current, and the portion related to cash flows occurring beyond one year is classified as noncurrent. Cash flows from designated derivative instruments used as hedges are classified in the consolidated statements of cash flows in the same section as the cash flows of the hedged item. 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. 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. 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. If the purchase price exceeds the amounts allocated to par value and additional paid-in capital related to the series of shares repurchased and retained earnings, the remainder is allocated to additional paid-in capital related to other series of shares. To determine the cost of treasury stock that is either sold or reissued, the Company uses the last in, first out method. If the proceeds from the re-issuance of treasury stock are greater than the cost, the excess is recorded as additional paid-in capital. 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. 77 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognition Revenue is recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration that the Company expects to receive in exchange for those services or goods. Revenues do not include taxes collected from customers on behalf of taxing authorities such as sales tax and value-added tax. However, certain revenues include taxes that customers pay to taxing authorities on the Company’s behalf, such as foreign withholding tax. Revenue recognition for each source of revenue is also based on the following policies. Advertising Advertising revenues are principally generated from the sale of commercial time on linear (television networks and authenticated TVE applications) and digital platforms (DTC streaming subscription services and websites). A substantial portion of the linear and digital advertising contracts in the U.S. and certain international markets guarantee the advertiser a minimum audience level that either the program in which their advertisements are aired or the advertisement will reach. On the linear platform, the Company provides a service to deliver an advertising campaign which is satisfied by the provision of a minimum number of advertising spots in exchange for a fixed fee over a contract period of one year or less. The Company delivers spots in accordance with these contracts during a variety of day parts and programs. In the agreements governing these advertising campaigns, the Company has also promised to deliver to its customers a guaranteed minimum number of viewers (“impressions”) on a specific television network within a particular demographic (e.g. men aged 18-35). These advertising campaigns are considered to represent a single, distinct performance obligation. Revenues are recognized based on the guaranteed audience level multiplied by the average price per impression. The Company provides the advertiser with advertising until the guaranteed audience level is delivered, and invoiced advertising revenue receivables may exceed the value of the audience delivery. As such, revenues are deferred until the guaranteed audience level is delivered or the rights associated with the guarantee lapse, which is typically less than one year. Audience guarantees are initially developed internally, based on planned programming, historical audience levels, the success of pilot programs, and market trends. Actual audience and delivery information is published by independent ratings services. 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 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. The amount of distribution fees due to the Company is reported by distributors based on actual subscriber levels. Such information is generally not received until after the close of the reporting period. In these cases, the Company estimates the number of subscribers receiving the Company’s programming to estimate royalty revenue. Historical adjustments to recorded estimates have not been material. Distribution revenue from fixed-fee contracts is recognized over the contract term based on the continuous delivery of the content to the affiliate. Any monetary incentives provided to distributors other than for distinct goods or services acquired at fair value are recognized as a reduction of revenue over the term. Although the delivery of linear feeds and digital products, such as video-on-demand (“VOD”) and authenticated TVE applications, are considered distinct performance obligations within a distribution arrangement, on-demand offerings generally match the programs that are airing on the linear network. 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 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. 78 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Content 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. In general, fixed payments for the licensing of intellectual property are recognized as revenue at either the inception of the license term or as sales-based royalties as underlying sales occur if the intellectual property has significant standalone functionality (“functional IP,” such as a produced film or television series), or over the corresponding license term if the licensee’s ability to derive utility is dependent upon our continued support of the intellectual property throughout the license term (“symbolic IP,” such as a character or a brand). Feature films may be produced or acquired for initial exhibition in theaters or direct release on our streaming service. Arrangements with theaters for exhibiting a film over a certain period are generally sales-based royalties and recorded as revenue as the underlying sales of the exhibitors occur. Television programs are initially produced for broadcast networks, cable networks, premium pay services, first-run syndication or streaming services; revenues are recognized when the programs are available for use by the licensee. Fixed license fee revenues from the subsequent licensing of feature films and television programs in the off-network cable, premium pay, syndication, streaming and international television and streaming markets are also recognized upon availability of the content for use by the licensee. For television/streaming service licenses that include multiple titles with a fixed license fee across all titles, the availability of each title is considered a separate performance obligation, and the fixed fee is allocated to each title based on its estimated relative standalone selling price and recognized as revenue when the title is available for use by the licensee. When the term of an existing agreement is renewed or extended, revenues are recognized when the licensed content becomes available under the renewal or extension. Certain arrangements (e.g., certain pay-TV/SVOD licenses) may include variable license fees that are based on sales of the licensee; these are recognized as revenue as the applicable underlying sales occur. Revenues from home entertainment sales of feature films and television programs in physical format are generally recognized at the later of the delivery date or the date when made widely available for sale or rental by retailers (“street date”) based on gross sales less a provision for estimated returns, rebates and pricing allowances. The provision is based on management’s estimates by analyzing vendor sales of our product, historical return trends, current economic conditions and changes in customer demand. 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. 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. Revenues from the licensing of intellectual property such as characters or brands (e.g., for merchandising or theme parks) are recognized either straight-line over the license term or as the licensee’s underlying product sales occur (sales-based royalty) depending on which method is most reflective of the earnings process. Contract Assets and Liabilities A contract asset is recorded when revenue is recognized in advance of the Company’s right to bill and receive consideration and that right is conditioned upon something other than the passage of time. 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 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. Payment terms vary by the type and location of the customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer. 79 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Share-Based Compensation Expense The Company has incentive plans under which performance-based restricted stock units (“PRSUs”), service-based restricted stock units (“RSUs”), and stock options may be issued. In addition, the Company offers an Employee Stock Purchase Plan (the “ESPP”). Share-based compensation expense for all awards is recorded as a component of selling, general and administrative expense. Forfeitures for all awards are recognized as incurred. Excess tax benefits realized from the exercise of stock options and vested RSUs, PRSUs and the ESPP are reported as cash inflows from operating activities on the consolidated statements of cash flows. PRSUs PRSUs represent the contingent right to receive shares of WBD common stock, and typically vest over one to three years based on continuous service and the attainment of qualitative and quantitative performance targets. The number of PRSUs that vest typically ranges from 0 % to 300 % based on a sliding scale where achieving or exceeding the performance target will result in 100 % to 300 % of the PRSUs vesting and achieving 70 % or less of the target will result in no portion of the PRSUs vesting. Additionally, for certain PRSUs, the Company’s Compensation Committee has discretion in determining the final number of units that vest, but may not increase the amount of any PRSU award above 100 %. Upon vesting, each PRSU becomes convertible into one share of WBD common stock. Holders of PRSUs do not receive payments of dividends in the event the Company pays a cash dividend until such PRSUs are converted into shares of WBD common stock. Compensation expense for PRSUs is based on the fair value of WBD common stock on the date of grant. Compensation expense for PRSUs that vest based on achieving subjective operating performance conditions or in situations where the employee may withhold taxes in excess of the maximum statutory requirement, is remeasured at fair value each reporting period until the award is settled. Compensation expense for all PRSUs is recognized ratably over the vesting period only when it is probable that the operating performance conditions will be achieved. The Company records a cumulative adjustment to compensation expense for PRSUs if there is a change in the determination of the probability that the operating performance conditions will be achieved. RSUs RSUs represent the contingent right to receive shares of WBD common stock, substantially all of which vest ratably each year over periods of three to five years based on continuous service. Compensation expense for RSUs is based on the fair value of the award on the date of grant and is recognized ratably during the vesting period. 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. 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 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 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. The dividend yield is assumed to be zero because the Company has no history of paying cash dividends and no present intention to pay dividends. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the award. ESPP The ESPP enables eligible employees to purchase shares of WBD common stock through payroll deductions or other permitted means. The Company recognizes the fair value of the discount associated with shares purchased under the ESPP as share-based compensation expense. 80 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Advertising Costs Advertising costs are expensed as incurred and are presented in selling, general and administrative expenses. Third-party advertising costs were $ 2,104 million, $ 2,152 million and $ 2,428 million for years ended December 31, 2025, 2024 and 2023, respectively. Collaborative Arrangements 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 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. The substance of these arrangements is that the third-party partner owns an interest in the film or series; 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 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. Bundled streaming service arrangements are evaluated at inception to determine whether it is a collaborative agreement based on the facts and circumstances. In the cases of bundled collaborative agreements, the partners share the expenses incurred and revenues generated. In each period, the Company reflects its share of expenses and revenues in the consolidated statements of operations. The arrangement among Turner, CBS and the NCAA provides Turner and CBS with rights to the NCAA Division I Men’s Basketball Championship Tournament (the “NCAA Tournament”) in the U.S. and its territories and possessions through 2032. The aggregate programming rights fee, production costs, advertising revenues and sponsorship revenues related to the NCAA Tournament and related programming are shared equally by the Company and CBS. 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 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. 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 Income taxes are recorded using the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred taxes are measured using rates the Company expects to apply to taxable income in years in which those temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely than not such assets will be unrealized. From time to time, the Company engages in transactions in which the tax consequences may be uncertain. Significant judgment is required in assessing and estimating the tax consequences of these transactions. The Company prepares and files tax returns based on its interpretation of tax laws and regulations. In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. 81 WARNER BROS. 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. The Company includes interest and where appropriate, penalties, as a component of income tax expense on the consolidated statements of operations. Significant judgment is exercised in evaluating all relevant information, the technical merits of the tax positions, and the accurate measurement of unrecognized tax benefits when determining the amount of reserve and whether positions taken on the Company’s tax returns are more likely than not to be sustained. This also involves the use of significant estimates and assumptions with respect to the potential outcome of positions taken on tax returns that may be reviewed by tax authorities. 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 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. Concentrations Risk Customers 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 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 Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk. Counterparty Credit Risk The Company is exposed to the risk that the counterparties to outstanding derivative financial instruments will default on their obligations. The Company manages these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with outstanding derivative financial instruments is spread across a relatively broad counterparty base of banks and financial institutions. The Company also has a limited number of arrangements where collateral is required to be posted in the instance that certain fair value thresholds are exceeded. Additionally, the Company may be required to post collateral related to its revolving receivables program. As of December 31, 2025, collateral posted under these arrangements was not material. Accounting and Reporting Pronouncements Adopted Income Taxes 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. The amendments should be applied prospectively; however, retrospective application is permitted. The Company prospectively adopted the guidance effective January 1, 2025 and has provided the required annual disclosures in Note 16 and Note 18. 82 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounting and Reporting Pronouncements Not Yet Adopted Disaggregation of Income Statement Expenses In November 2024, the FASB issued guidance updating the disclosure requirements for income statement expenses, primarily through disaggregation of certain types of expenses presented on the income statement. The amendments are effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either: (1) prospectively to financial statements issued for reporting periods after the effective date, or (2) retrospectively to all prior periods presented in the financial statements. 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. NOTE 3. EQUITY AND EARNINGS PER SHARE Repurchase Programs Common Stock 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. 83 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Earnings Per Share The table below sets forth the Company’s calculated earnings per share (in millions). Earnings per share amounts may not recalculate due to rounding. Year Ended December 31, 2025 2024 2023 Numerator: Net income (loss) $ 749 $ ( 11,482 ) $ ( 3,079 ) Less: 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 income (loss) available to Warner Bros. Discovery, Inc. Series A common stockholders for basic and diluted earnings per share $ 728 $ ( 11,314 ) $ ( 3,126 ) Denominator — weighted average: 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). Year Ended December 31, 2025 2024 2023 Anti-dilutive share-based awards 43 76 69 NOTE 4. ACQUISITIONS AND DISPOSITIONS Acquisitions BluTV 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. In December 2023, the Company acquired the remaining 65 % of BluTV for $ 50 million. Dispositions 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 Ltd. (“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. 84 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Changes in the carrying value of goodwill attributable to each business unit were as follows (in millions). Streaming Studios Global Linear Networks Total December 31, 2023 $ 8,067 $ 9,272 $ 17,630 $ 34,969 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 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 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 Finite-lived intangible assets subject to amortization consisted of the following (in millions, except years). Weighted Average Amortization Period (Years) December 31, 2025 December 31, 2024 Gross Accumulated Amortization Net Gross Accumulated Amortization Net Trademarks and trade names 27 $ 22,939 $ ( 5,872 ) $ 17,067 $ 22,835 $ ( 4,212 ) $ 18,623 Affiliate, advertising and subscriber relationships 8 24,359 ( 21,191 ) 3,168 24,240 ( 18,528 ) 5,712 Franchises 35 7,900 ( 1,144 ) 6,756 7,900 ( 789 ) 7,111 Character rights 14 995 ( 269 ) 726 995 ( 197 ) 798 Other 6 624 ( 577 ) 47 586 ( 531 ) 55 Total $ 56,817 $ ( 29,053 ) $ 27,764 $ 56,556 $ ( 24,257 ) $ 32,299 Amortization expense for finite-lived intangible assets reflects the pattern in which the assets’ economic benefits are consumed over their estimated useful lives. For assets whose economic benefits are anticipated to be consumed evenly, a straight-line method is utilized. For assets in which the economic benefits are expected to be recognized unevenly over the useful life of the asset, an accelerated method, such as the sum-of-the-months’ digits method, is utilized. 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 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. During 2023, the Company reassessed the useful lives and amortization methods for its linear networks and HBO trademarks and trade names, and its DC franchise, and concluded the pattern of amortization should be accelerated. Accordingly, the Company has changed the amortization method for these assets from the straight-line method to the sum-of-the-months’ digits method. 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. 85 WARNER BROS. 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). 2026 2027 2028 2029 2030 Thereafter Amortization expense $ 3,426 $ 2,626 $ 2,007 $ 1,767 $ 1,559 $ 16,379 Impairment Analysis We perform fair value-based impairment tests of goodwill and intangible assets with indefinite lives on an annual basis, and between annual tests if an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying value. Significant judgments and assumptions for all quantitative goodwill tests 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 revenue growth rates and profit margins. 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; and • 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 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 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. These cash flows, utilized in the DCF analysis, are derived from the reporting unit’s budget and its strategic long-term plan, which reflect expectations based upon operating performance and assumptions consistent with those of a market participant with regards to affiliate revenue, sports rights, and continued softness in the U.S. linear advertising market. • Long-term growth rate of negative 3 %. • A discount rate of 10.5 %. This is reflective of the risks inherent in the future cash flows of the reporting unit and market conditions. 86 WARNER BROS. 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 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. As of October 1, 2024, the Company performed a quantitative goodwill impairment assessment for all of its reporting units. The estimated fair value of each reporting unit exceeded its carrying value and, therefore, no impairment was recorded. 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. Fair Value Measurements The determination of fair value of the Company’s reporting units represents a Level 3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs. Changes in significant judgments and estimates could significantly impact the determined fair value of the reporting unit or the valuation of intangible assets. Changes to assumptions that would decrease the fair value of the reporting unit may result in corresponding increases to the impairment of goodwill at the reporting unit. NOTE 6. RESTRUCTURING AND OTHER CHARGES 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. Games group. During 2023, the Company initiated a strategic realignment plan associated with its Warner Bros. Pictures Animation group. Restructuring and other charges by reportable segment and corporate and inter-segment eliminations were as follows (in millions). Year Ended December 31, 2025 2024 2023 Streaming $ 27 $ 3 $ 66 Studios 18 263 225 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. Facility consolidation impairment charges of $ 411 million were recorded in impairment and loss on dispositions in the consolidated statements of operations during the year ended December 31, 2024. 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. 87 WARNER BROS. 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 $ 80 $ 98 $ 202 $ 80 $ 460 Contract termination accruals, net — — 1 3 4 Employee termination accruals, net 24 79 84 78 265 Other accruals ( 20 ) 1 ( 2 ) 4 ( 17 ) Cash paid ( 53 ) ( 83 ) ( 180 ) ( 107 ) ( 423 ) December 31, 2024 31 95 105 58 289 Contract termination accruals, net — — — 1 1 Employee termination accruals, net 26 21 66 73 186 Other accruals 1 ( 3 ) 3 211 212 Cash paid ( 35 ) ( 55 ) ( 105 ) ( 216 ) ( 411 ) December 31, 2025 $ 23 $ 58 $ 69 $ 127 $ 277 NOTE 7. REVENUES Disaggregated Revenue The following table presents the Company’s revenues disaggregated by revenue source (in millions). Year Ended December 31, 2025 Streaming Studios Global Linear Networks Corporate and Inter-segment Eliminations Total Revenues: Distribution $ 9,444 $ 8 $ 9,819 $ ( 9 ) $ 19,262 Advertising 1,032 1 6,332 ( 59 ) 7,306 Content 388 11,740 1,195 ( 3,676 ) 9,647 Other 12 870 310 ( 111 ) 1,081 Totals $ 10,876 $ 12,619 $ 17,656 $ ( 3,855 ) $ 37,296 Year Ended December 31, 2024 Streaming Studios Global Linear Networks Corporate and Inter-segment Eliminations Total Revenues: Distribution $ 9,022 $ 8 $ 10,680 $ ( 9 ) $ 19,701 Advertising 855 5 7,306 ( 76 ) 8,090 Content 428 10,717 1,848 ( 2,696 ) 10,297 Other 8 877 341 7 1,233 Totals $ 10,313 $ 11,607 $ 20,175 $ ( 2,774 ) $ 39,321 88 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2023 Streaming Studios Global Linear Networks Corporate and Inter-segment Eliminations Total Revenues: Distribution $ 8,703 $ 17 $ 11,521 $ ( 4 ) $ 20,237 Advertising 548 15 8,342 ( 205 ) 8,700 Content 886 11,358 1,005 ( 2,046 ) 11,203 Other 17 802 376 ( 14 ) 1,181 Totals $ 10,154 $ 12,192 $ 21,244 $ ( 2,269 ) $ 41,321 Accounts Receivable and Credit Losses The allowance for credit losses was not material at December 31, 2025 and 2024. Contract Assets and Liabilities The following table presents contract liabilities on the consolidated balance sheets (in millions). Category Balance Sheet Location December 31, 2025 December 31, 2024 Contract liabilities Deferred revenues $ 1,642 $ 1,569 Contract liabilities Other noncurrent liabilities 355 206 The change in deferred revenue for the year ended December 31, 2025 primarily reflects cash payments received or contracted billings recorded for which the performance obligations were not satisfied prior to the end of the period, partially offset by $ 1,378 million of revenues recognized that were included in the deferred revenue balance at December 31, 2024. Revenue recognized for the year ended December 31, 2024 related to the deferred revenue balance at December 31, 2023 was $ 1,643 million. Contract assets were not material as of December 31, 2025 and 2024. Transaction Price Allocated to Remaining Performance Obligations Most of the Company’s distribution contracts are licenses of functional intellectual property where revenue is derived from royalty-based arrangements, for which revenues are recorded as a function of royalties earned to date instead of estimating incremental royalty contract revenue. However, there are certain other distribution arrangements that are fixed price or contain minimum guarantees that extend beyond one year. The Company recognizes revenue for fixed fee distribution contracts monthly based on minimum monthly fees by calculating one twelfth of annual license fees specified in its distribution contracts, or based on the pro-rata fees earned calculated on the license fees specified in the distribution contract. The Company’s content licensing contracts and sports sublicensing deals are licenses of functional intellectual property. The Company’s brand licensing contracts are licenses of symbolic intellectual property. The Company’s advertising contracts are principally generated from the sale of advertising campaigns comprised of multiple commercial units. In contracts with guaranteed impressions, we have identified the overall advertising campaign as the performance obligation to be satisfied over time, and impressions delivered against the satisfaction of our guarantee as the measure of progress. Certain of these arrangements extend beyond one year. The following table presents a summary of remaining performance obligations by contract type (in millions). Contract Type December 31, 2025 Duration Distribution - fixed price or minimum guarantee $ 2,489 Through 2030 Content licensing and sports sublicensing 4,601 Through 2032 Brand licensing 4,023 Through 2062 Advertising 1,127 Through 2032 Other 138 Through 2029 Total $ 12,378 89 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The value of unsatisfied performance obligations disclosed above does not include: (i) contracts involving variable consideration for which revenues are recognized in accordance with the sales or usage-based royalty exception, which typically have a similar duration as the contracts disclosed above, and (ii) contracts with an original expected length of one year or less, such as most advertising contracts; however for content licensing revenues, including revenues associated with the licensing of theatrical and television product for television and streaming services, the Company has included all contracts regardless of duration. NOTE 8. SALES OF RECEIVABLES Revolving Receivables Program During 2025, the Company amended its revolving receivables program to reduce the facility limit to $ 5,000 million and extend the program to June 2026. 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, 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.) The following table presents a summary of receivables sold (in millions). Year Ended December 31, 2025 2024 Gross receivables sold/cash proceeds received $ 15,560 $ 15,254 Collections reinvested under revolving receivables program ( 16,497 ) ( 15,818 ) Net cash proceeds remitted $ ( 937 ) $ ( 564 ) Net receivables sold $ 15,485 $ 15,153 Obligations recorded (Level 3) $ 380 $ 361 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 Gross receivables pledged as collateral $ 2,632 $ 2,402 Restricted cash pledged as collateral $ — $ 100 Balance sheet classification: Receivables, net $ 2,230 $ 2,039 Prepaid expenses and other current assets $ — $ 100 Other noncurrent assets $ 402 $ 363 Accounts Receivable Factoring 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. The accounts receivable factoring agreements is separate and distinct from the revolving receivables program. 90 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9. CONTENT RIGHTS For purposes of amortization and impairment, capitalized production costs are grouped based on their predominant monetization strategy: individually or as a group. Live programming includes licensed sports rights and related advances. The table below presents the components of content rights (in millions). December 31, 2025 Predominantly Monetized Individually Predominantly Monetized as a Group Total Production costs: Released, less amortization $ 3,006 $ 5,686 $ 8,692 Completed and not released 1,109 521 1,630 In production and other 1,782 2,544 4,326 Total production costs $ 5,897 $ 8,751 $ 14,648 Licensed content, live programming, and advances, net 4,478 Game development costs, less amortization 310 Total film and television content rights and games 19,436 Less: Current content rights and prepaid license fees, net ( 322 ) Total noncurrent film and television content rights and games $ 19,114 December 31, 2024 Predominantly Monetized Individually Predominantly Monetized as a Group Total Production costs: Released, less amortization $ 2,948 $ 5,678 $ 8,626 Completed and not released 794 767 1,561 In production and other 1,700 2,008 3,708 Total production costs $ 5,442 $ 8,453 $ 13,895 Licensed content, live programming, and advances, net 5,744 Game development costs, less amortization 247 Total film and television content rights and games 19,886 Less: Current content rights and prepaid license fees, net ( 784 ) Total noncurrent film and television content rights and games $ 19,102 Content amortization consisted of the following (in millions). Year Ended December 31, 2025 2024 2023 Predominantly monetized individually $ 2,346 $ 3,999 $ 5,165 Predominantly monetized as a group 9,306 9,554 10,648 Total content amortization $ 11,652 $ 13,553 $ 15,813 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, 2025, total content impairments were $ 203 million. 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.) 91 WARNER BROS. DISCOVERY, INC. 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). Year Ending December 31, 2026 2027 2028 Released investment in films and television content: Monetized individually $ 804 $ 642 $ 532 Monetized as a group 2,150 1,225 849 Licensed content, live programming, and advances 1,695 894 624 Games 8 — — Completed and not released investment in films and television content: Monetized individually $ 879 Monetized as a group 210 At December 31, 2025, acquired film and television libraries are being amortized using straight-line or other accelerated amortization methods through 2036. NOTE 10. INVESTMENTS The Company’s equity investments consisted of the following, net of investments recorded in other noncurrent liabilities (in millions). Category Balance Sheet Location Ownership December 31, 2025 December 31, 2024 Equity method investments: The Chernin Group (TCG) 2.0-A, LP Other noncurrent assets 44 % $ 276 $ 240 nC+ Other noncurrent assets 32 % 153 128 TNT Sports Other noncurrent assets 50 % 10 92 Other Other noncurrent assets 258 261 Total equity method investments 697 721 Investments with readily determinable fair values Other noncurrent assets — 41 Investments without readily determinable fair values Other noncurrent assets (a) 348 353 Total investments $ 1,045 $ 1,115 (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. 92 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Equity Method Investments Certain of the Company’s other equity method investments are VIEs, for which the Company is not the primary beneficiary. As of December 31, 2025, the Company’s maximum exposure for all its unconsolidated VIEs, including the investment carrying values and unfunded contractual commitments made on behalf of VIEs, was approximately $ 492 million. The Company’s maximum estimated exposure excludes the non-contractual future funding of VIEs. 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. 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. 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 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. NOTE 11. DEBT The table below presents the components of outstanding debt (in millions). December 31, Weighted-Average Interest Rate as of 12/31/2025 2025 2024 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 Unamortized discount, premium, debt issuance costs, and fair value adjustments for acquisition accounting, net ( 278 ) ( 22 ) Debt, net of unamortized discount, premium, debt issuance costs, and fair value adjustments for acquisition accounting 32,567 39,505 Current portion of debt ( 139 ) ( 2,748 ) Noncurrent portion of debt $ 32,428 $ 36,757 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. 93 WARNER BROS. 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) 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. During the year ended December 31, 2024, the Company also repaid in full at maturity $ 296 million of aggregate principal amount outstanding of its senior notes due November 2024; £ 400 million ($ 529 million equivalent at repayment) of aggregate principal amount outstanding of its senior notes due September 2024; $ 48 million of aggregate principal amount outstanding of its senior notes due June 2024; $ 726 million of aggregate principal amount outstanding of its senior notes due February and March 2024; and completed open market repurchases for $ 965 million of aggregate principal amount outstanding of its senior notes. During the year ended December 31, 2024, the Company issued € 650 million of 4.302 % fixed rate senior notes due January 2030 and € 850 million of 4.693 % fixed rate senior notes due May 2033, the proceeds of which were used to fund the aforementioned tender offer. 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. 94 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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 $ 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, 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. As of December 31, 2025, the Company was in compliance with all applicable covenants and there were no events of default under the Credit Agreement. Long-term Debt Repayment Schedule The following table presents a summary of scheduled debt and estimated interest payments, excluding the revolving credit facility and commercial paper borrowings, for the next five years based on the amount of the Company’s debt outstanding as of December 31, 2025 (in millions). 2026 2027 2028 2029 2030 Thereafter Long-term debt repayments $ 139 $ 16,483 $ 1,409 $ 2,274 $ 1,354 $ 11,186 Interest payments $ 1,947 $ 1,353 $ 723 $ 648 $ 584 $ 5,454 95 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. LEASES The Company has operating and finance leases for transponders, office space, studio facilities, software, and other equipment. The Company’s leases were reflected in the Company’s consolidated balance sheets as follows (in millions). December 31, 2025 2024 Operating Leases Location on Balance Sheet Operating lease right-of-use assets Other noncurrent assets $ 2,749 $ 2,373 Operating lease liabilities (current) Accrued liabilities $ 285 $ 307 Operating lease liabilities (noncurrent) Other noncurrent liabilities 3,226 2,731 Total operating lease liabilities $ 3,511 $ 3,038 Finance Leases Finance lease right-of-use assets Property and equipment, net $ 635 $ 432 Finance lease liabilities (current) Accrued liabilities $ 149 $ 107 Finance lease liabilities (noncurrent) Other noncurrent liabilities 534 356 Total finance lease liabilities $ 683 $ 463 Supplemental information related to leases was as follows. December 31, 2025 2024 Weighted average remaining lease term (in years): Operating leases 11 11 Finance leases 6 6 Weighted average discount rate Operating leases 4.97 % 4.43 % Finance leases 5.46 % 5.11 % The Company’s leases have remaining lease terms of up to 27 years, some of which include multiple options to extend the leases for up to a total of 20 years. Most leases are not cancelable prior to their expiration. The components of lease cost were as follows (in millions): Year Ended December 31, 2025 2024 2023 Operating lease cost $ 407 $ 441 $ 540 Finance lease cost: Amortization of right-of-use assets $ 150 $ 111 $ 85 Interest on lease liabilities 32 19 8 Total finance lease cost $ 182 $ 130 $ 93 Variable fees and other (a) $ 29 $ 44 $ 74 Total lease cost $ 618 $ 615 $ 707 (a) Includes variable lease payments related to our operating and finance leases and costs of leases with initial terms of less than one year. 96 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Supplemental cash flow information related to leases was as follows (in millions): Year Ended December 31, 2025 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ ( 455 ) $ ( 476 ) $ ( 501 ) Operating cash flows from finance leases $ ( 32 ) $ ( 19 ) $ ( 19 ) Financing cash flows from finance leases $ ( 139 ) $ ( 95 ) $ ( 74 ) Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 726 $ 78 $ 364 Finance leases $ 341 $ 300 $ 95 Maturities of lease liabilities as of December 31, 2025 were as follows (in millions): Operating Leases Finance Leases 2026 $ 441 $ 178 2027 424 157 2028 419 123 2029 416 81 2030 407 45 Thereafter 2,594 224 Total lease payments 4,701 808 Less: Imputed interest ( 1,190 ) ( 125 ) Total $ 3,511 $ 683 During the year ended December 31, 2025, ROU asset impairment charges were $ 112 million and were primarily related to impairments of the Company’s Hudson Yards, New York office as a result of recoverability tests performed during the year as subleases for the office were executed. The impairment charges were recorded in impairment and loss on dispositions in the consolidated statements of operations. 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. NOTE 13. DERIVATIVE FINANCIAL INSTRUMENTS In the normal course of business, the Company is exposed to foreign currency exchange rate market risk and interest rate fluctuations. As part of its risk management strategy, the Company uses derivative financial instruments, primarily foreign currency forward contracts, fixed-to-fixed currency swaps, total return swaps, and interest rate swaps, to hedge certain foreign currency, market value and interest rate exposures. The Company’s objective is to reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them. The Company does not enter into or hold derivative financial instruments for speculative trading purposes. 97 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS There were no amounts eligible to be offset under master netting agreements as of December 31, 2025 and 2024. The fair value of the Company’s derivative financial instruments at December 31, 2025 and 2024 was determined using a market-based approach (Level 2). The following table summarizes the Company’s derivative financial instruments recorded on its consolidated balance sheets (in millions). December 31, 2025 December 31, 2024 Fair Value Fair Value Notional Prepaid expenses and other current assets Other non- current assets Accounts payable and accrued liabilities Other non- current liabilities Notional Prepaid expenses and other current assets Other non- current assets Accounts payable and accrued liabilities Other non- current liabilities Cash flow hedges: Foreign exchange $ 2,235 $ 53 $ 60 $ 35 $ 38 $ 1,608 $ 47 $ 14 $ 25 $ 28 Net investment hedges: (a) Cross-currency swaps 452 7 — — 21 421 6 — — 4 No hedging designation: Foreign exchange 126 9 — 15 79 951 18 7 14 122 Cross-currency swaps 225 4 — — 11 210 2 — — 1 Total return swaps 501 — — — — 454 — — 16 — Credit contracts 2,000 8 — — — — — — — — Total $ 81 $ 60 $ 50 $ 149 $ 73 $ 21 $ 55 $ 155 (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.) Derivatives Designated for Hedge Accounting Cash Flow Hedges The Company uses foreign exchange forward contracts to mitigate the foreign currency risk related to revenues, production rebates, and production expenses. As production spend occurs or when rebate receivables are recognized, foreign forward exchange contracts designated as cash flow hedges are de-designated. Upon de-designation, gains and losses on these derivatives directly impact earnings in the same line and same period as the hedged risk. 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 income (loss) until the hedged item affects earnings. Excluded components, including forward points, are included in current earnings. 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, 2025 2024 2023 Gains (losses) recognized in accumulated other comprehensive loss: Foreign exchange - derivative adjustments $ 23 $ 37 $ 23 Gains (losses) reclassified into income from accumulated other comprehensive loss: Foreign exchange - distribution revenue ( 27 ) 22 ( 5 ) Foreign exchange - advertising revenue — 2 1 Foreign exchange - costs of revenues 6 7 3 Foreign exchange - other income (expense), net — — 18 Interest rate - interest expense, net ( 3 ) ( 5 ) ( 1 ) Interest rate - gain on extinguishment of debt ( 1 ) ( 4 ) 1 Interest rate - other income (expense), net 14 20 — 98 WARNER BROS. 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. The maximum length of time the Company is hedging exposure to the variability in future cash flows is 30 years. Net Investment Hedges The Company is exposed to foreign currency risk associated with the net assets of non-USD functional entities and uses fixed-to-fixed cross currency swaps to mitigate this risk. During the year ended December 31, 2024, to mitigate the currency risk associated with the net assets of non-USD functional entities, the Company designated its € 1,500 million denominated debt issued in May 2024 as a net investment hedge (see Note 11 ) and subsequently de-designated and re-designated € 225 million of its Euro denominated debt. During the year ended December 31, 2024, the Company also designated an additional € 900 million of fixed-to-fixed cross currency swaps as a net investment hedge and subsequently settled € 300 million and de-designated € 200 million of fixed-to-fixed cross currency swaps designated as a net investment hedge. During the year ended December 31, 2023, to mitigate the risk associated with the net assets of non-USD functional entities, the Company re-designated its Sterling denominated debt due in 2024 as a net investment hedge after the unwind of the cash flow hedge previously noted. 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 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. Year Ended December 31, Amount of gain (loss) recognized in AOCI Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing) Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing) 2025 2024 2023 2025 2024 2023 Cross currency swaps $ ( 19 ) $ 70 $ 43 Interest expense, net $ 11 $ 4 $ 24 Euro denominated notes (foreign denominated debt) ( 209 ) 78 3 N/A — — — Sterling denominated notes (foreign denominated debt) — ( 5 ) ( 11 ) N/A — — — Total $ ( 228 ) $ 143 $ 35 $ 11 $ 4 $ 24 Derivatives Not Designated for Hedge Accounting The Company has deferred compensation plans that have risk related to the fair market value gains and losses on investments and uses total return swaps to mitigate this risk. 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 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. 99 WARNER BROS. 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). Year Ended December 31, 2025 2024 2023 Interest rate swaps $ — $ 19 $ 63 Total return swaps 50 31 46 Total in selling, general and administrative expense 50 50 109 Interest rate swaps — ( 3 ) 20 Cross-currency swaps ( 8 ) 1 1 Foreign exchange derivatives 32 ( 27 ) 7 Credit contracts ( 17 ) — — Total in other income (expense), net 7 ( 29 ) 28 Total $ 57 $ 21 $ 137 NOTE 14. FAIR VALUE MEASUREMENTS Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities carried at fair value are classified in the following three categories: Level 1 - Quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3 - Valuations derived from techniques in which one or more significant inputs are unobservable. The table below presents assets and liabilities measured at fair value on a recurring basis (in millions). December 31, 2025 Category Balance Sheet Location Level 1 Level 2 Level 3 Total Assets Cash equivalents: Time deposits Cash and cash equivalents $ — $ 107 $ — $ 107 Equity securities: Money market funds Cash and cash equivalents 61 — — 61 Mutual funds Prepaid expenses and other current assets 14 — — 14 Company-owned life insurance contracts Prepaid expenses and other current assets — 2 — 2 Mutual funds Other noncurrent assets 205 — — 205 Company-owned life insurance contracts Other noncurrent assets — 105 — 105 Total $ 280 $ 214 $ — $ 494 Liabilities Deferred compensation plan Accrued liabilities $ 66 $ — $ — $ 66 Deferred compensation plan Other noncurrent liabilities 682 — — 682 Total $ 748 $ — $ — $ 748 100 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 Category Balance Sheet Location Level 1 Level 2 Level 3 Total Assets Cash equivalents: Time deposits Cash and cash equivalents $ — $ 95 $ — $ 95 Equity securities: Money market funds Cash and cash equivalents 46 — — 46 Mutual funds Prepaid expenses and other current assets 16 — — 16 Company-owned life insurance contracts Prepaid expenses and other current assets — 1 — 1 Mutual funds Other noncurrent assets 216 — — 216 Company-owned life insurance contracts Other noncurrent assets — 102 — 102 Total $ 278 $ 198 $ — $ 476 Liabilities Deferred compensation plan Accrued liabilities $ 62 $ — $ — $ 62 Deferred compensation plan Other noncurrent liabilities 650 — — 650 Total $ 712 $ — $ — $ 712 Equity securities include money market funds, investments in mutual funds held in separate trusts, which are owned as part of the Company’s supplemental retirement plans, and company-owned life insurance contracts. (See Note 17.) The fair value of the deferred compensation plan liability was determined based on the fair value of the related investments elected by employees. 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, 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 $ 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. NOTE 15. SHARE-BASED COMPENSATION The Company has various incentive plans under which PRSUs, RSUs, and stock options have been issued. Upon exercise or vesting of stock awards, the Company issues new shares from its existing authorized but unissued shares. As of December 31, 2025, there were 136 million shares of common stock in reserves that were available for future issuance under the incentive plans. Share-Based Compensation Expense The table below presents the components of share-based compensation expense (in millions). Year Ended December 31, 2025 2024 2023 PRSUs $ 239 $ 89 $ 65 RSUs 457 415 375 Stock options 73 53 60 Total share-based compensation expense $ 769 $ 557 $ 500 Tax benefit recognized $ 115 $ 96 $ 97 Liability-classified share-based compensation awards include certain PRSUs. The Company recorded total liabilities for cash-settled and other liability-classified share-based compensation awards of $ 190 million and $ 66 million as of December 31, 2025 and 2024, respectively. 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. 101 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Share-Based Award Activity PRSUs The table below presents PRSU activity (in millions, except years and weighted-average grant date fair value). PRSUs Weighted- Average Grant Date Fair Value Weighted-Average Remaining Contractual Term (years) Aggregate Fair Value Outstanding as of December 31, 2024 9.8 $ 11.20 1.2 $ 104 Granted 4.8 $ 11.79 Performance adjustments 2.6 $ 8.64 Converted ( 4.3 ) $ 9.57 $ 48 Forfeited ( 0.1 ) $ 10.06 Outstanding as of December 31, 2025 12.8 $ 11.87 1.0 $ 370 Vested and expected to vest as of December 31, 2025 12.8 $ 11.87 1.0 $ 370 Convertible as of December 31, 2025 2.5 $ 11.05 0.0 $ 72 As of December 31, 2025, there was $ 73 million of unrecognized compensation cost related to PRSUs. RSUs The table below presents RSU activity (in millions, except years and weighted-average grant date fair value). RSUs Weighted- Average Grant Date Fair Value Weighted-Average Remaining Contractual Term (years) Aggregate Fair Value Outstanding as of December 31, 2024 78.8 $ 11.41 1.6 $ 835 Granted 43.0 $ 11.13 Vested ( 31.5 ) $ 12.69 $ 388 Forfeited ( 6.1 ) $ 10.42 Outstanding as of December 31, 2025 84.2 $ 10.81 1.2 $ 2,432 Vested and expected to vest as of December 31, 2025 84.2 $ 10.81 1.2 $ 2,432 As of December 31, 2025, there was $ 457 million of unrecognized compensation cost related to RSUs, of which $ 11 million is related to cash settled RSUs. 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. 102 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Options The table below presents stock option activity (in millions, except years and weighted-average exercise price). Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding as of December 31, 2024 36.0 $ 30.90 2.7 $ 8 Granted 25.1 $ 10.31 Exercised ( 2.1 ) $ 13.96 $ 12 Forfeited ( 12.9 ) $ 30.02 Outstanding as of December 31, 2025 46.1 $ 20.68 4.8 $ 551 Vested and expected to vest as of December 31, 2025 46.1 $ 20.68 4.8 $ 551 Exercisable as of December 31, 2025 8.5 $ 33.92 2.6 $ 25 The Company received cash payments from the exercise of stock options totaling $ 30 million, $ 0 million, and $ 0 million during 2025, 2024 and 2023, respectively. 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 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. Year Ended December 31, 2025 2024 2023 Black-Scholes option-pricing model Risk-free interest rate 3.97 % 4.19 % 4.35 % Expected term (years) 5.0 4.7 4.5 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) 5.0 N/A N/A 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 2025, 2024 and 2023 was $ 12 million, $ 0 million, and $ 0 million, respectively. NOTE 16. INCOME TAXES The domestic and foreign components of income (loss) before income taxes were as follows (in millions). Year Ended December 31, 2025 2024 2023 Domestic $ 744 $ ( 11,843 ) $ ( 4,702 ) Foreign 895 455 839 Income (loss) before income taxes $ 1,639 $ ( 11,388 ) $ ( 3,863 ) 103 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The components of the provision for income taxes were as follows (in millions). Year Ended December 31, 2025 2024 2023 Current: Federal $ 1,025 $ 983 $ 753 State and local 131 321 57 Foreign 444 522 750 1,600 1,826 1,560 Deferred: Federal ( 601 ) ( 1,488 ) ( 1,845 ) State and local ( 113 ) ( 276 ) ( 548 ) Foreign 4 32 49 ( 710 ) ( 1,732 ) ( 2,344 ) Income tax expense (benefit) $ 890 $ 94 $ ( 784 ) 104 WARNER BROS. 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 U.S. federal statutory tax rate $ 344 21 % State and local income taxes, net of federal income tax effects (1) ( 14 ) ( 1 ) % Foreign tax effects: UK: Statutory tax rate differential 25 1 % Tax incentives ( 102 ) ( 6 ) % Other 16 1 % Canada withholding taxes 61 4 % Withholding taxes from other foreign jurisdictions (2) 256 15 % Other foreign jurisdictions 75 5 % Effect of cross-border tax laws: Foreign branch income 62 4 % Other ( 19 ) ( 1 ) % Tax credits: 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 % Other 16 1 % 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, 2024 2023 Pre-tax income at U.S. federal statutory income tax rate $ ( 2,391 ) 21 % $ ( 811 ) 21 % Non-deductible goodwill impairment 1,881 ( 17 ) % — — % State and local income taxes, net of federal tax benefit 30 — % ( 388 ) 10 % Effect of foreign operations 331 ( 3 ) % 342 ( 9 ) % Change in unrecognized tax benefits 153 ( 1 ) % 33 ( 1 ) % Other, net 90 ( 1 ) % 40 ( 1 ) % Income tax expense (benefit) $ 94 ( 1 ) % $ ( 784 ) 20 % 105 WARNER BROS. 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 $ 9,147 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. Components of deferred income tax assets and liabilities were as follows (in millions). December 31, 2025 2024 Deferred income tax assets: Tax attribute carry-forward $ 2,894 $ 2,661 Lease liabilities 937 793 Accrued liabilities and other 1,144 1,180 Total deferred income tax assets 4,975 4,634 Valuation allowance ( 2,398 ) ( 2,043 ) Net deferred income tax assets 2,577 2,591 Deferred income tax liabilities: Accounts receivable ( 248 ) ( 267 ) Intangible assets ( 5,889 ) ( 6,916 ) Right-of-use assets ( 756 ) ( 636 ) Property and equipment ( 567 ) ( 273 ) Content rights ( 272 ) ( 342 ) Equity method investments and other outside basis differences ( 85 ) ( 61 ) Other ( 521 ) ( 468 ) Total deferred income tax liabilities ( 8,338 ) ( 8,963 ) Net deferred income tax liabilities $ ( 5,761 ) $ ( 6,372 ) As of December 31, 2025, the company maintains a valuation allowance of $ 2,398 million to offset deferred tax assets attributable to certain foreign net operating losses, and to a lesser extent U.S. federal and state tax attribute carryforwards. The Company’s net deferred income tax assets and liabilities were reported on the consolidated balance sheets as follows (in millions). December 31, 2025 2024 Noncurrent deferred income tax assets (included within other noncurrent assets) $ 622 $ 613 Deferred income tax liabilities ( 6,383 ) ( 6,985 ) Net deferred income tax liabilities $ ( 5,761 ) $ ( 6,372 ) 106 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s loss carry-forwards were reported on the consolidated balance sheets as follows (in millions). Federal State Foreign Loss carry-forwards $ 56 $ 1,313 $ 7,903 Deferred tax asset related to loss carry-forwards 12 62 1,923 Valuation allowance against loss carry-forwards ( 6 ) ( 56 ) ( 1,581 ) Earliest expiration date of loss carry-forwards 2028 2026 2026 A reconciliation of the beginning and ending amounts of unrecognized tax benefits (without related interest and penalty amounts) is as follows (in millions). Year Ended December 31, 2025 2024 2023 Beginning balance $ 2,371 $ 2,147 $ 1,929 Additions based on tax positions related to the current year 83 148 147 Additions for tax positions of prior years 123 250 195 Additions for tax positions acquired in business combinations — — 247 Reductions for tax positions of prior years ( 101 ) ( 76 ) ( 275 ) Settlements ( 37 ) ( 30 ) ( 46 ) Reductions due to lapse of statutes of limitations ( 123 ) ( 51 ) ( 62 ) Changes due to foreign currency exchange rates 40 ( 17 ) 12 Ending balance $ 2,356 $ 2,371 $ 2,147 As of December 31, 2025, if the Company were to recognize the full amount of unrecognized tax benefits, $ 2,156 million would reduce the Company’s income tax expense and effective tax rate after giving effect to interest deductions and offsetting benefits from other tax jurisdictions. The Company and its subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. 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. With few exceptions, the Company is no longer subject to audit by any jurisdiction for years prior to 2008. 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. 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. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. 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. 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, 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. 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. 107 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 17. 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 Eligible employees may contribute a portion of their compensation to the plans, which may be subject to certain statutory limitations. The Company contributes to certain of the plans to either match qualifying employee contributions or as discretionary contributions. The Company made total contributions of $ 206 million, $ 204 million, and $ 210 million for the years ended December 31, 2025, 2024 and 2023, respectively. The Company’s contributions were recorded in cost of revenues and selling, general and administrative expense on the consolidated statements of operations. Executive Deferred Compensation Plans The Company has deferred compensation plans through which certain senior-level employees may elect to defer a portion of their eligible compensation. Distributions from the deferred compensation plans are generally made following separation from service or other events as specified in the plan. In certain plans, the Company may make discretionary contributions to employee accounts. While these plans are unfunded, the Company has established separate rabbi trusts used to provide for certain of these benefits. The accounts of the separate rabbi trusts are included in the Company’s consolidated financial statements. The investments are included in prepaid expenses and other current assets and other noncurrent assets on the consolidated balance sheets. The deferred compensation obligation is included in accrued liabilities and other noncurrent liabilities in the consolidated balance sheets. The values of the investments and deferred compensation obligation are recorded at fair value. Changes in the fair value of the investments are included as a component of other income (expense), net, on the consolidated statements of operations. Changes in the fair value of the deferred compensation obligation are included as a component of selling, general and administrative expenses on the consolidated statements of operations. (See Note 14 and Note 18.) Multiemployer Benefit Plans The Company contributes to various multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of our union-represented employees. The risks of participating in multiemployer pension plans are different from single-employer pension plans in that (i) contributions made by the Company to the multiemployer pension plans may be used to provide benefits to employees of other participating employers; (ii) if the Company chooses to stop participating in the multiemployer pension plans, it may be required to pay those plans an amount based on the underfunded status of the plan, which is referred to as a withdrawal liability; and (iii) actions taken by a participating employer that lead to a deterioration of the financial health of a multiemployer pension plan may result in the unfunded obligations of the multiemployer pension plan being borne by its remaining participating employers. The Company also contributes to various other multiemployer benefit plans that provide health and welfare benefits to both active and retired participants. The Company does not participate in any multiemployer benefit plans that are individually significant to the Company. The following table summarizes the Company’s contributions to multiemployer pension and health and welfare benefit plans (in millions). Year Ended December 31, 2025 2024 2023 Pension benefits $ 102 $ 115 $ 128 Health and welfare benefits 226 248 153 Total contributions $ 328 $ 363 $ 281 Defined Benefit Plans The Company participates in and/or sponsors a qualified defined benefit pension plan that covers certain U.S. based employees and several non-U.S. defined benefit pension plans. The Company’s pension plans consist of both funded and unfunded plans. Plan provisions vary by plan and by country, and all plans are noncontributory. 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. 108 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Discount rates, long-term rate of return on plan assets, increases in compensation levels, and mortality rates are key assumptions used in determining the benefit obligation. The table below describes how the assumptions are determined. Assumption Description Discount rate Based on a bond portfolio approach that includes high-quality debt instruments with maturities matching the Company’s expected benefit payments from the plans. Long-term rate of return on plan assets Based on the weighted-average expected rate of return and capital market forecasts for each asset class employed and also considers the Company’s historical compounded return on plan assets for 10 and 15 -year periods. Increase in compensation levels Based on past experience and the near-term outlook. Mortality Various mortality tables adjusted and projected using mortality improvement rates. Net Periodic Pension Cost Expense recognized for the pension plans is based upon actuarial valuations. Inherent in those valuations are key assumptions, including discount rates and, where applicable, expected returns on assets. The service cost component of net periodic pension cost is recorded in operating expenses on the consolidated statements of operations, while the remaining components are recorded in other income (expense), net. Net periodic pension cost was not material for the years ended December 31, 2025, 2024 and 2023. 109 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Obligations and Funded Status The following tables present information about plan assets and obligations of the pension plans based upon a valuation as of December 31, 2025 and 2024, respectively (in millions). December 31, 2025 December 31, 2024 Accumulated benefit obligation $ 716 $ 683 Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 683 $ 753 Service cost 2 2 Interest cost 35 33 Benefits paid ( 40 ) ( 45 ) Actuarial losses (gains) 18 ( 48 ) Curtailments ( 1 ) — Settlement charges ( 14 ) ( 2 ) Effects of foreign currency exchange rate changes and other 33 ( 10 ) Projected benefit obligation at end of year 716 683 Plan assets: Fair value at beginning of year 471 540 Actual return on plan assets 10 ( 46 ) Company contributions 35 32 Benefits paid ( 40 ) ( 45 ) Settlement charges ( 14 ) ( 3 ) Effects of foreign currency exchange rate changes and other 31 ( 7 ) Fair value at end of year 493 471 Under funded status $ ( 223 ) $ ( 212 ) Amounts recognized as assets and liabilities on the consolidated balance sheets: Other noncurrent assets $ 34 $ 65 Accrued liabilities ( 27 ) ( 29 ) Other noncurrent liabilities ( 230 ) ( 248 ) Total $ ( 223 ) $ ( 212 ) 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. December 31, 2025 December 31, 2024 Discount rate 5.06 % 5.20 % Rate of compensation increases 3.30 % 3.16 % 110 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Plan Assets The Company’s investment policy is to maximize the total rate of return on plan assets to meet the long-term funding obligations of the pension plans. There are no restrictions on the types of investments held in the pension plans, which are invested using a combination of active management and passive investment strategies. Risk is controlled through diversification among multiple asset classes, managers, styles, and securities. Risk is further controlled both at the manager and asset class levels by assigning return targets and evaluating performance against these targets. The following table presents the weighted average pension plans asset allocations by asset category (in millions). December 31, 2025 Investment Type Target Actual Debt securities 5 % 4 % Equity securities 10 % 5 % Fixed income securities 72 % 80 % Multi-asset credit fund 5 % 6 % Real assets 4 % 3 % Hedge funds 2 % — % Cash 2 % 2 % Total 100 % 100 % Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 14 for a discussion of the fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value (in millions). December 31, 2025 Total Level 1 Level 2 Level 3 Debt securities $ 22 $ 22 $ — $ — Equity securities 24 24 — — Fixed income securities 394 — — 394 Multi-asset credit fund 32 — 32 — Cash 8 8 — — Total plan assets measured at fair value $ 480 $ 54 $ 32 $ 394 Assets held at net asset value practical expedient Real assets 13 Total plan assets $ 493 The table below sets forth a summary of changes in the fair value of the Level 3 pension assets for the year ended December 31, 2025 (in millions). Fixed Income Funds Fair value at beginning of year $ 66 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 $ 394 111 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 Total Level 1 Level 2 Level 3 Debt securities $ 19 $ 19 $ — $ — Equity securities 55 25 30 — Fixed income securities 444 22 356 66 Multi-asset credit fund 77 — 77 — Cash 6 6 — — Total plan assets measured at fair value $ 601 $ 72 $ 463 $ 66 Assets held at net asset value practical expedient Real assets $ 16 Hedge funds 44 Total assets held at net asset value practical expedient $ 60 Liabilities: Derivatives ( 190 ) Total plan assets $ 471 The table below sets forth a summary of changes in the fair value of the Level 3 pension assets for the year ended December 31, 2024 (in millions). Fixed Income Funds Fair value at beginning of year $ 76 Unrealized losses ( 5 ) Purchases, issuances, sales and settlements, net ( 5 ) Balance at end of year $ 66 Estimated Benefit Payments The following table presents the estimated future benefit payments expected to be paid out for the defined benefits plans over the next ten years (in millions). Pension Plans 2026 $ 51 2027 45 2028 48 2029 48 2030 47 Thereafter 235 112 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18. SUPPLEMENTAL DISCLOSURES Property and equipment Property and equipment consisted of the following (in millions). December 31, Useful Lives 2025 2024 Equipment, furniture, fixtures and other (a) 3 - 7 years $ 3,071 $ 2,613 Capitalized software costs 1 - 5 years 3,583 3,076 Land, buildings and leasehold improvements (b) 15 - 30 years 4,038 3,832 Property and equipment, at cost 10,692 9,521 Accumulated depreciation ( 4,826 ) ( 4,035 ) 5,866 5,486 Assets under construction 819 601 Property and equipment, net $ 6,685 $ 6,087 (a) Property and equipment includes assets acquired under finance lease arrangements. Assets acquired under finance lease arrangements are generally amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the terms of the related leases. (See Note 12.) (b) Land has an indefinite life and is not depreciated. Leasehold improvements generally have an estimated useful life equal to the lease term. Capitalized software costs are for internal use. The net book value of capitalized software costs was $ 1,352 million and $ 1,246 million as of December 31, 2025 and 2024, respectively. Depreciation expense for property and equipment totaled $ 1,079 million, $ 1,102 million and $ 1,097 million for the years ended December 31, 2025, 2024 and 2023, respectively. Prepaid expenses and other current assets Prepaid expenses and other current assets consisted of the following (in millions). December 31, 2025 2024 Production receivables $ 1,072 $ 979 Content rights and prepaid license fees 322 784 Other current assets 1,952 2,056 Total prepaid expenses and other current assets $ 3,346 $ 3,819 Accrued liabilities Accrued liabilities consisted of the following (in millions). December 31, 2025 2024 Accrued participation and residuals $ 2,796 $ 2,953 Accrued production and content rights payable 1,675 1,758 Accrued payroll and related benefits 1,588 1,495 Accrued withholding taxes 668 644 Other accrued liabilities 2,899 3,588 Total accrued liabilities $ 9,626 $ 10,438 113 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other noncurrent liabilities Other noncurrent liabilities consisted of the following (in millions). December 31, 2025 2024 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 Other income (expense), net, consisted of the following (in millions). Year Ended December 31, 2025 2024 2023 Foreign currency losses, net $ 8 $ ( 323 ) $ ( 173 ) (Losses) gains on derivative instruments, net 21 ( 9 ) 28 Change in the value of investments with readily determinable fair value 10 ( 1 ) 37 Change in the value of equity investments without readily determinable fair value ( 4 ) ( 11 ) ( 73 ) Gain on sale of equity method investments — 194 — Interest income 206 210 179 Indemnification receivable accrual ( 171 ) 77 ( 53 ) Other income, net ( 5 ) 13 26 Total other income (expense), net $ 65 $ 150 $ ( 29 ) 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, 2025 2024 2023 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 Non-cash investing and financing activities: Accrued purchases of property and equipment $ 38 $ 36 $ 41 Assets acquired under finance lease and other arrangements 320 390 235 Non-cash settlement of PRSU awards 115 59 35 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 — — 70 114 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash, Cash Equivalents, and Restricted Cash December 31, 2025 December 31, 2024 Cash and cash equivalents $ 4,566 $ 5,312 Restricted cash - other current assets (a) 4 104 Total cash, cash equivalents, and restricted cash $ 4,570 $ 5,416 (a) Restricted cash at December 31, 2024 primarily included cash posted as collateral related to the Company’s revolving receivables program. (See Note 8.) Supplier Finance Programs Consistent with customary industry practice, the Company generally pays certain content producers at or near the completion of the production cycle. In these arrangements, content producers may earn fees upon contractual milestones to be invoiced at or near completion of production. In these instances, the Company accrues the content in progress in accordance with the contractual milestones. Certain of the Company’s content producers sell their related receivables to a bank intermediary who provides payments that coincide with these contractual production milestones upon confirmation with the Company of our obligation to the content producer. This confirmation does not involve a security interest in the underlying content or otherwise result in the payable receiving seniority with respect to other payables of the Company. Invoices processed through the program are subject to a one-year maximum tenor. The Company does not incur any fees or expenses associated with the paying agent services, and this service may be terminated by the Company or the financial institution upon 30 days’ notice. At, or near, the production completion date (invoice due date), the Company pays the financial institution the stated amounts for confirmed producer invoices. These payments are reported as cash flows from operating activities. Changes in confirmed accrued content producer liabilities were as follows (in millions). These amounts were outstanding and unpaid by the Company and were recorded in accrued liabilities on the consolidated balance sheets, given the principal purpose of the arrangement is to allow producers access to funds prior to the typical payment due date and the arrangement does not significantly change the nature of the payables and does not significantly extend the payment terms beyond the industry norms. Year Ended December 31, 2025 2024 Obligations outstanding at the beginning of the year $ 307 $ 338 Invoices confirmed during the year 678 949 Invoices paid during the year ( 726 ) ( 980 ) Foreign currency translation and other adjustments 1 — Obligations outstanding at the end of the year $ 260 $ 307 Venu Sports 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. 115 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accumulated Other Comprehensive Loss The table below presents the changes in the components of accumulated other comprehensive loss, net of taxes (in millions). Currency Translation Derivative Adjustments Pension Plans Accumulated Other Comprehensive Income (Loss) December 31, 2022 $ ( 1,498 ) $ 14 $ ( 39 ) $ ( 1,523 ) Other comprehensive income (loss) before reclassifications 799 16 ( 21 ) 794 Reclassifications from accumulated other comprehensive loss to net income — ( 12 ) — ( 12 ) Other comprehensive income (loss) 799 4 ( 21 ) 782 December 31, 2023 ( 699 ) 18 ( 60 ) ( 741 ) Other comprehensive income (loss) before reclassifications ( 358 ) 32 ( 14 ) ( 340 ) Reclassifications from accumulated other comprehensive loss to net income 49 ( 35 ) — 14 Other comprehensive income (loss) ( 309 ) ( 3 ) ( 14 ) ( 326 ) December 31, 2024 ( 1,008 ) 15 ( 74 ) ( 1,067 ) Other comprehensive income (loss) before reclassifications 664 16 ( 30 ) 650 Reclassifications from accumulated other comprehensive loss to net income 2 8 — 10 Other comprehensive income (loss) 666 24 ( 30 ) 660 December 31, 2025 $ ( 342 ) $ 39 $ ( 104 ) $ ( 407 ) NOTE 19. REDEEMABLE NONCONTROLLING INTERESTS Redeemable noncontrolling interests are presented outside of permanent equity on the Company’s consolidated balance sheets when the put right is outside of the Company’s control. 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 income (loss). Such currency translation adjustments to redemption value are allocated to the Company’s stockholders only. Redeemable noncontrolling interest adjustments of carrying value to redemption value are reflected in retained earnings, unless there is an accumulated deficit, in which case the adjustments are reflected in additional paid-in capital. The adjustment of carrying value to the redemption value that reflects a redemption in excess of fair value is included as an adjustment to income from continuing operations available to the Company’s stockholders in the calculation of earnings per share. (See Note 3.) The table below summarizes the Company’s redeemable noncontrolling interests balances (in millions). December 31, 2025 2024 Discovery Family $ — $ 86 Other 19 23 Total $ 19 $ 109 116 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table below presents the reconciliation of changes in redeemable noncontrolling interests (in millions). December 31, 2025 2024 2023 Beginning balance $ 109 $ 165 $ 318 Cash distributions to redeemable noncontrolling interests ( 12 ) ( 35 ) ( 30 ) Reclassification of redeemable noncontrolling interest to noncontrolling interest ( 74 ) — ( 22 ) Redemption of redeemable noncontrolling interest — — ( 111 ) Comprehensive income adjustments: Net (loss) income attributable to redeemable noncontrolling interests ( 2 ) ( 42 ) 9 Currency translation on redemption values — — ( 3 ) Retained earnings adjustments: Adjustments of carrying value to redemption value (redemption value does not equal fair value) ( 1 ) 18 2 Adjustments of carrying value to redemption value (redemption value equals fair value) ( 1 ) 3 2 Ending balance $ 19 $ 109 $ 165 The Company’s significant redeemable noncontrolling interests are described below. Discovery Family Hasbro Inc. (“Hasbro”) had the right to put the entirety of its remaining 40 % interest in Discovery Family to the Company at any time during the one-year period beginning December 31, 2021, or in the event the Company’s performance obligation related to Discovery Family was not met. Embedded in the redeemable noncontrolling interest was a call right that was exercisable for one year after December 31, 2021. Neither the put nor the call was exercised in 2022. 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. 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. MTG 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. Other In August 2023, the Company and JCOM Co., Ltd. (“JCOM”) executed a series of transaction agreements to which the Company and JCOM each contributed certain rights, liabilities, or rights via license agreements to Discovery Japan, Inc. (“JVCo”), an existing 80 / 20 joint venture between the Company and JCOM, in exchange for new common shares of JVCo, resulting in the Company and JCOM owning 51 % and 49 % of JVCo, respectively. Retaining controlling financial interest subsequent to the transaction, the Company continues to consolidate the joint venture. 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. 117 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 20. 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. Food Network and Cooking Channel are operated and organized under the terms of the Partnership. The Company holds 80 % of the voting interest and 68.7 % of the economic interest in the Partnership. During the fourth quarter of 2025, the Partnership agreement was extended and specified a dissolution date of December 31, 2026. If the term of the Partnership is not extended prior to the dissolution date of December 31, 2026, the Partnership agreement permits the Company, as holder of 80 % of the applicable votes, to reconstitute the Partnership and continue its business. If for some reason the Partnership is not continued, it will be required to limit its activities to winding up, settling debts, liquidating assets and distributing proceeds to the partners in proportion to their partnership interests. Ownership interests attributable to the noncontrolling owner are presented as noncontrolling interests on the Company’s consolidated financial statements. Under the terms of the Partnership agreement, the noncontrolling owner cannot force a redemption outside of the Company’s control. As such, the noncontrolling interests in the Partnership are reflected as a component of permanent equity in the Company’s consolidated financial statements. NOTE 21. RELATED PARTY TRANSACTIONS In the normal course of business, the Company enters into transactions with related parties. 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). Year Ended December 31, 2025 2024 2023 Revenues and service charges (a) $ 773 $ 1,404 $ 2,790 Expenses $ 267 $ 268 $ 357 Distributions to noncontrolling interests and redeemable noncontrolling interests $ 198 $ 193 $ 301 (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). December 31, 2025 2024 Receivables $ 116 $ 254 Payables $ 17 $ 13 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.) 118 WARNER BROS. DISCOVERY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 22. COMMITMENTS, CONTINGENCIES, AND GUARANTEES Commitments In the normal course of business, the Company enters into various commitments, which primarily include programming and talent arrangements, operating and finance leases (See Note 12), arrangements to purchase various goods and services, long-term debt (see Note 11), pension funding and payments (See Note 17), and future funding commitments to equity method investees (See Note 10) (in millions). Year Ending December 31, Content Other Purchase Obligations Other Employee Obligations Total 2026 $ 5,736 $ 1,384 $ 478 $ 7,598 2027 4,333 1,082 301 5,716 2028 3,354 475 167 3,996 2029 1,688 37 72 1,797 2030 1,641 33 53 1,727 Thereafter 2,993 16 54 3,063 Total $ 19,745 $ 3,027 $ 1,125 $ 23,897