Warner Bros. (WBD) Looks to Streamline Sprawling Empire via Historic Stock Split

Warner Bros. Discovery (WBD) is preparing for another significant transformation, announcing plans to split into two separate publicly traded companies—“Streaming & Studios” and “Global Networks”—by mid-2026. This decision comes just three years after the Warner Bros.-Discovery merger, which has been weighed down by a heavy debt burden and the ongoing decline of traditional cable. Over that time, WBD stock has slid almost 30%.

The combined company has also struggled to gain investor confidence, reflected in its volatile stock performance. While there are risks, investors should be excited about the impending transformation, and I am optimistically neutral. 

WBD’s De-merger Rationale

From my perspective, the split is a logical move. The two divisions are on distinctly different paths. For those unfamiliar, “Streaming & Studios” (which includes DC Studios, HBO, and Max) comprises growth-oriented, content-driven assets, while “Global Networks” (CNN, Discovery Channel, TNT Sports) represents more traditional media. These segments naturally appeal to different types of investors, and the streaming business could command a higher P/E multiple as a standalone entity.

Just as important, separating the businesses allows for customized capital structures that are better aligned with their respective strategies and focused on debt reduction. Notably, the “Global Networks” company will retain a 20% equity stake in “Streaming & Studios,” giving it continued exposure to the growth potential of the streaming side.

The Twin Growth Play of Streaming and Studios

The new Streaming & Studios company will be led by David Zaslav, the current President and CEO of Warner Bros. Discovery. It will focus on scaling HBO Max to mirror the success of industry giant Netflix (NFLX).

The division is projected to generate over $1.3 billion in profit by the end of 2025, with an ambitious target of reaching 150 million streaming subscribers by the end of 2026, just shy of half of Netflix’s current subscriber base.

Interestingly, it appears that the bulk of Warner Bros. Discovery’s $37 billion in long-term debt will remain with the Global Networks entity, allowing Streaming & Studios to concentrate on growth initiatives unencumbered by heavy liabilities.

Despite a 6% year-over-year decline in Q1 revenue to $4.77 billion—reflecting the broader drop in traditional TV viewership—“Global Networks” continues to generate substantial free cash flow. The division will shift its focus toward maximizing profitability and monetizing its extensive content library.

Mixed Market Reaction Reflects Both Hope and Uncertainty

Following the announcement, market reaction was mixed—WBD shares initially surged over 10% at the open but ultimately closed down around 3%. This reflects a blend of optimism and caution surrounding the complexity of the split. While the restructuring offers strategic clarity, it doesn’t erase the company’s substantial debt, nor does it solve the ongoing decline in linear TV revenue for its legacy business.

The Streaming & Studios division also faces intense competition from deep-pocketed rivals, such as Amazon Prime Video (AMZN) and Apple TV (AAPL). Beyond that, the split introduces regulatory challenges, transaction costs, and the inherent uncertainty of disentangling a recently merged company.

Is Warner Bros Discovery a Good Stock to Buy Now?

On Wall Street, WBD earns a Moderate Buy consensus rating based on 10 Buy, eight Hold, and zero Sell ratings in the past three months. WBD’s average stock price target of $12.60 represents an upside potential of 22% over the next 12 months.

See more WBD analyst ratings

Following the split announcement, Barclays analyst Kannan Venkateshwar issued a Hold rating, expressing skepticism about the company’s intention to divvy up its debt. He noted that “The company has $37B of gross debt and another $5B of off-balance sheet debt, and neither standalone entity will have enough EBITDA to absorb this on a standalone basis without a significant increase in leverage.” 

Meanwhile, Barrington analyst Patrick Sholl is more optimistic on WBD. He reiterated a Buy rating and is particularly bullish on the prospects within its streaming division, noting, “The company’s direct-to-consumer (DTC) segment is showing positive trends, with expectations to generate significant EBITDA from streaming operations in 2025. This growth is supported by increasing subscriber numbers, successful bundling strategies, and the introduction of an ad-supported tier, which are all expected to enhance monetization efforts. Additionally, the international market is contributing significantly to subscriber growth, with further expansion planned for 2026.”

Warnes Bros. Remains a Calculated Risk

Warner Bros. Discovery’s decision to split just three years after its merger with Discovery brings both risk and opportunity. The stock’s performance since the merger suggests that combining fast-growing streaming assets with a declining linear TV business under one roof hasn’t delivered the desired results. While the move may seem messy, it appears necessary. The company now faces the complex task of executing the separation, after which each entity will confront its own challenges.

Global Networks will need to attract value-oriented investors despite heavy debt and ongoing revenue decline, while Streaming & Studios must meet high expectations in a fiercely competitive landscape. Notably, there are already rumors that the streaming division could become an acquisition target, part of a broader wave of consolidation across the media sector.

Ultimately, investors are left with more questions than answers, and the next chapter in this unfolding story will unfold over time. What’s certain for now is that the split adds another layer of uncertainty.