Warner Bros. Discovery faced a setback as it reported worse-than-expected quarterly earnings, primarily impacted by underperforming box office releases from its movie studio. The David Zaslav-led company, which owns Warner Bros. studios along with CNN, TNT, and streaming service Max, experienced a 17% decline in studio business revenue in the fourth quarter.

The fourth quarter revenue stood at $10.28 billion, falling short of analysts' average estimate of $10.35 billion. Excluding items, the company recorded a loss of 16 cents per share, larger than the anticipated loss of 7 cents per share by Wall Street.

Notable disappointments included "The Color Purple," which grossed $68 million against a nearly $100 million budget, and "Aquaman and the Lost Kingdom," which garnered $433 million worldwide with a budget nearing $215 million. Despite this, the firm saw success with "Barbie," bringing in $1.45 billion at the global box office.

While the company's streaming platforms saw a 3% revenue increase to $2.53 billion in the direct-to-consumer segment, free cash flow surged 33% to $3.31 billion, surpassing analysts' expectations of $2.5 billion. Looking ahead, WBD Chief Financial Officer Gunnar Wiedenfels expressed optimism for the upcoming action film "Superman: Legacy" but acknowledged challenges in the superhero genre.

Although cost-cutting measures led to notable free cash flow growth, concerns arose regarding Warner Bros. Discovery's ability to drive revenue and earnings expansion. Lightshed Partners analyst Rich Greenfield highlighted the importance of demonstrating sustainable growth beyond short-term strategies in order to attract investor confidence and ensure long-term success for the company.