Warner Bros. Discovery plunges 16% as CEO warns of 'generational disruption' to media

• Warner Bros. Discovery stock dropped more than 16% on Wednesday following it's third quarter earnings report.
• The media company reported a decline in ad revenue during the third quarter.

Shares of Warner Bros. Discovery dropped more than 16% Wednesday following a third-quarter earnings report that missed Wall Street's expectations and pointed to a weak advertising market and industry outlook.

The stock move puts the media giant on track for its biggest one-day drop in share price in over two years. Shares were trading at $9.72 at 1:20 p.m. ET.

Warner Bros. Discovery reported a bigger loss than Wall Street was expecting, at $0.17 per share versus Bloomberg estimates of $0.08. The media sector at large faces headwinds in ad revenue amid an uncertain macro outlook. This was reflected in Warner Bros. results, with the company reporting that it saw a decline of 12% in ad spending among its TV networks.

A weak ad market and the strikes that disrupted Hollywood productions this year were cited specifically as challenges the company and the industry is facing.

"TV revenue declined significantly primarily due to certain large licensing deals in the prior year and the impact of the WGA and SAG-AFTRA strikes," the company said in a press release.

CEO David Zaslav on the earnings call sounded the alarm on the issues facing the media sector, warning investors of the difficulty in navigating the changes.

"This is a generational disruption we're going through," Zaslav said. "Going through that with a streaming service that's losing billions of dollars, it's really difficult to go on offense."

Notably, the third quarter was the first full three-month span since the debut of streaming service Max, a new platform that combined programming from HBO Max and Discovery.

From the second to the third quarter, the company saw 700,000 fewer subscribers at 95.1 million, below the analyst forecast of 95.4 million, per StreetAccount.

Gunnar Wiedenfels, the company's chief financial officer, said Wednesday that WBD is unlikely to achieve its debt-to-adjusted earnings ratio next year due to a difficult advertising environment as well as repercussions from the Hollywood strikes.

"It is unlikely from today's perspective that we will hit our target leverage range by the end of 2024 without a meaningful recovery of the TV ad market," Wiedenfels said.

Investors will next turn their attention to Disney earnings, which will report after the closing bell on Wednesday and will provide another bellwether for the wider media market.