Warner Bros. Discovery (WBD) 1Q23 earnings report.

Warner Bros. Discovery reported a big quarterly loss even though its US direct-to-consumer segment turned a profit for the first time ever.

The company also expects its U.S. DTC, or streaming, business to be profitable in 2023, a year ahead of its expectations, CEO David Zaslav said in an earnings release Friday morning.

Revenue for the first quarter was $10.7 billion, about in line with analysts’ estimates. The company reported a net loss of $1.1 billion and adjusted EBITDA of $2.6 billion.

According to Refinitiv, the company reported the following compared to analyst estimates:

• Revenue: $10.7 billion versus $10.78 billion expected
• Loss per share: 44 cents versus an expected profit of 1 cent

Warner Bros. Discovery stock closed 4.5% higher on Friday. It’s up 36% so far this year.

Like all major media companies, Warner Bros. Discovery is transitioning to streaming video as millions of Americans ditch traditional pay-TV each year. The company ended the quarter with 97.6 million streaming subscribers, up 1.6 million from the previous quarter.

The US direct-to-consumer segment generated income of $50 million for the quarter, an increase of $704 million year-over-year on a pro forma combined basis. Streaming was still losing money internationally, JB Perrette, head of streaming at Warner Bros. Discovery, said in a conference call on the results.

Warner Bros. Discovery is adding Discovery+ content to HBO Max and relaunching the service as Max later this month in the US. Zaslav had previously promised Its streaming business will break even by 2024 and be profitable by 2025. He has slashed content spending drastically, including cutting shows and films from Max, to boost efforts to make the business profitable.

“We have a great product that will be profitable now this year,” Zaslav said on the call. He pointed out that the company also offers news and sports, which it hasn’t added to Max yet. Warner Bros. Discovery will be “disciplined” in its talks to renew the rights of the National Basketball Association, Zaslav added.

“We have a wide variety of assets,” Zaslav said. “We have now restructured this company and we are really strained. The environment is challenged, challenged, challenged, but when things start to recover you will see a very quick turnaround in this company.”

Warner Bros. Discovery lost $930 million in free cash flow in the quarter, primarily on interest and sports media rights payments.

The company ended the fourth quarter with $49.5 billion in debt on its balance sheet and $2.6 billion in cash on hand. Warner Bros. Discovery is attempting to boost free cash flow through spending cuts, including laying off thousands of employees last year to reduce its heavy debt load.

The company’s cable network segment brought in $5.6 billion in the quarter, down 10% year over year. Distribution revenue declined 3% (excluding FX) as more subscribers canceled cable. Ad revenue fell 14% in the quarter.

Warner Bros. studio revenue was $3.2 billion, down 7% excluding FX.

WATCH: David Zaslav, CEO of Warner Bros. Discovery, talks to CNBC about Q1 results