Discovery beat Wall Street revenue expectations for the third quarter on Wednesday, thanks to higher advertising and distribution revenue as the company prepares for its proposed merger with AT&T Inc's WarnerMedia unit.

According to data, revenue increased by about 23% to $3.15 billion in the third quarter ended Sept. 30, slightly above the $3.14 billion estimates.

Total paid streaming subscribers worldwide reached 20 million at the end of the third quarter, up from 17 million in the previous quarter and 18 million announced by the company in early August. According to the company, this figure includes subscribers to the Discovery+ streaming service, which debuted in January.

After a dip due to the pandemic, advertising revenue rebounded and was up 28% internationally compared to the same period last year. Domestic and international distribution revenue was also up year on year, thanks to Discovery+.

Discovery logo and symbol, meaning, history, PNG

The owner of Animal Planet and TLC is planning a merger with AT&T's WarnerMedia unit to form a new media company with the scale to compete with streaming rivals such as Netflix and Walt Disney. The transaction is expected to be completed in the middle of next year.

During a conference call with investors on Wednesday, Chief Executive Officer David Zaslav stated that Discovery expects free cash flow to exceed $2.1 billion for the full year and that net leverage at the close of the WarnerMedia deal will be at or below 4.5 times, as opposed to the 5 times estimated in May.

Zaslav will be the CEO of the proposed new company, Warner Brothers Discovery. Kevin Mayer, Disney's former head of direct-to-consumer and international, joined the company as a consultant on Wednesday, he announced. "About how different pieces of content, whether it's movies, perform," Mayer will advise on windowing strategy, according to Zaslav.

Excluding one-time items, Discovery earned 24 cents per share, falling short of analysts' expectations of 41 cents.