AOL continued to weigh on Time Warner as the media group reported a 26 per cent drop in second-quarter income on Wednesday, largely because of weakness at its internet division.

AOL, which has emerged as the biggest challenge confronting Jeff Bewkes, chief executive, suffered a drop of 36 per cent in operating income as as it continued to shed paying subscribers. Advertising revenue, which AOL is banking on as its future, rose only 2 per cent.