Walt Disney sharply outperformed Wall Street’s quarterly earnings estimates on Wednesday, with results buoyed by the strong holiday box office performance of animated sequel “Moana 2,” though the company warned of a modest decline in Disney+ streaming subscribers in the coming quarter.
The strength in entertainment helped offset a decline at Disney’s domestic theme parks, which were impacted by hurricanes Helene and Milton in Florida.
The parks-led Experiences group also incurred about $75 million in expenses associated with the December launch of the Disney Treasure cruise ship.
Disney reported a 44% jump in adjusted per-share earnings of $1.76 for the October-December quarter, exceeding the $1.45 per-share earnings consensus estimate of 24 analysts surveyed by LSEG.
Revenue for the fiscal first quarter rose 5% to $24.69 billion, slightly ahead of analysts’ projections of $24.62 billion. Operating income rose 31% from a year earlier to $5.1 billion.
Shares fell more than 1% in early trading, as investors appeared to react to Disney’s guidance that its flagship Disney+ streaming service would shed a modest number of subscribers in the coming quarter following its recent price increase.
That stands in sharp contrast to rival Netflix’s record gains of 19 million subscribers.
“Clearly, Netflix won last quarter’s battle in the overall streaming war,” said Forrester research director Mike Proulx. “While Disney’s (streaming) business posted a modest revenue increase, it was largely driven by price hikes. Price pinching consumers isn’t a long-term growth strategy.”
Disney forecast “high single digit” adjusted earnings-per-share growth in fiscal 2025 compared with the prior year and an increase of approximately $875 million in operating income at the streaming entertainment unit.
The company said it would incur $50 million in costs associated with exiting its Venu Sports joint venture with Warner Bros Discovery and Fox. The media companies abandoned their plans for a sports streaming service in January, after it ran into substantial legal opposition.
Operating income at Disney’s Entertainment unit, which includes film, television and streaming, increased to $1.7 billion in the quarter, nearly double the results from a year earlier, thanks in part to the strong performance of “Moana 2.”
The animated sequel topped $1 billion in box office proceeds over the Martin Luther King Jr. Day weekend in January, becoming the fourth Walt Disney Animation film to reach that financial milestone.
“Disney has turned in the fairytale performance investors had been hoping for … It shows that Disney is still a powerful force to be reckoned with when it comes to delivering blockbuster hits,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Television business
Disney’s traditional television business continued to erode. Operating income at so-called linear networks fell 11% to $1.1 billion. CEO Bob Iger called the company’s venerable TV networks “an asset” that enhances its overall television business, including streaming.
“While I won’t rule out the possibility some of the smaller networks, in some form or another, being configured differently in terms of how we bring them to market, maybe even ownership,” said Iger. “But right now, we actually feel good about the hand that we have.”
The remarks come as Comcast prepares to spin off its some cable networks into a separately traded company.
Subscribers for the company’s flagship streaming video service, Disney+, slipped 1% from the prior quarter to 124.6 million. The company had warned of a modest drop in subscribers because of a price increase that took effect in October. It also forecast a modest decline in Disney+ subscribers in the second quarter, compared to the first.
Disney+ and Hulu and produced an operating profit of $293 million in the quarter, marking the third straight quarter of profitability and a turnaround from the year-ago loss of $138 million.
Disney said its addition of ESPN to Disney+ has encouraged subscribers to sample sports programming, increasing time spent on the app, a trend it hopes to capitalize on with the addition of a daily “SportsCenter” studio show called “SC+” this year. All of this sets the stage for the launch of its flagship ESPN offering within the app this fall.
In the Experiences segment, which includes consumer products and the cruise line, as well as parks, operating income was roughly flat at $3.1 billion.
Profit declined 5% at domestic parks because the hurricanes and cruise ship costs, while operating income at international parks rose 28% from a year ago.
“Parks has always been Disney’s ace-in-the-hole, a massively profitable division that helped to subsidize the immense cost required to prop up a cash-burning streaming operation,” said Brandon Katz, senior entertainment industry strategist at Parrot Analytics.
“It’s concerning that Parks has now reported softer-than-expected results in back-to-back quarters.”
At the Sports unit, which includes the ESPN network and Star India business, operating income was $247 million, compared with a year-ago loss, in part reflecting improvement in Star India’s operating results ahead of Disney and Reliance Industries completing a deal to combine their Indian media assets.
Iger appeared to reference rival Netflix’s entry into live sports during the investor call, and its Jake Paul-Mike Tyson boxing match and its Christmas Day NFL games, saying ESPN provides sports fans with programming “365 days a year, 24 hours a day.”
“So if you’re a sports fan, it’s not about one day of one boxing event or one day of football,” said Iger. “It’s about sports every single day of the year and every hour of the day. And that’s a pretty compelling … consumer proposition.”
