Disney reported on Tuesday that a key component of its streaming segment had turned a profit for the first time, a significant development for the company. However, Disney anticipates weaker results in this segment for the current quarter. Disney stock dropped nearly 10% in early trading.
The forecast underscores Disney’s ongoing challenges in maintaining profitability in streaming, which is increasingly important as its traditional TV business declines. CEO Bob Iger’s recent turnaround efforts have boosted investor confidence in the stock, particularly after the company’s recent victory in a high-profile proxy fight against activist investor Nelson Peltz.
Some Streaming Profits
In the fiscal second quarter, the direct-to-consumer (DTC) segment of Disney’s entertainment business, including Disney+ and Hulu, reported operating income of $47 million. This marks a significant improvement from the $587 million loss reported in the same period last year.
However, Disney expects the DTC segment’s results to decline in the third quarter, driven by losses from Disney+ Hotstar in India. Despite this, the company anticipates full streaming profitability by the fourth quarter of this year.
In addition to Disney+ and Hulu, not all of Disney’s streaming services were profitable in Q2. Including ESPN+, total direct-to-consumer losses amounted to $18 million, although that was a huge improvement from the $659 million loss reported in the year-earlier period.
Disney Parks
Disney Experiences, which includes Disney Parks, reported revenue of over $8.3 billion. That was a 10% increase over Q2 2023.
CEO Bob Iger said that the Experiences division of the company was a primary driver for growth in the company.
Disney reported the following details:
“The increase in operating income at our domestic parks and experiences was due to higher results at Walt Disney World Resort and Disney Cruise Line, partially offset by lower results at Disneyland Resort.
– At Walt Disney World Resort, higher results in the current quarter compared to the prior-year quarter were due to:
- Increased guest spending attributable to higher average ticket prices
- Higher costs due to inflation, partially offset by lower depreciation and cost-saving initiative
– Growth at Disney Cruise Line was due to an increase in average ticket prices, partially offset by higher costs
– The decrease in operating results at Disneyland Resort was due to:
- Higher costs driven by inflation
- An increase in guest spending attributable to higher average ticket prices and daily hotel room rates
- Higher volumes due to attendance growth, partially offset by lower occupied room nights
International Parks and Experiences
Higher international parks and experiences’ operating results were due to:
– An increase in operating results at Hong Kong Disneyland Resort attributable to:
- Guest spending growth due to increases in average ticket prices and food, beverage and merchandise spending
- Higher volumes resulting from increases in attendance and occupied room nights. Volume growth benefitted from additional days of operations in the current quarter as well as the opening of World of Frozen in November 2023
- Increased costs driven by inflation and new guest offerings”
Results And Guidance
Disney reported adjusted earnings of $1.21 per share for Q2, surpassing analysts’ expectations of $1.10 per share. Revenue came in at $22.1 billion, meeting consensus expectations.
The company also raised its guidance for full-year adjusted earnings growth to 25%, up from the previous 20%. However, Disney incurred a significant impairment charge of over $2 billion after merging its Star India business with Reliance Industries.
Despite the positive earnings report, Disney’s stock took a hit in early trading due to the weaker-than-expected forecast for its streaming segment in the current quarter.
Glad that Disney’s streaming business is becoming profitable?