Disney’s latest financial report reveals a mixed bag of results, with theme parks thriving and streaming profits on the rise, while the film studio faces challenges.
Disney’s Financial Performance: Theme Parks Thrive While Studios Struggle
Disney’s theme parks, which had a few wobbly quarters, blew past Wall Street estimates as streaming profits advanced in the June quarter, vying with red ink at the film studio on tough comparisons with blockbuster Inside Out 2 from the previous year.
Revenue and Earnings Overview
Total revenue rose 2% for Disney’s fiscal third quarter to $23.7 billion, slightly below forecasts. Adjusted earnings per share was a significant beat at $1.61, up from $1.39.
Segment Performance
Operating income across the media giant’s three reporting segments – Entertainment, Experiences, and Sports – grew 8% to $4.6 billion. The Sports division, led by ESPN, is taking center stage with major announcements over the past 12 hours: the timing and price of ESPN’s new streaming service; a rights deal with WWE; and ESPN acquiring the NFL Network.
Advertising and Revenue Trends
In Sports, ESPN’s domestic advertising revenue rose 3%. Total revenue Stateside was up 1% to $3.9 billion, despite a 7% dip in income due to higher programming and production costs, including rate increases for NBA and college sports rights.
Entertainment Sector Challenges
Total Sports revenue fell 5% to $4.3 billion, while profit surged 29% to $1 billion, absent losses from Star India that weighed on the 2024 quarter. Disney restructured its India operations in November 2024, which will impact its financials until it passes that point this year.
Entertainment profit of $1 billion dropped 15%, with revenue inching up 1% to $10.7 billion as softer theatrical releases and ongoing declines in linear television were partly offset by upbeat streaming results. The content division where the film studio resides swung to a loss of $21 million from a profit of $254 million due to higher film cost impairments and lower box office performance with Elio, Thunderbolts, and Lilo & Stitch in the June quarter compared to Inside Out 2 last year.
Direct-to-Consumer Growth
Direct-to-Consumer revenue rose 6% to $6.2 billion, with streaming profit of $346 million surpassing a $19 million loss a year ago and increasing sequentially from Q1 as well.
Disney+ hit 128 million subscribers, adding 1.8 million from FYQ1. Combined, Disney+ and Hulu subscribers rose to 183 million, with Hulu growing to 55.5 million total subscribers, including 4.3 million with Live TV, which declined slightly.
Hulu Acquisition and Future Plans
The quarter was significant for Hulu news, as Disney closed out its acquisition of the remaining stake in the streamer it didn’t already own from Comcast/NBCUniversal on June 9. Disney noted that Q2 DTC was marked by subscription revenue growth due to more subscribers and rate increases. Programming and production costs fell from the previous year, including International Cricket Council (ICC) content carried on Disney+ Hotstar.
The company also highlighted an increase in hours of content available on the services, lower marketing costs, and higher subscriber-based license fees attributable to more subscribers to bundles with third-party offerings.
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Linear Networks Decline
Linear Networks revenue fell 15% to $2.27 billion, and operating income declined 28% to $697 million, driven by the Star India transaction that knocked international revenue down by 58%. Domestic revenue also fell 4% to $2.05 billion, and profit dropped 14% as advertising sales declined amid lower average viewership and rates. Affiliate revenue fell on fewer subscribers.
Future Outlook
This has been the same story quarter after quarter at Disney and other legacy media companies for years now. Warner Bros. Discovery and Comcast are carving out their linear assets. Disney and partner Hearst are exploring a sale of jointly owned A+E Media, something CEO Bob Iger may be asked about on a call with analysts later this morning.
Parks & Experiences Growth
Domestic Parks & Experiences revenue jumped 10% to $6.4 billion, and operating income grew 22% to $1.7 billion, driven by higher spending and more hotel stays at the parks and resorts, along with a boost from Disney Cruise Line due to the launch of the Disney Treasure in the March quarter.
Experiences’ total revenue, including international parks and consumer products, rose 8%, exceeding forecasts, to $9.1 billion, with operating income of $2.5 billion, up 13%.
Universal Epic Universe opened on May 22, boosting parent Comcast’s quarterly numbers but showing no apparent negative impact on Orlando neighbor Walt Disney World. Also in May, Disney made headlines by announcing a new state-of-the-art theme park and waterfront resort in Abu Dhabi.
“We are pleased with our creative success and financial performance in Q3 as we continue to execute across our strategic priorities,” said Iger after the quarterly numbers. “The company is taking major steps forward in streaming with the upcoming launch of ESPN’s direct-to-consumer service, our just-announced plans with the NFL, and our forthcoming integration of Hulu into Disney+, creating a truly differentiated streaming proposition that harnesses the highest caliber brands and franchises, general entertainment, family programming, news, and industry-leading sports content. And we have more expansions underway around the world in our parks and experiences than at any other time in our history. With ambitious plans ahead for all our businesses, we’re not done building, and we are excited for Disney’s future.”
He’ll be hosting that call at 8:30 ET.
