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 and declines at linear networks.
In an early look at the numbers, Evercore ISI analyst Kutgun Maral called it a “healthy quarter with upside where it matters most, theme parks & DTC profitability.”
Shares rose overnight, dipped premarket and are trading sideways as CEO Bob Iger and CFO Hugh Johnson take questions from analysts on a call.
Total revenue rose 2% for Disney’s fiscal third quarter to $23.7 billion, hair lighter than forecasts. Adjusted earnings per share was a big beat at $1.61, up from $1.39.
Operating income across the media giant’s three reporting segments – Entertainment, Experiences and Sports — grew 8% to $4.6 billion. The latter division led by ESPN is taking center court 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.
In Sports, ESPN’s domestic advertising revenue rose 3%. Profit eased 7% on higher programming and production costs including rate increases for the NBA and college sports rights.
Total Sports revenue fell 5% to $4.3 billion and profit surged 29% to $1 billion absent losses from Star India that weighed on the 2024 quarter. Disney restructured its India operations in November of 2024, which will have a ripple effect its financials until it passes that point this year.
Entertainment profit of $1 billion dropped 15% and revenue inched up 1% to $10.7 billion as softer theatrical and ongoing declines in linear television were partly offset by upbeat streaming results. The content division where the film studio lives swung to a loss of $21 million from a profit of $254 million on higher film cost impairments and lower box office with Elio, Thunderbolts and Lilo & Stitch in the June quarter vs Inside Out 2 last year.
In commentary alongside the numbers, CEO Bob Iger and CFO Hugh Johnston held up Lilo & Stitch as a proof of ongoing momentum at the film studio. The live action remake reboot recently crossed the $1 billion mark at the worldwide box office, making it Hollywood’s first film to reach that milestone this year, joining global hits Moana 2, Deadpool & Wolverine and Inside Out 2 to become Disney’s fourth billion-dollar-film in just over a year and fueling viewership of the original 2002 animated film and related content on Disney+ with more than 640 million hours streamed globally.
A a sequel to the live-action film is n development. The film is also is on track to become the company’s second-largest licensed merchandise franchise this year behind only Mickey Mouse, with more than 70% revenue growth compared to last year. Stitch has been deployed across our parks and experiences worldwide.
Marvel’s The Fantastic Four: First Steps opened to great reviews two weeks ago and upcoming 2025 releases include highly anticipated Zootopia 2 and Avatar: Fire and Ash. Lucasfilm’s Star Wars: The Mandalorian and Grogu, Pixar’s Toy Story 5, a live-action Moana and Marvel’s Avengers: Doomsday arrive in 2026.
Direct-to-Consumer revenue rose 6% to $6.2 billion as streaming profit of $346 million bested a $19 million loss a year ago and was up sequentially from Q1 as well.
Disney+ hit 128 million subscribers, adding 1.8 million from FYQ2. Disney+ and Hulu subs combined rose to 183 million. Hulu grew to 55.5 million total subscribers including 4.3 million with Live TV, which declined slightly.
Disney’s fiscal year ends in September.
The quarter was big on Hulu news. Disney closed out its acquisition of the remaining stake in the streamer it didn’t already own from Comcast/NBCUniversal on June 9.
Disney said Q2 DTC was marked by subscription revenue growth on more subscribers and rate increases. Programming and production costs fell from the year earlier that included International Cricket Council (ICC) carried on Disney+ Hotstar.
The company also noted 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.
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.
This has the 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 Iger may be asked about on the call.
Domestic Parks & Experiences revenue jumped 10% to $6.4 billion and operating income grew 22% to $1.7 billion with higher spending and more hotel stays at the parks and resorts and, to a lesser extent, a boost from Disney Cruise Line from the launch of the Disney Treasure in the March quarter.
Experiences’ total revenue including international parks and consumer products, rose 8%, ahead of forecasts, to $9.1 billion with operating income of $2.5 billion, up 13%.
Universal Epic Universe opened 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 a big splash announcing a new, state-of-the- theme park anf 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.”
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