Disney (DIS) reported its fiscal third-quarter earnings on Wednesday, revealing that its total streaming division had turned a profit for the first time. This was a significant milestone for the company, as it had previously expected to achieve total streaming profitability by this quarter. The direct-to-consumer (DTC) streaming business, which includes Disney+, Hulu, and ESPN+, posted operating income of $47 million, a stark improvement from the $512 million loss in the prior-year period.
Overall, Disney reported adjusted earnings of $1.39 per share, surpassing analysts‘ expectations of $1.19 and higher than the $1.03 reported in the same period last year. Revenue also exceeded consensus estimates, coming in at $23.2 billion compared to the expected $23.1 billion. The company raised its guidance for full-year adjusted earnings growth to 30%, up from the previous 25%.
Despite the positive news in the streaming division, Disney’s parks business experienced weakness in the quarter. Domestic operating income dropped by 6% to $1.35 billion, with the company attributing this decline to a moderation in consumer demand. Disney warned that this trend could continue over the next few quarters, particularly impacting Disneyland Paris due to the Olympics and cyclical softening in China. However, the company noted that demand for its cruises remained strong.
Looking ahead, Disney remains optimistic about its trajectory, with plans to improve margins over the coming years. One of the strategies to achieve this is through new price hikes for its streaming services. Disney announced that it would raise prices across its Disney+ and Hulu plans, with the changes set to take effect in October. The company expects both DTC entertainment and ESPN+ to be profitable in the fourth quarter.
Disney stock initially rose by 3% in premarket trade following the earnings report before giving up these gains. Despite the fluctuations, Disney stock had remained relatively unchanged throughout the year leading up to the report. The company’s focus on expanding its streaming business and improving profitability in the face of challenges in its parks division demonstrates its commitment to long-term growth and success.
In conclusion, Disney’s latest earnings report highlights the company’s progress in achieving profitability in its streaming division while facing challenges in its parks business. With a strong outlook for streaming profitability and plans for margin improvement, Disney continues to position itself for future success in the ever-evolving entertainment industry.