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 performance in its streaming division, Disney’s parks business faced challenges in the quarter. Domestic operating income for the parks dropped by 6% from the prior year to $1.35 billion. The company noted a „moderation of consumer demand“ towards the end of the quarter and warned that this trend could continue over the next few quarters. Disneyland Paris is expected to be impacted by reduced consumer demand due to the Olympics and cyclical softening in China, although demand for cruises remains 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. The company announced that it would raise prices across its Disney+ and Hulu plans, with these changes set to take effect in October. Disney expects both DTC entertainment and ESPN+ to be profitable in the fourth quarter.
Following the earnings report, Disney stock initially rose by 3% in premarket trade before giving up these gains. Year-to-date, Disney stock had been relatively unchanged prior to the report. The company’s outlook for streaming profitability to improve in the fourth quarter provides investors with a positive outlook for the future.
In conclusion, Disney’s strong performance in its streaming division, coupled with challenges in its parks business, paints a mixed picture of the company’s overall performance in the third quarter. With a focus on improving margins and profitability in its streaming services, Disney is positioning itself for long-term growth and success in the evolving entertainment landscape.