The Walt Disney Co. has exceeded expectations in its streaming business, turning a profit a quarter earlier than anticipated and beating Wall Street estimates in its fiscal Q3 earnings report. The company reported revenue of $23.2 billion, income of $3.1 billion, and earnings per share of $1.43, all of which surpassed analyst predictions.
The entertainment division was the driving force behind Disney’s success in Q3, with profits soaring due to improvements in direct-to-consumer offerings and the success of films like Inside Out 2. Entertainment revenues reached $10.6 billion, a 4 percent increase from the previous year, while income more than doubled to $1.2 billion.
Specifically, the direct-to-consumer streaming business, which includes Disney+, Hulu, and ESPN+, saw revenue of $6.4 billion and income of $47 million, a significant improvement from the losses experienced the year before. Disney achieved profitability in its streaming business earlier than expected and anticipates further margin improvements in fiscal Q4.
CEO Bob Iger attributed the success of Disney’s streaming services to the company’s creativity, noting increased consumption of content on the platforms. Management also highlighted the rollout of a password sharing crackdown and a strong advertising market for the streaming service as factors driving growth.
However, not all divisions of Disney performed as well in Q3. The experiences division, which includes theme parks and cruise lines, reported a softer quarter with $8.4 billion in revenue, a 2 percent increase from the previous year, but a 3 percent decrease in operating income. Disney anticipates continued slowdown in this division over the next few quarters, partly due to the negative impact of the Paris Olympics on Disneyland Paris attendance.
Despite challenges in the experiences segment, Disney remains confident in its overall performance. Iger stated that the company’s strategic priorities in creative studios, streaming, sports, and experiences businesses have driven strong results. Disney achieved profitability in its combined streaming businesses ahead of schedule and remains optimistic about future growth opportunities.
In terms of streaming subscribers, Disney+ core subscribers reached 118.3 million, while Hulu subscribers increased by 2 percent to 46.7 million. Disney+ domestic average revenue per user (ARPU) declined slightly, while international ARPU rose. Hulu ARPU increased by 8 percent, driven by higher advertising revenue.
In the sports division, revenues for ESPN reached $4.56 billion, a 5 percent increase from the previous year, with operating income of $802 million, down 6 percent. Factors contributing to the decline in operating income included higher production costs and a decrease in pay-TV subscribers, offset by a better advertising environment and higher fees.
Looking ahead, Disney continues to explore strategic partnerships for an ESPN direct-to-consumer service. Iger mentioned ongoing conversations with potential partners, emphasizing the company’s belief in the opportunities for collaboration, particularly in content development.
Overall, Disney’s strong performance in Q3 reflects its ability to adapt and thrive in a rapidly evolving entertainment landscape. With a focus on creativity, innovation, and strategic partnerships, Disney is well-positioned to continue driving growth and delivering value to its shareholders and audiences.
