Disney has made a triumphant return to profitability in the third quarter, driven by the success of its combined streaming business and a stellar showing in theaters with the release of “Inside Out 2.” The entertainment giant reported a nearly tripled operating income of $1.2 billion for its entertainment segment, which includes the movie studio and parts of its television wing. This success was further bolstered by the box office hits “Deadpool & Wolverine,” giving Disney the top two films of the year.
The direct-to-consumer business, which encompasses Disney+ and Hulu, reported a quarterly operating loss of $19 million, significantly smaller than the $505 million loss from the previous year. Revenue for this segment climbed 15% to $5.81 billion, showcasing the growing strength of Disney’s streaming services. In a strategic move, Disney announced price increases for Disney+, Hulu, and ESPN+ starting on Oct. 17, with the aim of further capitalizing on the success of its streaming platforms.
Disney’s financial performance for the quarter was impressive, with the company earning $2.62 billion, or $1.43 per share, compared to a loss of $460 million, or 25 cents per share, in the same period last year. Adjusted earnings per share also exceeded analysts’ expectations, coming in at $1.39 per share. Revenue for the quarter rose 4% to $23.16 billion, surpassing Wall Street estimates.
Despite these positive results, Disney’s stock faced some pressure in early trading due to weaknesses in its domestic parks division. The company noted a moderation in demand at U.S. parks, which could persist for the next few quarters. Disney anticipates a mid single-digit decline in operating income for its Experiences division in the fourth quarter, attributed to various factors including softening demand in China and the impact of the Olympics on consumer travel to Disneyland Paris.
The success of Disney’s content sales and licensing, fueled by the performance of “Inside Out 2” in theaters, contributed to the company’s overall operating income. The movie has become the highest-grossing animated film of all time, generating over $1.5 billion globally. Additionally, the original “Inside Out” played a significant role in driving Disney+ sign-ups and views worldwide.
Disney’s combined streaming businesses, including Disney+, Hulu, and ESPN+, achieved profitability for the first time, thanks to a strong quarter for ESPN+ and better-than-expected performance from the direct-to-consumer unit. CEO Bob Iger and CFO Hugh Johnston highlighted ESPN’s success in primetime viewership, driven by popular sports events like the NBA finals, WNBA draft, and NHL playoffs.
Looking ahead, Disney anticipates full-year adjusted earnings per share growth of 30%, reflecting the company’s confidence in its future prospects. Shareholders recently rejected activist investor Nelson Peltz’s bid for board seats, reaffirming their support for Iger’s leadership. Additionally, Disney resolved its conflict with Florida Gov. Ron DeSantis over the development of Walt Disney World, signaling a positive outcome for the company’s future endeavors.
In conclusion, Disney’s strong performance in the third quarter underscores its resilience and adaptability in the ever-evolving entertainment landscape. With a successful streaming business, blockbuster movie releases, and strategic growth initiatives, Disney is well-positioned for continued success in the years to come.
