Disney posted fiscal first-quarter earnings Wednesday that beat on the top and bottom lines, but revealed the beginnings of expected streaming subscriber losses at Disney+.
The company’s streaming business reported another quarter of profitability despite a 1% decline in subscribers for Disney+, the company’s flagship service. While domestic subscriptions for the platform increased around 1%, international numbers declined around 2%.
Disney warned during its fiscal fourth-quarter report in November that it expected a “modest decline” in subscriptions during the December period. Disney told investors Wednesday that it expects another “modest decline” in subscribers during the second quarter.
Total paid Disney+ subscriptions stand at 124.6 million, compared to 125.3 million at the end of the company’s fiscal fourth quarter. Total Hulu subscriptions rose 3% during the period to 53.6 million.
Still, Disney+’s average monthly revenue per paid subscriber increased roughly 4% to $7.99 due to price hikes, the company said.
Disney’s stock was up about 1% in premarket trading.
Here is what Disney reported for the period ended December 28 compared with what Wall Street expected, according to LSEG
- Earnings per share: $1.76 adjusted vs. $1.45 expected
- Revenue: $24.69 billion vs. $24.62 billion
Disney’s net income increased nearly 23% to $2.64 billion, or $1.40 per share, from $2.15 billion or $1.04 per share, during the same quarter last year. Adjusting for one-time items including restructuring charges and impairments related to intangible Hulu assets, Disney reported adjusted earnings of $1.76 per share.
Revenue increased 4.8% to $24.69 billion compared to $23.55 billion in the year-earlier period.
The company saw revenue gains across the board for its entertainment, sports and experience segments.
Its entertainment division saw a 9% jump in revenue, reaching $10.87 billion. Operating income for the unit, which includes its direct-to-consumer, linear and content sales businesses, increased 95% to $1.7 billion during the quarter thanks to higher content sales and licensing. Linear continued to drag on overall results.
“In fiscal Q1 we saw outstanding box office performance from our studios, which had the top three movies of 2024,” CEO Bob Iger noted in the company’s earnings release Wednesday.
The debut of “Moana 2” over Thanksgiving weekend helped push the box office to new heights. The animated sequel was still going strong at the box office through the new year, topping $1 billion during the Martin Luther King Jr. Day weekend. The company noted Wednesday its content sales/licensing and other operating income got a boost from “Moana 2.”
Overall, Disney dominated the box office in 2024, with the help of other films like Marvel’s “Deadpool & Wolverine” and Pixar’s “Inside Out 2.”
The company said it expects double-digit growth in operating income for the entertainment segment in fiscal 2025, with an increase in direct-to-consumer operating income of around $875 million.
Experiences
Over at its experiences business, which includes parks, cruises and resorts as well as consumer products, revenue rose 3% during the quarter to $9.42 billion.
Domestic theme park revenue accounted for 68% of the division’s total, or $6.43 billion. While that revenue marked a 2% improvement over the same quarter last year, the combination of Hurricanes Milton and Helene coupled with declines in attendance and investments in Disney’s fleet of cruise ships weighed on domestic operating income.
The experiences division posted a 5% decline in domestic theme park operating income for the quarter, at $1.98 billion.
Disney expects its experience segment to see operating income growth of between 6% and 8% in fiscal 2025.
Theme parks in the U.S. have recently experienced a slowdown in foot traffic following the post-Covid surge in attendance.
Disney CFO Hugh Johnston said Wednesday on CNBC’s “Squawk Box” that the experiences segment performed better than expected for the fiscal quarter.
“In fact, the consumer is a bit stronger than we would have expected,” Johnston said Wednesday. “I think what we’re seeing is consumers are just very value focused, and you deliver value to them, they’re willing to pay the price for it.”
Disney’s parks recently turned a record revenue and profit, even as the company has raised prices for its destinations. The company is in the midst of a 10-year, $60 billion investment in the segment.
Sports
In sports, Disney’s ESPN reported revenue growth of 8% year over year, reaching $4.81 billion, and operating income that was up 15% from the prior-year period to $228 million.
The company expects operating income for its overall sports segment, which houses ESPN as well as Star India, to grow 13% in fiscal 2025.
Disney said that guidance includes a roughly $50 million hit tied to its exit from the Venu Sports joint venture. Disney and its joint venture partners, Warner Bros. Discovery and Fox, called off their efforts to move forward with Venu, which was supposed to be a streaming app that included all of the live sports from its parent companies.
The change in strategy came after legal headaches that halted the launch of Venu last fall.
As a result of the Venu stoppage, Fox on Tuesday announced it would move forward with its own streaming service after years of staying largely on the sidelines of the direct-to-consumer streaming game.
This story is developing. Please check back for updates.
Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.
