California: Disney reported stronger-than-expected fiscal third-quarter earnings on Wednesday, with its combined streaming businesses turning a profit ahead of schedule, boosting overall performance.
The entertainment giant posted adjusted earnings per share of 1.39 dollars, surpassing Wall Street's forecast of 1.19 dollars, according to LSEG data. Revenue also exceeded expectations, coming in at 23.16 billion dollars compared to the anticipated 23.07 billion dollars.
Disney's total segment operating income surged by 19 percent to 4.225 billion dollars compared to the same period last year, driven by the positive momentum in its entertainment division, particularly in streaming. For the first time, Disney’s combined streaming businesses — Disney+, Hulu, and ESPN+ — achieved profitability, a milestone that occurred a quarter earlier than anticipated.
During the earnings call, Disney executives highlighted the streaming business's progress toward profitability, a crucial target for media companies as more customers shift to streaming services. CEO Bob Iger praised the company’s recent successes in film and television, which have contributed to the growth of the streaming segment.
The combined streaming businesses reported an operating profit of 47 million dollars, a significant improvement from the 512 million dollars loss reported in the same quarter last year. However, excluding ESPN+, the direct-to-consumer streaming unit still faced a loss of 19 million dollars.
In a notable shift in reporting structure, Disney now categorizes ESPN under its sports unit, while Disney+ and Hulu fall within the direct-to-consumer entertainment segment. Disney+ Core subscribers, which exclude Disney+ Hotstar in India and other regions, rose by 1 percent to 118.3 million, defying earlier expectations of no subscriber growth for the quarter. Hulu subscribers also saw a 2 percent increase, reaching 51.1 million.
The entertainment segment’s revenue increased by 4 percent to 10.58 billion dollars, largely driven by subscription revenue growth due to price hikes and an uptick in Disney+ Core subscribers. However, revenue for Disney’s traditional TV networks declined by 7 percent.
On Tuesday, Disney announced further price increases for its streaming services. Iger addressed these hikes during the earnings call, stating that the company’s growing popularity and consumption give them the confidence to adjust pricing without significant customer loss.
Looking ahead, Iger revealed plans to enhance technology features on Disney’s streaming platforms and introduce live channels in the coming months. He also announced an upcoming crackdown on password sharing, similar to recent moves by Netflix, as part of efforts to boost profitability.
Iger expressed optimism about the future of Disney’s streaming business, hinting at significant growth expected by fiscal 2025. Disney’s overall revenue for the quarter increased by 4 percent to 23.155 billion dollars compared to the same period last year.
ESPN’s domestic and international revenue, excluding Star India, grew by 5 percent, with domestic advertising revenue surging by 17 percent. ESPN’s operating income rose by 4 percent to 1.09 billion dollars, benefiting from a rebound in the ad market, particularly in digital and streaming.
Disney CFO Hugh Johnston noted that the ad market is "really healthy and strong," driven by Disney’s live sports offerings and streaming services. While there was some softness in domestic parks, Johnston highlighted that the entertainment division’s profit tripled during the quarter, underscoring the strength of Disney’s diverse portfolio.
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