Disney’s fiscal second-quarter earnings report unveiled a mixed bag of results, showcasing strength in streaming but facing headwinds in traditional segments. While the company beat analyst expectations with adjusted earnings per share of $1.21 compared to the anticipated $1.10, its revenue of $22.08 billion fell slightly short of the expected $22.11 billion, marking the fourth consecutive quarter of revenue misses. Consequently, Disney’s shares plummeted by 10% as investors reacted to the soft guidance for the third quarter, particularly in the experiences segment.
One of the standout performances in the quarter came from Disney’s streaming businesses, which reported a significant milestone as Disney+ and Hulu turned profitable for the first time. Operating income for the entertainment streaming segment surged to $47 million from a loss of $587 million a year prior, with streaming revenue excluding ESPN+ rising by 13% to $5.64 billion. This achievement was attributed to the increased number of Disney+ subscribers, which exceeded 117.6 million globally, along with higher average revenue per user.
Despite the impressive strides in streaming, Disney’s traditional businesses faced challenges, particularly in the TV segment. ESPN’s revenue rose by 3% to $4.21 billion, but operating income dropped by 9% to $799 million due to a decline in cable subscribers and higher programming costs. Similarly, linear network revenue across Disney’s portfolio, excluding ESPN, fell by 8% to $2.77 billion, with operating income slumping by 22% to $752 million, attributed to fewer subscribers and decreased international affiliate fees.
In the experiences segment, Disney’s U.S. parks and experiences revenue rose by 7% to $5.96 billion, while international sales soared by 29% to $1.52 billion. However, Disneyland Resort in California reported lower profits due to cost inflation, including higher labor expenses, which impacted overall profitability in the segment. Furthermore, third-quarter results are expected to be weighed down by higher expenses and attendance normalization following a post-pandemic surge in demand.
Looking ahead, Disney anticipates returning to subscriber growth in the fourth quarter despite expecting no growth in the third quarter for Disney+ core subscribers. The recent deal with Charter Communications, which provided some cable packages with subscriptions to Disney+’s ad tier, is expected to drive growth in the segment, albeit partially diluting average revenue per user. While the company projects streaming profitability for the fourth quarter, it forecasts a loss in its entertainment direct-to-consumer unit for the fiscal third quarter. Despite the challenges ahead, Disney remains committed to navigating the evolving media landscape and leveraging its diverse portfolio to drive long-term growth and value for shareholders.
