The Walt Disney Company posted a loss in its second quarter due to restructuring and impairment charges, but its adjusted profit beat expectations and its streaming business turned profitable. Theme parks also continued to perform well, and the company raised its full-year outlook.
Disney on Tuesday said its overall streaming business will soften in the current quarter due to its platform Disney + Hotstar in India, expecting its combined streaming businesses to be profitable in the fourth quarter and a meaningful future growth driver. The company, with further improvements in profitability in FY2025.
The direct-to-consumer business, which includes Disney+ and Hulu, posted quarterly operating income of $47 million, compared with $587 million a year earlier. Revenue rose 13% to $5.64 billion.
For the combined streaming businesses, which include Disney+, Hulu and ESPN+, second-quarter operating loss narrowed to $18 million from $659 million, while revenue improved to $6.19 billion from $5.51 billion.
Disney+ Prime subscribers rose more than 6% in the second quarter.
However, the improving picture for Disney in streaming is its declining cable business. Revenue in that segment fell 8% in the most recent quarter.
“Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we’ve put in place over the past year continue to yield positive results,” CEO Bob Iger said in a prepared statement.
Speaking during Disney’s conference call, Iger said the company plans to add the ESPN tab to Disney+ by the end of the year, a move it previously made with Hulu. This will give US subscribers access to some live sports and studio programming on the Disney+ app.
ESPN, Fox and Warner Bros. Discovery announced projects The sports streaming platform, which includes offerings from at least 15 networks and four major professional sports leagues in February, is slated to launch in the fall.
Iger also said the company will begin stricter measures next month Password sharing It will expand that crackdown globally in September for its streaming service in some markets.
While Disney has quality streaming content, Iger said the company now needs to focus on building its technology, similar to what competitors like Netflix are doing. Those measures, including password cracking, are expected to improve profitability.
It was the first financial report since shareholders rejected attempts by activist investor Nelson Belts Last month, Iger stood firmly behind the company as it tried to revive the company after a difficult stretch to secure seats on the company’s board.
Thomas Monteiro, senior analyst at Investing.com, said some Disney investors may have expected more from the quarterly report, but “the company has tilted its performance toward its core business model, which is more conservative by nature.”
Monteiro focused on trying to make the company’s streaming division profitable.
“The big surprise of the day came on the streaming front, which finally managed to turn a profit — ahead of forecasts — amid a period of massive Hollywood strikes,” Monteiro said. “This suggests that perhaps a more global, lower-production-cost Netflix-like model is the way to go in a process that needs to rethink its growth expectations as a whole.”
Revenue at Disney’s domestic theme parks rose 7%, while its overseas theme parks rose 29%.
But Disney acknowledged wrestling with higher costs at its theme parks in the quarter due to inflation.
The company said guests spent more at Walt Disney World due to higher ticket prices, while Disneyland guests increased their spending due to higher ticket prices and hotel room rates.
Overseas, Hong Kong Disneyland benefited from the November opening of World of Frozen, a section of the park that includes rides based on the popular “Frozen” movies.
Like many tourist destinations, Disney continues to adapt to post-pandemic travel.
“Consumers continue to travel in record numbers, we’re still seeing healthy demand, and we’re seeing a global moderation from post-peak Covid travel,” Chief Financial Officer Hugh Johnston said on the call.
In the period ended March 30, Disney lost $20 million, or a penny per share. That compares with a profit of $1.27 billion, or 69 cents per share, a year ago.
Charges for restructuring and impairments rose to $2.05 billion from $152 million in the prior-year period.
Adjusted earnings, which strip out charges and other items, came in at $1.21 per share, easily beating the $1.12 per share analysts were expecting from Zacks Investment Research.
Disney now has a full-year adjusted earnings per share growth target of 25%, thanks to its second-quarter performance. It had previously predicted at least 20% growth.
The Burbank, California, company’s revenue rose to $22.08 billion from $21.82 billion a year earlier, but fell slightly short of Wall Street estimates of $22.13 billion.
Content sales and licensing revenue fell 40% in the second quarter, as Disney didn’t release significant movie titles in the second quarter, compared to a year earlier after the release of “Ant-Man and the Wasp: Quantummania.” Last year’s results were helped by the ongoing performance of the show “Avatar: The Way of Water,” which releases in December 2022.
Shares fell more than 10% on Tuesday.
In February, The Walt Disney Company said it was making “significant cost reductions” and reducing its selling, general and other operating expenses by $500 million in its first quarter. Company Cut thousands of jobs In 2023.
In March, Gov. Ron DeSantis and Disney allies A solution Agreement in state court battle over how Walt Disney World is shaped in the future following the Florida governor’s government takeover of the theme park resort.
Character artists and their organizing union, Actors Equity, said last month at Disneyland in California: They filed a petition For union recognition.
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