The Walt Disney Company (DIS) delivered a stellar performance in its fiscal fourth quarter, exceeding analysts’ expectations and showcasing a remarkable turnaround under CEO Bob Iger. The company’s impressive results were fueled by a powerful combination of box office successes and the surprising profitability of its streaming services. This marks a significant shift for Disney, solidifying its position as a major player in the entertainment landscape.
Revenue for the September quarter jumped 6% to a substantial $22.57 billion, surpassing the LSEG consensus estimate of $22.45 billion. Net income surged to $460 million (25 cents per share), a significant increase from the $264 million reported in the same period last year. Adjusted earnings per share reached $1.14, also outperforming the LSEG estimate of $1.10. Operating income saw a robust 23% year-over-year growth, reaching $3.66 billion. This robust financial picture underscores Disney’s successful strategic repositioning.
The entertainment segment, encompassing traditional television networks, direct-to-consumer streaming, and film, was the undeniable star of the quarter, experiencing a 14% year-over-year growth to $10.83 billion. This impressive growth is directly attributable to several blockbuster hits. “Inside Out 2” achieved a remarkable milestone, becoming the highest-grossing animated film of all time, surpassing even the success of “Frozen II.” Furthermore, “Deadpool & Wolverine” claimed the title of the highest-grossing R-rated film ever, outperforming Warner Bros. Discovery’s “Joker.” The combined success of these two films contributed a staggering $316 million in profit during the quarter, contributing significantly to the segment’s overall profit of $1.1 billion. This achievement further cements Disney’s dominance in the film industry, with the company becoming the first studio to surpass $4 billion in global box office revenue this year.
Perhaps the most significant development is the profitability of Disney’s streaming services. Five years after its launch, Disney+ is finally in the black. The combined streaming business, encompassing Disney+, Hulu, and ESPN+, reported an operating income of $321 million – a remarkable turnaround compared to the $387 million loss in the same quarter last year. This positive shift aligns with a broader trend among major streaming platforms. While Disney+ Core subscribers saw a modest 4% growth to 122.7 million, and Hulu subscribers a 2% increase to 52 million, reflecting similar growth seen by competitors like Netflix, Warner Bros. Discovery, Comcast, and Paramount Global, the profitability is a key indicator of a sustainable business model.
However, the growth in subscribers wasn’t uniform across all tiers. The introduction of a cheaper, ad-supported tier for Disney+ has resulted in a decrease in average revenue per user for domestic subscribers. More than half of U.S. subscribers have opted for this less expensive option. While this impacts revenue per user, it also opens new avenues for advertising revenue growth, with streaming entertainment ad revenue showing a healthy 14% increase. Conversely, the sports segment, largely comprised of ESPN, reported flat revenue.
The experiences segment, encompassing theme parks and consumer products, saw a more modest 1% revenue growth to $8.24 billion. This slower growth reflects a post-pandemic slowdown in visitor numbers, particularly in the U.S., a trend also observed by Comcast at its Universal theme parks. Comcast reported a 5.3% drop in theme park revenue, highlighting the challenges faced by the industry in navigating the post-pandemic landscape. However, Comcast benefited from a surge in revenue driven by the Summer Olympics and increased Peacock subscriber numbers. Peacock added 3 million subscribers, with paid subscribers growing 29% year-over-year to 36 million, and revenue increasing by a substantial 82% to $1.5 billion, enabling Comcast to significantly narrow Peacock’s losses.
Looking ahead, Disney’s fiscal 2025 guidance projects high-single-digit adjusted earnings growth compared to the recently completed fiscal year. Despite anticipating a “modest decline” in Disney+ Core subscribers during the first fiscal quarter due to higher pricing and the expiration of a promotional offer, the overall outlook is optimistic. The company projects a substantial year-over-year increase of approximately $875 million in profit for its entertainment streaming business (excluding ESPN+) in fiscal 2025, with an even more significant double-digit percentage rise expected in fiscal 2026. The experiences segment is also expected to see profit growth, projected at 6% to 8%, despite the anticipated impact of hurricanes and cruise line pre-launch costs totaling $220 million that will affect the first fiscal quarter’s results. With highly anticipated upcoming releases like “Moana 2” and “Mufasa: The Lion King” set to launch during the holiday season, Disney is poised for continued success. The achievement of profitability in its streaming segment reaffirms a critical path for long-term growth and positions Disney for continued success in the dynamic entertainment industry.
