Disney Streaming Business Turns Profitable in First Financial Report Since Iger Protest

Walt Disney Co. posted a second-quarter loss due to restructuring and impairment charges, but its adjusted profit beat expectations and its streaming business generated profit. Theme parks also continued to do well and the company improved its outlook for the year.

While Disney said Tuesday that it expects an overall slowdown in its streaming business in the current quarter due to its India platform, Disney+Hotstar, it expects its combined streaming businesses to are profitable in the fourth quarter and represent a significant future growth driver for the company, with further improvements in profitability in fiscal 2025.

The direct-to-consumer business, which includes Disney+ and Hulu, reported quarterly operating profit of $47 million, compared with a loss of $587 million a year earlier. Revenue rose 13% to $5.64 billion.

Disney+ core subscribers grew more than 6% in the second quarter.

“Looking at our business as a whole, it is clear that the turnaround and growth initiatives we launched last year have continued to produce positive results,” CEO Bob Iger said in a prepared statement .

It’s the first financial report since shareholders rejected activist investor Nelson Peltz’s efforts to stake a claim for a seat on the company’s board last month, standing firmly with Iger as he is trying to revitalize the company after a difficult period.

Thomas Monteiro, senior analyst at Investing.com, said some Disney investors may have expected more from the quarterly report, but that “the company has returned its operations to its core business model, which is inherently more conservative.”

Monteiro was focused on the company’s efforts to make its streaming division profitable.

“The big surprise of the day came from the streaming side, which finally managed to generate profits – well beyond forecasts – in the midst of Hollywood’s massive strike period,” Monteiro said. “This indicates that the more global, low-production-cost model, like that of Netflix, is likely the way to go in an operation that needs to rethink its growth expectations as a whole.”

Revenue from Disney’s domestic theme parks increased 7%, while revenue from its overseas theme parks saw a 29% increase.

But Disney acknowledged it struggled with higher costs at its theme parks during the quarter due to inflation.

The company said Walt Disney World guest spending increased due to rising ticket prices, while Disneyland guests increased spending due to increased ticket prices and room rates. hotel.

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” films.

For the period ended March 30, Disney lost $20 million, or a penny per share. That compares to a profit of $1.27 billion, or 69 cents per share, a year ago.

Restructuring and impairment charges jumped to $2.05 billion from $152 million in the year-earlier period.

Adjusted earnings, excluding charges and other items, came to $1.21 per share, easily beating the $1.12 per share predicted by analysts surveyed by Zacks Investment Research.

Disney said that because of its second-quarter performance, its full-year adjusted earnings per share growth target is now 25%. It previously forecast growth of at least 20%.

The Burbank, Calif., company’s revenue rose to $22.08 billion from $21.82 billion a year earlier, but was slightly below Wall Street estimates of $22.13 billion. .

Content sales and licensing revenue fell 40% because Disney released no significant film titles during the second quarter compared to the year-ago period, which included the release of “Ant- Man and the Wasp: Quantumania. Last year’s results were also helped by the continued performance of “Avatar: The Way of Water”, released in December 2022.

Shares fell 5% before the market opened.

In February, The Walt Disney Co. announced that it was making “significant cost reductions” and had reduced its selling, general and other operating expenses by $500 million during its first quarter. The company has cut thousands of jobs in 2023.

In March, allies of Gov. Ron DeSantis and Disney reached a settlement agreement in state court litigation over how Walt Disney World would be developed in the future, following the government takeover of the theme park by the governor of Florida.

Last month, Disneyland performers in California and the union that organizes them, the Actors’ Equity Association, said they had filed a petition for union recognition.