Disney Shares Down By 10% While Company Reports Steady Progress in Business

Disney Company

Disney released its fiscal second-quarter earnings on Tuesday, surpassing analyst estimates after narrowing its streaming losses.

However, shares of the company plummeted 10% as it fell short of revenue estimates for the fourth consecutive quarter and provided a softer outlook for the third quarter in terms of experiences.

The total segment operating income of Disney surged by 17%, buoyed by its entertainment streaming applications—Disney+ and Hulu—turning a profit in the quarter for the first time.

Combining with ESPN+, the streaming businesses incurred a loss of $18 million, significantly narrower than the $659 million loss reported a year earlier.

Entertainment streaming revenue, excluding ESPN+, climbed by 13% to $5.64 billion, with operating income reaching $47 million after a loss of $587 million in the corresponding period last year. The increase was attributed to the rise in Disney+ subscribers and higher average revenue per user.

Disney Company

Disney+ core subscribers grew by over 6 million to 117.6 million globally in the second quarter, while total Hulu subscribers increased by 1% to 50.2 million. ESPN+ subscribers, however, decreased by 2% to 24.8 million.

Disney’s Chief Executive Officer, Bob Iger, highlighted the positive impact of the Experiences segment and the streaming business on the company’s results.

He stated, “Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4.”

Disney’s reported earnings per share adjusted at $1.21 compared to the expected $1.10 cents, while revenue stood at $22.08 billion versus an estimated $22.11 billion. In the U.S., parks and experiences revenue increased by 7% to $5.96 billion, and international sales surged by 29% to $1.52 billion.

However, Disneyland Resort in California experienced lower profits due to cost inflation, particularly higher labor expenses.

Disney Company

The company anticipates third-quarter results for the parks and experiences business to be impacted by increased expenses and attendance normalization following a surge in demand post-pandemic.

Despite a slight revenue miss, Disney saw its traditional TV business struggle as cable TV subscribers continued to decline. ESPN’s revenue increased by 3% to $4.21 billion, but operating income declined by 9% to $799 million due to fewer cable subscribers and higher programming costs.

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.

Content sales, licensing, and other revenue, including box office, dropped by 40% in the quarter to $1.39 billion due to the absence of blockbuster movies.

While Disney+ core subscribers rose during the quarter, growth is not expected in the third quarter. However, the company anticipates returning to subscriber growth in the fourth quarter.

Despite projecting streaming profitability for the fourth quarter, a loss is forecasted in its entertainment direct-to-consumer unit for the fiscal third quarter.

Nate O'Hara
Nathan is a seasoned commerce writer with a passion for unraveling the intricacies of the business world and distilling them into engaging narratives. During his academic journey, he delved deep into subjects like economics, marketing, and entrepreneurship, honing his analytical skills and developing a keen understanding of market dynamics.