The Walt Disney Co. handily beat Wall Street estimates on earnings and just beat on revenue in the fiscal third quarter.
The Burbank entertainment and media giant reported on an adjusted net income of $2.8 billion ($1.39 a share) for the quarter ending June 29, compared with adjusted net income of $2.2 billion ($1.03) in the same period a year earlier. Revenue increased by 4% from the third quarter of the prior year to $23.2 billon.
Analysts on average expected earnings of $1.19 on revenue of $23.1 billion, according to LSEG.
In an executive summary released along with quarterly earnings, Disney Chief Executive Bob Iger and Hugh Johnston, the chief financial officer, said that that a core element to Disney’s century of success is the dynamic way the company leverages its creativity across multiple business and revenue streams to fuel long-term value.
“The unmatched creative power of our film and television studios, the wide appeal of our brands and franchises, and the innovative ways we bring our stories to life in our theme parks and experiences is distinctly Disney in a world of entertainment that is crowded with choices,” the two said.
The combined direct-to-consumer streaming businesses of Disney+, Hulu and ESPN+, were profitable for the first time ever, bringing in $47 million in operating income. That was a quarter ahead of when Disney expected to reach that milestone, Iger and Johnston said.
“We remain on track for that profitability to improve in (the fourth quarter),” the pair added.
The number of core Disney+ subscribers increased by almost 12% to 118 million, as compared to the 106 million in the previous year’s third quarter.
Disney continues to invest in its streaming technology to deliver an unparalleled experience, including for advertisers with the best advertiser technology in the streaming business globally, Iger and Johnston said in the summary.
“(We recently) shared our strong upfront results, with overall revenue up 5% driven by sports and streaming,” the pair added. “More than 40% of total upfront dollars committed this year are addressable, inclusive of streaming and digital. We also introduced a Disney Streaming Entertainment ad offering, which matches advertising opportunities with impressions that are served across our family of streaming apps, maximizing supply against premium audiences and outcomes.”
While revenue in the Experiences business segment, which includes theme parks and cruise ships, grew by 2% in the quarter, operating income came in short of its prior guidance, declining by 3% in the third quarter.
“Segment revenue growth was impacted by moderation of consumer demand towards the end of the third quarter that exceeded our previous expectations,” Iger and Johnston said. “While results at domestic parks decreased modestly in the quarter, attendance was comparable year over year and per capita spending was slightly up.”
The pair said they expect that the demand moderation seen in the domestic businesses in (the third quarter) could impact the next few quarters.
“While we are actively monitoring attendance and guest spending and aggressively managing our cost base, we expect (fourth quarter) Experiences segment operating income to decline by mid-single digits versus the prior year, reflecting these underlying demand dynamics as well as impacts at Disneyland Paris from a reduction in normal consumer travel due to the Olympics, and some cyclical softening in China,” Iger and Johnston said in the summary.
