Disney earnings top analyst estimates as streaming nearly breaks even in the quarter

Disney reported fiscal second-quarter earnings Tuesday that beat analyst estimates after narrowing streaming losses. Revenue was in line with expectations.

Disney’s total segment operating income jumped 17% as Disney’s entertainment streaming applications — Disney+ and Hulu — turned a profit in the quarter for the first time. When combined with ESPN+, the streaming businesses lost $18 million in the quarter, much narrower than the $659 million loss the division reported a year earlier.

Entertainment streaming revenue (excluding ESPN+) rose 13% in the quarter to $5.64 billion, and operating income was $47 million after a loss of $587 million a year prior. Disney credited increased Disney+ subscribers and higher average revenue per user for the gains.

Disney+ Core subscribers increased by more than 6 million in the second quarter to 117.6 million global customers. Total Hulu subscribers grew 1% to 50.2 million. ESPN+ subscribers fell 2% to 24.8 million.

Here is what Disney reported compared with what Wall Street expected, according to LSEG:

• Earnings per share: $1.21 adjusted vs. $1.10 cents expected
• Revenue: $22.08 billion vs. $22.11 billion expected

“Our results were driven in large part by our Experiences segment as well as our streaming business,” Disney Chief Executive Officer Bob Iger said in a statement. “Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4.”

U.S. parks and experiences revenue rose 7% to $5.96 billion, and international sales soared 29% to $1.52 billion on increased attendance and higher prices at Hong Kong Disneyland Resort.

Disney reported a loss attributable to the company of $20 million, or 1 cent per share, compared with a profit of $1.27 billion, or 69 cents per share in the year-earlier period. Adjusting for restructuring and impairment charges, among other things, Disney reported a profit of $1.21 per share.

Disney shares fell about 5% in premarket trading Tuesday.

Disney’s TV business continued to lag as millions of Americans drop cable TV each year. While ESPN’s revenue rose 3% to $4.21 billion, operating income dropped 9% to $799 million. Lower advertising revenue, a drop in cable subscribers, and higher programming costs attributable to the College Football Playoff led to the decline.

Linear network revenue across Disney’s portfolio, excluding ESPN, fell 8% to $2.77 billion. Operating incomed slumped 22% to $752 million. Disney cited fewer subscribers and a drop in international affiliate fees due to contract rate decreases for the declines. Advertising revenue decreases due to “lower average viewership” was also a factor, Disney said.

Content sales, licensing and other revenue, which includes box office, fell 40% in the quarter to $1.39 billion as Disney didn’t have any blockbuster movies in the quarter. Disney noted last year’s quarter also included the benefit of the ongoing performance of “Avatar: The Way of Water,” which was released in December 2022 and generated more than $2.3 billion in global box office sales.

This story is developing. Please check back for updates.