Disney misses on profit and key revenue segments, warns streaming growth could taper

Bob Chapek, Disney CEO at the Boston College Chief Executives Club, November 15, 2021.

Charles Krupa | AP

Disney fell short of expectations for profit and key revenue segments during the fiscal fourth quarter Tuesday and warned strong streaming growth for its Disney+ platform may taper going forward.

Shares of the company fell roughly 8% in after-hours trading.

The company’s quarterly results missed Wall Street expectations on the top and bottom lines, as both its parks and media divisions underperformed estimates. And Chief Financial Officer Christine McCarthy tempered investor expectations for the new fiscal year, forecasting revenue growth of less than 10%. The company reported 2022 fiscal revenue growth of 22%.

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Fourth-quarter revenue in the media and entertainment division fell 3% year over year to $12.7 billion during the year-earlier period, as the company’s direct-to-consumer and theatrical businesses struggled. Analysts had expected segment revenue of $13.9 billion, according to StreetAccount estimates.

The company also posted lower content sales because it had fewer theatrical films on the calendar, and therefore fewer films to place into the home entertainment market.

Here’s how the company performed in the period from July to September: 

  • Earnings per share: 30 cents per share adjusted vs. 55 cents expected, according to a Refinitiv survey of analysts
  • Revenue: $20.15 billion vs. $21.24 billion expected, according to Refinitiv
  • Disney+ total subscriptions: 164.2 million vs. 160.45 million expected, according to StreetAccount

Disney+ added 12.1 million subscriptions during the period, bringing the platform’s total subscriber base to 164.2 million, higher than the 160.45 million analysts had forecast, according to StreetAccount estimates.

However, growth is expected to slow in the fiscal first quarter, Disney executives warned on Tuesday’s conference call.

At the end of the fiscal fourth quarter, Hulu had 47.2 million subscribers and ESPN+ had 24.3 million. Combined, Hulu, ESPN+ and Disney+ have over 235 million streaming subscribers. Netflix, long the leader in the streaming space, had 223 million subscribers, according to the most recent tally.

Disney misses on top and bottom lines, beats on Disney+ subscribers

Disney CEO Bob Chapek said in the company’s earnings release that Disney+ will achieve profitability in fiscal 2024. The direct-to-consumer division lost $1.47 billion during the most recent quarter. It also reported a 10% drop in domestic average revenue per user (ARPU) to $6.10.

The company is set to hike prices for the service in December and is planning an ad-supported tier, which is expected to boost revenue.

Chapek has been on a mission to better link the company’s divisions as one single organization and accelerate its direct-to-consumer strategy.

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The company reported record results in its parks, experiences and products segment, Chapek said. The division, which includes the company’s theme parks, resorts, cruise line and merchandise business, saw revenue increase more than 34% to $7.4 billion during the quarter.

Still, Wall Street had slightly higher hopes for the division: Analysts were expecting revenue of $7.5 billion, according to StreetAccount.

Operating income for the division rose more than 66% to $1.5 billion as spending increased at its domestic and international parks and consumers booked voyages on its new cruise ship, the Disney Wish. The parks unit, specifically, brought in $815 million in operating income, well shy of the $919 million expected by StreetAccount.

Disney cited higher costs and said they were only partially offset by higher ticket revenue, driven by the introduction of the Genie+ and Lightning Lane guest offerings.

CFO McCarthy said Tuesday that Disney is looking for “meaningful efficiencies” and actively examining the company’s cost base.

— CNBC’s Alex Sherman contributed to this report.