Walt Disney Co. reported strong financial performance for its first quarter of fiscal year 2025, exceeding analyst expectations driven primarily by the success of its animated film "Moana 2" and growth across its sports and experiences divisions. The entertainment giant revealed impressive earnings, signaling confidence as it navigates challenges within its theme park operations.
For the quarter ending December 28, 2024, Disney's adjusted earnings per share (EPS) soared by 44% to $1.76, surpassing analysts' consensus of $1.45, according to LSEG's survey of 24 analysts. Revenue rose 5% to $24.69 billion, edging past analysts' projections of $24.62 billion.
Chief Executive Officer Bob Iger hailed the results, stating, "Overall, this quarter proved to be a strong start to the fiscal year, and we remain confident in our strategy for continued growth." Iger's optimism was bolstered by the company’s ability to generate significant revenue across its multiple segments, with operating income increasing by 31% from the previous year to reach $5.1 billion.
A big contributor to this financial success was the box office triumph of "Moana 2," which not only captivated audiences but also eclipsed the $1 billion mark during its release, making it Disney’s fourth animated feature to achieve such milestone. This performance showcased Disney's continuing influence and prowess within the entertainment industry.
Despite the positive highlights, Disney faced challenges, particularly with its flagship streaming service, Disney+, which lost about 1 million subscribers—about 1% of its user base—following recent price increases. This subscriber dip was anticipated, with Disney earlier indicating modest declines due to the changing pricing strategy implemented last October. CFO Hugh Johnston stated, "We're doing a nice job of eliminating unnecessary cost and, at the same time, investing back in the business..." Johnston emphasized the integrated strategy between linear networks and streaming services, which he believes positions Disney uniquely within the competitive media space.
While the strength of the entertainment division offset some concerns, Disney’s domestic parks recorded softer-than-expected results. The Experience segment was significantly impacted by hurricanes Helene and Milton, which caused considerable disruption, along with $75 million tied to the launch of the Disney Treasure cruise ship. Operating income for this segment remained relatively flat at around $3.1 billion.
Brandon Katz, senior entertainment industry strategist at Parrot Analytics, expressed concerns, noting, "Parks have always been Disney's ace-in-the-hole... it's concerning Parks have now reported softer-than-expected results. This reflects the greater challenges the company faces as it manages different aspects of its business simultaneously.
Encouragingly, the sports unit, which includes ESPN, reported operating income of $247 million, marking significant improvement compared to the previous year's losses. This rebounding within the sports category shows how Disney's diverse portfolio aids its financial resilience.
Looking forward, Disney affirmed its outlook for high single-digit adjusted EPS growth for fiscal 2025, alongside anticipated increases of about $875 million in operating income at its streaming entertainment unit. The dual focus on enhancing profitability at Disney+ and its other streaming services is indicative of Iger's long-term vision for the business as it evolves.
While the traditional television segment—that encompasses linear broadcasting—saw operating income fall by 11% to $1.1 billion, Disney remains committed to investing judiciously throughout its various channels, even amid competition from streaming services like Netflix, which has recently reported strong earnings.
"Disney has turned in the fairytale performance investors had been hoping for... it shows Disney is still a powerful force to be reckoned with when it delivers blockbuster hits," added Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The overall sentiment following Disney's earnings report saw its shares rise by 1.5% during premarket trading, indicating investor confidence arising from the results. Despite the tumultuous environment amid changing market conditions for media companies, Disney’s latest earnings indicate its adaptive capacity and potential for growth.
With these promising results, Disney appears poised to navigate upcoming financial landscapes, consolidatin with its multimedia offerings yet identifying key areas for improvement, particularly with its streaming services. Balancing this growth with cost management will be pivotal as it continues to deliver engaging content across all platforms.