The Walt Disney Company (DIS) reported its fiscal first-quarter earnings for 2025 on Wednesday, delivering stronger than expected results, but not without some concerning trends for its flagship streaming service, Disney+. The company posted net income of $2.55 billion, or $1.40 per share, on revenues of $24.69 billion. These figures surpassed analysts' expectations, which had anticipated net income of $2.38 billion, or $1.31 per share, on revenues of $24.63 billion.
Disney's earnings results signal resilience amid industry challenges, particularly as they relate to the competitive streaming market. Despite the overall success, Disney+ recorded its first subscriber losses, dropping from 125.3 million to 124.6 million from the previous quarter. This decline came after management had already warned investors of potential subscriber decreases during its fiscal fourth-quarter report last November.
CEO Bob Iger and CFO Hugh Johnston addressed analysts during the earnings call, emphasizing their commitment to innovative content and strategies. Iger asserted, "They are not a burden at all. They are actually an asset," referring to the company's continued investment in both linear and streaming businesses. Their remarks conveyed optimism about the future, even with signs of subscriber losses.
Revenue from Disney's various segments grew, indicating diversified performance. The entertainment division reported revenue of $10.87 billion, up 9% year over year, and the sports segment, which includes ESPN, generated $4.81 billion, reflecting an 8% rise. This growth is attributed to successful content releases and operational strategies.
The company is also experiencing improved earnings from its parks, experiences, and products division, which raised revenues to $9.42 billion. While this segment showed gains, it faced challenges from recent hurricanes impacting attendance and domestic operating income, which fell to $1.98 billion, down 5% from last year.
Interestingly, even though Disney+ is experiencing subscriber attrition, it remains profitable. Disney stated its streaming business performed positively, with average revenue per subscriber rising to $7.99 due to price increases implemented last year. The growth of Hulu subscriptions, which increased by 3% to 53.6 million, also provided some solace amid the concerns surrounding Disney+.
Despite the challenges, Disney remains committed to enhancing its streaming services, and Iger announced plans for the launch of ESPN's "flagship" offering this fall, which is expected to consolidate all sports content from the network. This move aims to streamline Disney's streaming offerings and increase subscriber engagement.
Investors remain cautiously optimistic as the stock has seen gains, rising about 17% over the past year. Pre-market trading reflects some bumps following the news release, indicating possibly mixed reactions from the market. Analysts have set price targets for Disney stock at around $123.14, offering approximately 13% upside potential.
Disney's performance is closely watched, as the company navigates the rapidly changing media environment and works to adapt to the preferences of today’s consumers. Iger's positive comments about both linear and digital segments signal confidence, as he noted, "The consumer is a bit stronger than we would have expected," indicating the company’s awareness and responsiveness to market dynamics.
With Disney planning significant investments of $60 billion over the next decade to bolster its experiences segment, the company is positioned to pursue growth across various channels. The broader media industry is under constant pressure from changes to subscription models and consumer expectations, and how Disney adapts to these factors will be key to their sustained success.
Going forward, the company anticipates challenges, particularly with the shifting college football playoff schedule impacting ESPN's advertising revenue and unit operating income. They expect to face headwinds due to their exit from the Venu sports joint venture, which was aimed at sanifying streaming sports broadcasts.
Overall, Walt Disney Company continues to face the tightrope of achieving profitability across its various segments, with the added complexity of adapting to the streaming wars. With their commitment to innovation and growth, Disney looks to stabilize subscriber counts and boost profitability for the remainder of fiscal 2025.