Walt Disney Q2 Earnings: Profit Beat, Moderating Parks Growth, Password-Sharing Crackdown And More

Zinger Key Points
  • Disney shares dip: Misses Q2 revenue estimate with $22.08 billion, just shy of $22.11 billion target.
  • Streaming profits up: Disney+, Hulu turn quarterly profit; ESPN+ losses narrow significantly.

Walt Disney Co DIS shares are trading lower Tuesday following the second-quarter earnings.

The company reported revenue growth of 1% year-on-year to $22.08 billion, marginally missing the consensus of $22.11 billion. Adjusted EPS of $1.21 beat the consensus of $1.09.

Segments: Entertainment revenue declined by 5% year over year to $9.8 billion. Sports revenue grew 2% year over year to $4.3 billion. Experiences revenue climbed 10% year over year to $8.4 billion.

In its conference call, the company said that Parks’ growth is moderating from peak post-COVID levels.

In the Entertainment segment, Linear Networks revenue declined by 8% year over year to $2.8 billion, Direct-to-Consumer revenue climbed 13% year over year to $5.6 billion, and Content Sales/Licensing and Other revenue declined by 40% year over year to $1.4 billion.

The consolidated operating income grew by 17% year over year to $3.8 billion as the company’s entertainment streaming applications, Disney+ and Hulu, posted a quarterly profit for the first time, CNBC reports. Combined with ESPN+, the streaming businesses lost $(18) million, versus the $(659) million loss year over year.

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

Disney+ Core subscribers increased to 117.6 million global customers from 111.3 million a year ago. Total Hulu subscribers grew to 50.2 million from 49.7 million a year earlier. ESPN+ subscribers fell to 24.8 million from 25.2 million in the December 2023 quarter.

In its conference call, the company said the Disney+ password-sharing crackdown will start next month.

CEO Robert A. Iger said, “Our results were driven in large part by our Experiences segment as well as our streaming business. Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4.”

Revenue from U.S. parks and experiences increased 7% year over year to $5.96 billion. International sales climbed 29% year over year to $1.52 billion, driven by higher attendance and prices at Hong Kong Disneyland Resort.

Disney’s TV business lagged as millions of Americans shifted to cord-cutting culture. ESPN’s revenue rose 3% year over year to $4.21 billion. However, operating income declined 9% year over year to $799 million. 

Linear network revenue across Disney’s portfolio, excluding ESPN, fell 8% year over year to $2.77 billion. Operating income dived 22% year over year to $752 million. 

Content sales, licensing, and other revenue plunged 40% year over year to $1.39 billion due to a lack of blockbuster movies.

Outlook: Disney expects a fiscal 2024 adjusted EPS growth target of 25%.

It also remains on track to generate approximately $14 billion of cash provided by operations and over $8 billion of free cash flow this fiscal year.

Price Actions: DIS shares are trading lower by 7.61% at $107.61 premarket on the last check Tuesday.

Walt Disney. Photo via Shutterstock

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