Disney ( DIS ) reported Wednesday that its entire streaming division turned a profit for the first time, although the company attributed weakness in its parks division to “moderation in consumer demand” at the end of the quarter.
In Disney’s fiscal third quarter, its direct-to-consumer (DTC) streaming business, which includes Disney+, Hulu and ESPN+, posted operating income of $47 million, compared with a loss of $512 million in the year-ago period. The company previously expected total streaming profits to hit a profit in the current quarter.
Overall, the company reported Q3 adjusted earnings of $1.39 per share, above the $1.19 analysts polled by Bloomberg expected and the $1.03 reported by Disney in the year-ago period.
Revenue came in at $23.2 billion, beating consensus expectations of $23.1 billion and up from $22.3 billion reported in the year-ago period.
Disney raised its full-year adjusted earnings growth guidance to 30% from 25% previously.
Disney stock initially rose in pre-market trading on Wednesday before giving up these gains. Shares fell about 3% after hours. Coming into the report, Disney stock was roughly unchanged this year.
Looking ahead, Disney said streaming profits are on track to improve in the fourth quarter, with both DTC Entertainment, which posted a $19 million loss in Q3, and ESPN+ expected to be profitable.
“We remain confident in our trajectory and have many building blocks to improve margins in the coming years,” the company said in the release.
One of those building blocks is a new price hike for these services. On Tuesday, the company It announced a price hike again On its Disney+ and Hulu plans, the changes will take effect in October. The company also plans to add new features like access to ABC Live and a playlist of content for young kids.
“Every time we’ve taken a price increase, we’ve had only a modest bounce back from it,” Disney CEO Bob Iger said on the call. “There is nothing we consider significant.” He said the goal of streaming is to “build engagement on the platform,” hence the new features and package opportunities.
The media giant noted that the number of core Disney+ subscribers rose slightly to 118.3 million in the third quarter, from 117.6 million a year ago. Analysts expected subscribers to be roughly equal.
Average revenue per user, or ARPU, fell 3% to $7.74 for domestic Disney+ users, despite recent price hikes and stricter restrictions on password sharing. On the earnings call, Disney CFO Hugh Johnston said increased bundling and a shift to ad tiering have impacted the metric.
Parks, linear business under pressure
The parks business was Disney’s main disappointment in the quarter, with domestic operating income falling 6% from a year earlier to $1.35 billion. The company warned that demand may continue to moderate over the “next few quarters”.
“As we aggressively monitor arrivals and guest spending and aggressively manage our cost base, we expect Q4 Experiences segment operating income to decline by mid-single digits from the prior year, reflecting these underlying dynamics,” the company said in its release.
On the earnings call, Johnston offered some optimism, saying, “While we’re seeing some moderation in demand, I certainly wouldn’t call it a significant change.” He said the company expects a “flat-ish” revenue number from parks in the current quarter.
The company added that Disneyland Paris will suffer from some cyclical softening in China as normal consumer demand trends ease due to the Olympics. The company said it continues to see “strong” demand for its vessels.
Meanwhile, linear struggles continued with domestic linear network revenue falling 7%, dragged down by declining advertising revenue and lower ancillary revenue as more consumers cut the cord. Operating income in the segment declined by 1%.
ESPN bucked the downward trend, with domestic operating income for the sports company up 1% due to growth in advertising and subscription revenue.
In February, Disney doubled down on sports streaming with the reveal of an upcoming joint venture with Fox and Warner Bros. Discovery. The company is also working on a separate sports streaming platform for ESPN, which will debut in fall 2025.
With strong showings like “Inside Out 2” and more recent films, Disney’s theatrical power seems to be back on track. “Deadpool & Wolverine.” With the upcoming releases of “Moana 2” and “Mufasa: The Lion King” heading the box office later this year. This resulted in an increase in content sales and licensing revenue, rising to $245 million in Q3 compared to a loss of $112 million in the prior year.
Alexandra Canal Senior reporter at Yahoo Finance. Follow her on X @alli_kanal, LinkedIn, and email [email protected].
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