The Walt Disney Co. beat Wall Street expectations for its fiscal third quarter on Wednesday, with Disney+ and Hulu swinging to a profit amid continued subscriber growth.
The company saw profit nearly doubling to $5.3 billion, driven by growth in its entertainment and experiences segments, while revenue grew 2% to $23.7 billion driven by growth in its sports and experiences segments.
Disney+ and Hulu swung to a streaming profit of $346 million in the company’s fiscal third quarter, compared to a loss of $19 million in the year-ago period, and saw revenue grow 6% to $6.2 billion, driven by price increases and subscriber growth. Together, the streaming services added 2.6 million subscribers for a total of 183.3 million. When including ESPN+, the total subscriber count across the three services was 207.4 million. Disney did not break out whether ESPN+ posted a profit or loss for the quarter.
ESPN recently announced an agreement to acquire the NFL Network, the linear RedZone channel and NFL Fantasy in exchange for the league taking a 10% stake in the sports network. Disney currently owns 80% of ESPN, while Hearst owns the remaining 20%.
Disney also set an Aug. 21 launch date for its upcoming standalone ESPN streaming service, revealed plans to fully integrate Hulu and Disney+ with a unified standalone app launching in 2026 and revealed that Disney+, Hulu and ESPN+ would stop reporting subscribers and average revenue per user.
“We are pleased with our creative success and financial performance in Q3 as we continue to execute across our strategic priorities,” Disney CEO Bob Iger said in a statement. “With ambitious plans ahead for all our businesses, we’re not done building, and we are excited for Disney’s future.”
Here are the quarterly results:
Net income: $5.26 billion, compared to $2.62 billion a year ago.
Earnings Per Share: Diluted earnings per share of $2.92, compared to $1.43 per share a year ago. Excluding certain items, EPS grew 16% to $1.61, compared to $1.44 per share expected by analysts surveyed by Yahoo Finance.
Revenue: $23.7 billion, up 2% year over year, compared to $23.75 billion expected by analysts surveyed by Yahoo Finance.
Operating Income: $4.6 billion, up 8% compared to $4.2 billion a year ago.
Disney+ Subscribers: Added 1.8 million subscribers during the quarter for a total of 127.8 million.
Looking ahead, Disney expects to add more than 10 million subscribers in the fiscal fourth quarter, with the majority of the increase coming from Hulu as a result of its expanded deal with Charter Communications. Disney+ subscribers are expected to see a modest increase from the third quarter.
For the full year, the company is now forecasting adjusted earnings per share growth of 18% to $5.85, double-digit growth in entertainment streaming operating income to $1.3 billion, 18% operating income growth in sports and 8% operating income growth in experiences.
It also will incur roughly $185 million in pre-opening expenses related to Disney Cruise Line, including roughly $50 million in its fiscal fourth quarter, and an equity loss of roughly $200 million from its India joint venture.
Disney Entertainment
Disney’s entertainment segment, which includes Disney+, Hulu and the company’s entertainment linear networks, grew revenue 1% to $10.7 billion, while profit fell 15% to $1 billion.
Disney+ reported a total of 57.8 million domestic subscribers, remaining flat from the previous quarter, and 69.9 million international subscribers, up 2%. Disney+ average revenue per user was flat at $8.09 domestically, due to higher ad revenue offset by subscriber mix shifts, while international grew 2% to $7.67 due to price increases.
Hulu SVOD only subscribers grew 2% to 51.2 million, while Hulu + Live TV subscribers fell 2% to 4.3 million. Hulu SVOD only and Hulu + Live TV ARPU were both flat at $12.40 and $100.27, respectively, due to higher ad revenue offset by subscriber mix shifts.
Entertainment linear networks revenue fell 15% to $2.3 billion, while operatinh profit fell 28% to $697 million. Domestically, the segment saw revenue fall 4% to $2.o5 billion and profit fall 14% to $587 million, driven by lower ad and affiliate revenue and viewership and higher programming and production costs. Internationally, revenue fell 58% to $219 million and operating profits fell 92% to $12 million, due to the Star India transaction with Reliance Industries.
Content sales, licensing and other revenue grew 7% to $2.26 billion, but swung to a loss of $21 million, reflecting lower theatrical distribution results from the releases of “Elio,” “Thunderbolts” and the live-action “Lilo and Stitch,” as well as higher film cost impairments.
NFL to Buy 10% Stake in ESPN
Disney Sports
Disney’s sports segment, which includes ESPN and ESPN+, saw revenue fall 5% to $4.3 billion, while operating income jumped 29% to $1.04 billion.
ESPN linear saw revenue grow 1% to $4.31 billion and profit fall 7% to $1.01 billion. It saw lower domestic income due to lower affiliate revenue, higher NBA and college sports rights costs and the absence of NHL Stanley Cup Finals rights costs in the quarter, offset by higher fees to air sports content on ABC, ad revenue growth from rate increases and lower UFC pay per view fees.
ESPN+ subscribers were flat at 24.1 million, while ARPU fell 3% to $6.40 due to lower ad revenue. ESPN content is also available through a tile in Disney+ and will be available on the standalone ESPN streaming service.
Disney Experiences
Disney’s experiences segment, which includes its theme parks, hotels, Disney Cruise Line and consumer products, grew revenue 8% to $9.1 billion and operating profit 13% to $2.5 billion.
Domestic operating income growth was due to higher theme park guest spending, cruise day and occupied room nights volume due to the launch of the Disney Treasure and increased costs from new guest offerings, including the expansion of theDisney Cruise Line fleet.
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