The Walt Disney Co. reported its fiscal Q3 earnings early Wednesday, with films like Toy Story 5, streaming, and its lucrative experiences division powering its results.
The company missed Wall Street expectations for revenue, but beat them in operating income and earnings per share, with stronger-than-expected theme park performance helping to bolster its bottom line.
The company also teed up some big changes coming to its divisions, teasing a plan to turn Disney+ into “a comprehensive membership ecosystem,” with the first elements of that vision rolling out early next year.
Meanwhile, the company’s lucrative consumer products segment will move from being part of Disney’s experiences division and into its entertainment division: “We believe this shift will have strategic
and operational benefits by bringing the monetization of our IP through consumer products closer to the
studios that create that IP,” the company writes.
Disney reported revenue of $25.2 billion, up 7 percent from a year ago, with segment operating income of $5.5 billion, up 21 percent from a year ago.
In entertainment, revenues were $11.3 billion with operating income of $1.68 billion. In streaming, SVOD entertainment revenue (Disney+ and Hulu minus ESPN) was $712 million, a sharp increase from a year ago, and a signal that streaming is becoming more reliably profitable.
The company did note that The Mandalorian and Grogu and the live action Moana “underperformed” at the box office, but argued that “these franchise investments contributed to value creation beyond their theatrical releases.” Toy Story, for example, has generated more than $16 billion for Disney as a franchise, it said.
In experiences, revenues were $10 billion, up 10% from a year ago, with operating income of $3 billion, up 20%. That was despite market concerns around theme parks, especially with Universal recently reporting lower than expected results. The company said that international visitors are still down at its park, but they made up for it with domestic attendance and annual passholders.
In sports, the NBA Finals helped power ESPN, with revenues of $4.5 billion, up 4 percent, though operating income fell 17 percent to $858 million due to higher NBA rights costs.
Disney also said that it would use the cash from the $1.2 billion sale of its A+E stake to do stock buybacks, and elaborated a bit on how it expects to use artificial intelligence:
“With AI, it isn’t simply about efficiency. We use it first and foremost to enhance a creative process that will always be human-centered, artist-driven, and creator-led,” the company writes. “We’ve cultivated the world’s richest portfolio of IP and production experience across a century of filmmaking, giving us an advantage that our peers and no new entrant can quickly replicate.”
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