When Disney reported solid earnings in February, the activist investors then surrounding the company essentially called it a stunt: a temporary effort, in the heat of battle, to fend off them and not, as Robert A. Iger maintained, a test. that a struggling Disney had finally “turned the corner.”
The Disney boss’s argument became much stronger.
Disney beat Wall Street expectations for the second straight quarter on Tuesday, in part because its flagship streaming service made money for the first time. Disney+ was expected to lose more than $100 million in the most recent quarter, widening losses since its arrival in 2019 to about $12 billion. Instead, he made a profit of $47 million.
“Two quarters earlier than expected,” Hugh Johnston, Disney’s chief financial officer, said by phone. The company had previously predicted that Disney+ would be profitable in September; Some investors and analysts have been skeptical about this, putting downward pressure on Disney shares.
Disney’s earnings per share for the most recent quarter rose 30 percent from a year earlier. Revenue rose 1 percent to $22.1 billion.
Disney beat analyst expectations for earnings per share by 10 percent. The company met revenue expectations.
In the quarter, Disney+ added 6.3 million subscriptions worldwide (excluding India), bringing its total to 117.6 million. Average revenue per paid subscriber increased 6 percent to $7.28.
Subscriptions to Hulu, which is also owned by Disney, were largely flat (50 million), while the company’s sports streaming service, ESPN+, lost a few hundred thousand subscriptions to end the quarter at 24 .8 million. Together, Disney’s three streaming services lost $18 million, an improvement from $659 million in the same period a year earlier.
Johnston said Disney’s streaming portfolio was on track to turn a profit as a whole for September. In the next quarter, Disney faces some losses related to Disney+ Hotstar, a low-priced streaming service in India.
Disney Experiences, the division that includes theme parks and cruises, helped drive the company’s quarterly growth. The unit’s revenue totaled $8.4 billion, up 10 percent year-on-year, and operating income totaled $2.3 billion, up 12 percent. Higher ticket prices at Disney World in Florida contributed to those results. Hong Kong Disneyland also had a great quarter. (Disneyland in California faltered a bit, in part due to higher operating costs.)
Traditional television, with fewer people paying for cable connections, continued its downward trajectory. Revenue at Disney’s entertainment networks, which include ABC, FX and National Geographic, declined 8 percent, while operating income plummeted 22 percent. Advertising growth at ESPN contributed to a 2 percent increase in revenue and helped limit a decline in operating income to 2 percent.
Disney’s last reported earnings were in February, combining strong results with a flurry of announcements about future entertainment offerings. A sequel to “Moana”. A partnership with Epic Games, the creator of Fortnite. A timeline for the launch of a flagship ESPN streaming service that integrates sports programming with ESPN and ESPN Bet fantasy platforms.
At the time, several activist investors, including the formidable Nelson Peltz, were running proxy campaigns for board seats. While the activists had markedly different views on how Disney should be run (one wanted “Netflix-like margins” of up to 20 percent on streaming, another floated breaking up the company), they expressed the same basic motivation: Disney’s stock price was not high. enough.
Disney shares have been trading at around $117, down from $85 six months ago. But three years ago the shares were priced at about $197.
Mr. Iger finally defeated them. But Peltz told CNBC that he would “watch and wait” to see if Disney delivers on its promises of growth and succession. If not, he said, “You will see me again.”