Disney Sees Streaming and Parks Growth Amid Ongoing Cord-Cutting

Strong Growth in Streaming and Experiences Businesses

Disney has shown significant progress in its streaming and experiences businesses, which are now key drivers of its growth. This comes as the company continues to navigate challenges in its traditional TV operations. The entertainment giant recently released its earnings report, highlighting positive developments in these areas.

For the current fiscal year, which ends in September, Disney expects its direct-to-consumer streaming business to generate $1.3 billion in operating income. This is an increase from the previous forecast of $1 billion. Additionally, the division that includes theme parks, cruise ships, and consumer products is projected to see an 8% growth in operating income for the year, reaching the top end of its earlier guidance.

These forecasts suggest that Disney is finding a path forward after years of disruption caused by the pandemic, shifts in digital entertainment consumption, and challenges with leadership transitions. The company is relying on more consumers subscribing to services like Disney+, Hulu, and ESPN, as well as increased spending on theme parks and cruises to fuel its growth.

Financial Performance and Market Reaction

In the June quarter, Disney’s revenue rose 2% compared to the same period last year, reaching $23.65 billion. Net income attributable to the company was $5.26 billion, roughly double the amount from the previous year. Much of this increase was due to a one-time tax benefit related to Hulu. Earnings per share grew 16% to $1.61, excluding the Hulu tax benefit and other costs.

Despite the strong financial results, Disney’s revenue slightly missed Wall Street analysts’ expectations, while earnings exceeded them. As a result, Disney shares fell more than 4% in early trading.

Struggles in Traditional TV Networks

Revenue from Disney’s linear television networks declined by 15% in the quarter, reaching $2.27 billion. Operating income dropped 28% to $697 million, primarily due to fewer subscribers, lower viewership, and reduced ad rates.

Meanwhile, the direct-to-consumer business generated $346 million in operating income, compared to a $19 million loss in the same period last year. Disney+ added 1.8 million subscribers during the fiscal third quarter, while Hulu added 900,000 subscribers, bringing its total to 51.2 million (excluding live television offerings). Subscriptions to ESPN+ remained flat at 24.1 million.

Future Plans for Streaming Growth

Disney executives have outlined plans to improve profit margins in streaming by leveraging better technology to boost usage in the U.S. and increasing local content production overseas. They aim to take streaming profit margins to 10% and beyond.

The company expects its Disney+ and Hulu subscriber count to grow by more than 10 million during the current quarter, with much of this growth coming from a deal with Charter Communications. Disney will also launch an expanded streaming version of ESPN, offering the same content available on its cable channels.

Additionally, ESPN will start selling additional football streaming content as part of a major deal with the National Football League. Under this agreement, the NFL will take a 10% stake in ESPN in exchange for control of key media assets, including NFL Network.

Financial Impact of New Deals

Chief Financial Officer Hugh Johnston noted that the NFL deal is expected to improve earnings by about 5 cents per share in the first fiscal year after it closes, which the company hopes will happen late next year. Separately, ESPN and TKO Group’s World Wrestling Entertainment reached a more than $1.6 billion agreement for exclusive rights to major WWE events starting in 2026.

Strong Performance in Experiences Division

Experiences revenue grew 8% to $9.09 billion in the June quarter, with operating income rising 13% to $2.52 billion. The biggest increases came from Disney’s domestic parks and cruise business. Despite new competition from Comcast’s Epic Universe in Orlando, Walt Disney World had its best fiscal third quarter ever.

Johnston mentioned on CNBC that while there are concerns about consumer spending in the U.S., Disney does not see it impacting their operations. However, guest spending at Disney’s theme parks in China has been more challenging.

Mixed Results at the Box Office

The quarter had mixed results at the box office, with the $1 billion-grossing “Lilo & Stitch” remake balancing against poor performance for “Elio,” the lowest-grossing film in Pixar’s history outside of the pandemic. Iger stated that “Lilo & Stitch” is on track to be Disney’s second biggest merchandise franchise this year, behind only Mickey Mouse.