Disney beat Wall Street expectations in its latest quarter, buoyed by an unexpected improvement in its streaming business, despite rising costs hitting the entertainment industry.
The media giant reported adjusted earnings per share of $1.63 for its first fiscal quarter, ahead of estimates of around $1.56.
Revenue rose five per cent year on year to $26bn, but operating income slipped to $4.6bn from $5.1bn a year earlier, as inflationary pressures and rights costs continue to bite.
Streaming reigned supreme, with revenue from the firm’s direct-to-consumer business climbing 11 per cent to $5.3bn.
Meanwhile, operating income rose to $450m, a positive step forward for a division that only recently turned profitable.
Disney has stopped reporting subscriber numbers, instead pushing investors to focus on margins, pricing and cash generation.
Chief executive Bog Iger said he was “pleased with the start of our fiscal year”, with the company forecasting streaming operating income of roughly $500m in the current quarter, and double-digit growth for the full year.
The pivot comes as the industry decisively moves away from the old “growth at any cost” streaming playbook
That shift also follows rivals facing growing strategic pressure within the market.
Warner Bros Discovery is locked in takeover talks with Netflix, as legacy studios grapple with the long-term decline of cable TV, as well as the soaring costs of premium content.
The industry-wide re-calibration has left scale and pricing power under more intense scrutiny than subscriber counts alone.
Disney’s entertainment division benefited from strong box office performances from Zootopia 3 and Avatar, lifting revenue seven per cent to $11.6bn.
Yet higher production and distribution costs dragged operating income in the unit down 35 per cent, proving that cinematic success doesn’t always translate directly into profit.
Sports inflation and succession signals
Pressure for the company was most acute in sports, with operating income in Disney’s sports division falling 23 per cent.
This was driven by higher NBA and college sports rights costs, compounded by a $110 hit from a carriage dispute with Youtube TV.
Revenue rose just one per cent to $4.9bn, demonstrating the tight margins now baked into live sports broadcasting.
The results arrived as Disney’s long-running succession question nears resolution, with Bloomberg recently reporting the group is close to naming Josh D’Amaro as Iger’s successor.
This would close a chapter that has weighed on investor confidence since Iger’s return in 2022.
Looking ahead, Disney reaffirmed its full-year outlook, projecting double-digit earnings growth, $19bn in operating cash flow and $7bn in share buybacks.
With Warner Bros exploring consolidation and Netflix pushing its balance sheet to stay on top, Disney’s goal is to prove that profitable streaming can coexist with its blockbuster ambitions.
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