Disney Surges in Q3 Earnings, Boosted by Theme Parks and Strategic Sports Push
By MICHELLE CHAPMAN
Burbank, CA – The Walt Disney Co. announced a significant surge in its fiscal third-quarter earnings, exceeding analyst expectations and highlighting robust performance in its domestic theme parks and a strategic pivot towards live sports content in its streaming services. For the three months ended June 28, the entertainment conglomerate reported a net income of $5.26 billion, or $2.92 per share, a substantial increase from $2.62 billion, or $1.43 per share, reported in the same period last year.
Excluding certain one-time items, Disney’s adjusted earnings reached $1.61 per share, comfortably surpassing the $1.46 per share forecast by analysts polled by Zacks Investment Research. While overall revenue for the Burbank, California-based company reached $23.65 billion, it narrowly missed Wall Street’s estimate of $23.68 billion.
Strategic Sports Acquisitions Bolster Streaming Portfolio
A major highlight of the earnings report was Disney’s aggressive expansion into live sports streaming. Its subsidiary, ESPN, has secured a groundbreaking five-year rights agreement with TKO Group’s WWE, valued at more than $1.6 billion according to The Wall Street Journal. This deal makes ESPN the exclusive U.S. domestic streamer of WWE’s premium live events, including marquee spectacles like WrestleMania, Royal Rumble, SummerSlam, and Survivor Series, starting next year. These events will be primarily available on ESPN’s new streaming service, set to launch next month, with select broadcasts airing on ESPN cable channels.
Further solidifying its sports dominance, Disney announced a nonbinding agreement between ESPN and the NFL. Under this arrangement, ESPN will acquire NFL Network, NFL Fantasy, and the rights to distribute the popular RedZone channel to cable and satellite operators. In return, the NFL will gain a 10% equity stake in ESPN. Mike Proulx, a Forrester vice president and research director, emphasized the strategic importance of these moves, stating, “Sports is the big headline coming out of Disney’s latest earnings report, and and for good reason. Live sports programming (like WWE Premium Live Events) amasses captive audiences that advertisers crave, and Disney is prioritizing programming with the highest ad revenue potential.”
Streaming Business Turns a Profit as Subscriber Reporting Shifts
Disney’s direct-to-consumer business, which encompasses its flagship Disney+ and Hulu streaming platforms, achieved a significant milestone, posting a quarterly operating income of $346 million. This marks a stark turnaround from a loss of $19 million in the prior-year quarter, underscoring the company’s efforts to achieve profitability in its streaming segment. Revenue for this division climbed by 6%.
Subscriber figures showed continued, albeit nuanced, growth. Disney+ reported 128 million total paid subscribers globally, an increase from 126 million in the second quarter. While domestic subscriptions (U.S. and Canada) remained flat, international subscriptions, excluding Disney+ HotStar, saw a 2% rise. Combined, Disney+ and Hulu subscriptions totaled 183 million, adding 2.6 million subscribers from the previous quarter.
Looking ahead, CEO Bob Iger and Chief Financial Officer Hugh Johnston anticipate a substantial increase of more than 10 million total Disney+ and Hulu subscriptions in the fourth quarter, primarily driven by Hulu due to an expanded Charter deal. A modest increase is also expected for Disney+ subscribers. In a move to evolve its financial reporting, Disney announced it will cease providing specific paid subscriber numbers for Disney+ and Hulu starting with fiscal 2026’s first quarter, and for ESPN+ beginning with fiscal 2025’s fourth quarter, citing the metric as less meaningful for evaluating overall business performance.
Theme Parks Drive Experiences Growth and Global Expansion
Disney’s Experiences division, which includes its six global theme parks, cruise line, merchandise, and video game licensing, was a powerful engine for growth. The segment’s revenue increased by 8%, and its operating income climbed 13% to $2.52 billion. Domestic parks notably led this growth, with a strong 22% increase in operating income, demonstrating robust attendance and spending. International parks and Experiences, however, saw a slight decline of 3% in operating income.
The company is also looking to expand its global footprint, having announced in May plans to build a seventh theme park in Abu Dhabi. CEO Bob Iger reaffirmed this ambitious outlook, stating, “We have more expansions underway around the world in our parks and experiences than at any other time in our history. With ambitious plans ahead for all our businesses, we’re not done building, and we are excited for Disney’s future.”
Succession Planning Underway for Iconic Leadership
Amidst these financial successes and strategic expansions, Disney continues its crucial search for a successor to CEO Bob Iger, who has been the public face of the company for nearly two decades. A formal succession planning committee was established in 2023, with the search gaining momentum last year when Morgan Stanley Executive Chairman James Gorman was enlisted to lead the effort.
Iger’s contract extension keeps him at the helm through the end of 2026, providing the company with ample time to select the right candidate. While both internal and external candidates are being considered, internal contenders widely believed to be in contention include Jimmy Pitaro, Chairman of Disney-owned ESPN; Josh D’Amaro, Chairperson of Walt Disney Parks and Resorts; and Disney Entertainment Co-Chairmen Alan Bergman and Dana Walden.
Despite the positive financial results and strategic announcements, shares of Disney experienced a decline of more than 3% in morning trading following the earnings report.
