Variety: ‘Inside Out 2’ Lifts Disney Quarterly Earnings, Overall Streaming Biz Swings to Profit Amid Light Disney+ Subscriber Gain

Story from Variety:

Disney’s latest quarterly results overall sparked joy for the Mouse House — with the record-breaking “Inside Out 2” boosting profits and the company’s consolidated streaming business landing in the black for the first time.

That said, there were some mixed emotions: Operating profit for Disney’s domestic theme parks slipped 6% in the June quarter and the company warned that ongoing weak demand could hurt the segment’s results for “the next few quarters.” Meanwhile, Disney’s TV business, excluding ESPN, continued to decline.

Total revenue for the quarter increased 4%, to $23.16 billion, and operating income shot up 19% to $4.23 billion for the three months ended June 29 (Disney’s Q3 of fiscal 2024). Adjusted earnings per share for the quarter were $1.39, up 35% from $1.03 in the year-prior quarter. The results topped Wall Street forecasts, as analysts on average expected revenue of $23.07 billion and EPS of $1.19, per financial data provider LSEG.

Disney CEO Bob Iger said in prepared remarks, “This was a strong quarter for Disney, driven by excellent results in our Entertainment segment both at the box office and in DTC, as we achieved profitability across our combined streaming businesses for the first time and a quarter ahead of our previous guidance.”

The success of Pixar’s “Inside Out 2,” which has become the highest-grossing animated film of all time, demonstrated “the renewed creative strength of our studios and drove strong outperformance” at Disney’s theatrical unit, according to the company. Since its mid-June bow, “Inside Out 2” has garnered $1.56 billion at the global box office.

Fueled by the release of “Inside Out 2,” the original “Inside Out” (2015) helped drive more than 1.3 million Disney+ sign-ups in the period and generated more than 100 million views worldwide, according to Disney. However, churn at Disney+ remained high: In the U.S. and Canada, the streamer added a net 800,000 new subs to reach 54.8 million and international Disney+ Core customers (excluding Disney+ Hotstar) decreased by about 100,000 to 63.5 million. That’s compared with a gain of 6.3 million in the first three months of 2024 for Disney+ Core (helped by the deal with Charter to offer Disney+ to select Spectrum TV customers for no additional charge).

Disney’s combined direct-to-consumer business (inclusive of ESPN+) saw revenue rise 15% to $6.4 billion and it swung to operating income of $47 million compared with a loss of $512 million in the year-earlier quarter. Reflecting quarterly fluctuations, Disney’s Entertainment DTC segment (Disney+ and Hulu) turned in an operating loss of $19 million (after a surprise profit in the first three months of the year) offset by a profit for ESPN+.

Looking ahead, the company expects results for the streaming businesses to improve in fiscal Q4, with both Entertainment DTC and ESPN+ forecast to be profitable in the current quarter. The media conglom anticipates Disney+ Core subscribers will “grow modestly” in fiscal Q4, ahead of an October price hike across nearly all U.S. streaming plans.

Disney’s Entertainment segment operating income nearly tripled year over year in June quarter, to $1.2 billion, as the theatrical unit buoyed by “Inside Out 2” and “Kingdom of the Planet of the Apes” contributed $254 million in operating income (versus an operating loss of $112 million a year ago). That helped offset a drop in ad sales at ABC and the rest of Disney’s linear TV business, where revenue fell 7% and operating income slid 6%.

In the June quarter, ESPN revenue rose 5% to $4.28 billion and operating income increased 4% while Star India’s operating loss widened to $314 million (versus $216 million a year earlier), resulting in Disney’s Sports segment operating income declining by 6%. Domestic ESPN ad revenue increased 17% year over year.

Overall, Disney projected an upbeat end to the fiscal year: The company raised its target for full-year adjusted EPS growth to 30% for the year ending September 2024, from 25% on its last earnings report.

In its theatrical segment, Disney expects fiscal Q4 profitability to “look roughly similar to Q3” — helped by boffo results for Marvel’s “Deadpool & Wolverine” summer blockbuster — and anticipates profitability for the full fiscal year 2024.

Despite “softer third quarter performance” in Disney’s theme parks segment, Iger said that “with our complementary and balanced portfolio of businesses, we are confident in our ability to continue driving earnings growth through our collection of unique and powerful assets.”

Disney said it expects that the “demand moderation” in the domestic theme parks businesses in fiscal Q3 could “impact the next few quarters.” For the September quarter, the Experiences segment operating income is projected to decline by “mid single digits” versus the prior year, “reflecting these underlying dynamics as well as impacts at Disneyland Paris from a reduction in normal consumer travel due to the Olympics, and some cyclical softening in China.”