Walt Disney (DIS, Financial) concluded a successful year for its theatrical business with the release of Moana 2, contributing to a robust first-quarter 2025 earnings report. The company reported a 44% increase in adjusted EPS, reaching $1.76. This growth was significantly supported by the Direct-to-Consumer (DTC) business, which saw profitability rise due to price hikes for Disney+ and Hulu. Despite these positive results, DIS shares remained stagnant as the company chose to reaffirm, rather than raise, its FY25 EPS guidance of high-single-digit growth.
- The film studio's success continued in Q1, with Moana 2 following the success of Inside Out 2 and Deadpool & Wolverine. This led to a 34% revenue increase to $2.2 billion for the Content Sales/Licensing unit, which turned profitable with $312 million in operating income, compared to a $(224) million loss in the same quarter last year.
- The DTC unit, part of the Experiences segment, improved significantly after previous losses from 2020-2023. Building on last quarter's profitability, the unit's operating income rose by $431 million year-over-year to $293 million. This improvement was driven by a 5% increase in Disney+ ARPU and a 4% increase for Hulu (Live TV + SVOD) due to price hikes.
- Despite anticipated churn, Disney+ lost about 700,000 subscribers from Q4, ending the quarter with 124.6 million subscribers, surpassing analyst expectations. However, DIS projected a slight decline in Disney+ subscribers for Q2, causing some concern about a potential downward trend.
- The theme park business performed better than expected after a challenging Q4, where operating income in the Experiences segment fell by 6%. Despite international park slowdowns, weak consumer spending, and hurricane impacts, demand remained strong. Experiences revenue increased by 3% to $9.4 billion, with operating income stable at $3.1 billion, despite a $120 million hurricane-related hit.
- Disney announced that Disney+ will host all its streaming products, including sports and ESPN. This fall, a new ESPN streaming product will debut on Disney+, replacing the previous plan for a sports streaming joint venture with Fox (FOX, Financial) and Warner Bros Discovery (WBD, Financial) called Venu.
Overall, Disney delivered another solid quarter with improving profitability at the forefront. However, the decision to maintain rather than increase FY25 EPS guidance has disappointed some investors.
