Disney Shares Jump As Company Tops Subscriber, Earnings Expectations In Its Q1
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Disney beat Wall Street expectations for earnings, revenue and streaming subscriber growth in its fiscal first quarter, sending its beleaguered shares up 7% in after-hours trading.
Flagship streaming service Disney+ reached 129.8 million subscribers, 11.8 million more than at the end of the previous quarter and ahead of analysts’ consensus expectation for 125.4 million. Total subscriptions across Disney+, ESPN+ and Hulu hit 196.4 million.
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Earnings per share in the quarter ending January 2 jumped to 63 cents from two cents a year ago and revenue climbed 34% to $21.8 billion. Both metrics beat analysts’ outlook.
Disney shares rallied during the regular trading day, gaining 3% to $147.31, but they have declined by more than 20% over the past year as investors have grown restless with the streaming story.
For the first time, Disney broke out subscriber numbers for the U.S. and Canada compared with numbers for outside of those countries. There were 42.9 million subscribers at the end of the quarter, and average revenue per user (ARPU) was $6.68, up 15% from a year earlier.
Hulu’s on-demand and live subscriber base topped 45 million for the first time, rising 15% to 45.3 million. Of the total, 4.3 million was for the company’s internet-delivered pay-TV bundle, Hulu + Live TV.
ESPN+ topped the 20-million mark, reaching 21.3 million, up a striking 76% from a year ago.
Operating income at Disney Media and Entertainment Distribution fell 44% to 808 million, reflecting a range of higher costs, from sports programming to marketing and technology. Price increases for the core trio of streaming services, helped provide some relief, the company said.
The company’s other division, Parks, Experiences and Products rode a major bounceback compared with the Covid doldrums of 2020, when most parks were still shuttered and cruise ships stuck in port. Revenue in the parks division more than doubled to $7.2 billion and operating income came in at $2.45 billion from a loss of $119 million a year ago.
The quarterly report is the first since the exit of former CEO and executive chairman Bob Iger. Along with Iger, several other members of senior management also departed. Bob Chapek is about to start the final year of a three-year contract as CEO, with a number of challenges to overcome. In addition to streaming, there is the looming question of theatrical movie release windows as Covid starts to ease as well as the future of ESPN, which throws off a massive amount of cash but is losing traditional pay-TV distribution.
After roaring out of the starting gate with 10 million sign-ups on the first day in November 2019, Disney+ went on to more than 100 million subscribers a few months later. Growth has flattened significantly since then. Disney has set a goal of reaching 230 million to 240 million subscribers to Disney+ by the end of fiscal 2024.
The numbers arrived on the heels of a disappointing streaming report from Netflix and a pledge from Comcast that it would incur steep losses in order to shore up Peacock. HBO Max is the only new service to offer a ray of sunshine, ending 2021 ahead of the company’s forecasts with 73.8 million subscribers when combined with linear HBO.
The company’s Direct-to-Consumer unit, revenue increased 34% to $4.7 billion, though operating losses widened by 27% to $600 million. Losses were notable at Disney+ even though its average revenue per subscriber stepped up 9% to $4.41, and, to a lesser extent, ESPN+. Those downturns were partly offset by improved results at Hulu.
Linear Networks revenue was flat at $7.7 billion, with headwinds including the absence of political ads on the company’s owned TV stations.
Content Sales/Licensing and Other, a line item that includes Walt Disney Studios, posted a 43% gain in revenue to $2.4 billion. On the bottom line, operating income of $188 million a year ago to a loss of $98 million.
Costs incurred from the marketing and distribution of West Side Story, Encanto, The King’s Man, Eternals, Nightmare Alley and The Last Duel compared with a 2020 quarter when no new titles were in the market. One positive was Disney’s share in the blockbuster box office brought in by Marvel’s Spider-Man: No Way Home.
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