Disney Reports Strong Q4 Earnings, Driven by Streaming Growth and Box Office Success

Disney has announced significant progress in its entertainment segment, primarily driven by the remarkable growth and profitability of its streaming business. The company's achievements come during a period of upheaval in the media industry, necessitating a comprehensive restructuring under the leadership of CEO Bob Iger, who has plans to pass on the reins to a successor in early 2026.

Disney: Improved outlook and financial performance

Despite the challenges, Disney executives remain optimistic about the long-term prospects, as demonstrated by the guidance issued for fiscal 2025, 2026, and 2027. The company anticipates high-single-digit adjusted earnings growth for fiscal 2025, with an expectation of double-digit adjusted EPS growth in the subsequent two years. Bob Iger's strategy to re-center creativity within the company while significantly improving profitability has been acknowledged as a pivotal factor in the positive guidance and stock performance, with shares rising over 10% in early trading.

Strong financial results

The company's financial results exceeded Wall Street expectations, with adjusted earnings per share of $1.14 and revenue of $22.57 billion for the reported quarter. Disney's net income saw a substantial increase to $460 million, a significant rise from the previous year's figure. The entertainment segment's revenue experienced a remarkable 14% increase year over year, greatly influenced by a successful summer at the box office.

Box office successes and profit contributions

The success of Disney Pixar's "Inside Out 2" and its "Deadpool & Wolverine" film significantly contributed to the entertainment segment's profit, generating an additional $316 million during the quarter. Furthermore, with the recent box office successes, Disney has become the first film studio to cross $4 billion globally in 2024. The company anticipates continued growth in its entertainment segment's operating income for fiscal 2025.

Streaming business turnaround

After years of annual losses, the streaming service, including Disney+, Hulu, and ESPN+, has turned profitable. The combined streaming business reported operating income of $321 million for the September period, a significant improvement from the same period the previous year. Disney's streaming service also experienced a substantial increase in subscribers, with a 4% growth in Disney+ Core subscribers and a 2% increase in Hulu subscribers.

Profitability focus and advertising revenue growth

The company has shifted its focus towards advertising as a strategy to drive profitability in the streaming business, leading to a 14% increase in streaming entertainment ad revenue during the fiscal fourth quarter. While the company expects a modest decline in Disney+ Core subscribers in the first quarter of 2025, it anticipates a substantial increase in profit for the entertainment streaming business in the coming fiscal years.

Challenges in traditional TV networks and sports segment

The traditional TV networks business faced a decline in revenue and profit as consumers increasingly migrate from pay TV bundles to streaming services. The company's sports segment, primarily composed of ESPN, experienced flat revenue and a decrease in profit due to higher programming costs and a dwindling customer base in the cable bundle.

Performance of the experiences segment

In contrast, the experiences segment, which includes theme parks and consumer products, saw a marginal revenue growth. While the domestic parks' operating income increased due to higher guest spending, the international parks faced a decline in attendance and guest spending, resulting in a drop in operating income. Despite these challenges, Disney remains optimistic about the future of its experiences segment, driven by cruise line expansion and theme park additions.