Disney ( DIS ) reported Wednesday that its overall streaming division turned a profit for the first time, although weakness in its parks division dented an otherwise positive report, with the company noting a “moderation in consumer demand” toward the end of the quarter.
In Disney’s fiscal third quarter, its direct-to-consumer (DTC) streaming business, which includes Disney+, Hulu and ESPN+, posted operating income of $47 million, compared with a loss of $512 million in the year-ago period. The company had previously expected to achieve total streaming profitability in the current quarter.
Overall, the company reported third-quarter adjusted earnings of $1.39 per share, above the $1.19 expected by analysts polled by Bloomberg and higher than the $1.03 Disney reported in the same period last year.
Revenue came in at $23.2 billion, exceeding consensus expectations of $23.1 billion but lower than the $22.3 billion reported in the same period last year.
Disney also raised its full-year adjusted earnings growth expectations to 30%, up from the previous 25%.
Disney shares rose as much as 3% in pre-market trading on Wednesday. The report shows that Disney shares are virtually unchanged this year.
Looking ahead, Disney said it remains on track to improve streaming profitability in the fourth quarter, with both DTC entertainment, which posted a $19 million loss in the third quarter, and ESPN+ expected to be profitable.
“We remain optimistic about our trajectory, with multiple building blocks for improving margins in the coming years,” the company said in the release.
One of those building blocks will be new price increases for these services. The company has Tuesday announced it would raise prices again for the Disney+ and Hulu plans, with these changes taking effect in October.
In the third quarter, the media giant posted a slight increase in the number of core Disney+ subscribers, to 118.3 million, compared to 117.6 million a year ago. Analysts had expected the number of subscribers to remain approximately the same.
Average revenue per user, or ARPU, fell 3% to $7.74 lower for domestic Disney+ users, despite recent price increases and a crackdown on password sharing.
Parks, linear business under pressure
The parks business was Disney’s biggest disappointment in the quarter, with domestic operating income falling 6% from the prior year to $1.35 billion. The company warned that demand moderation could continue “in the coming quarters.”
“While we actively monitor attendance and guest spend and aggressively manage our cost base, we expect the Experiences segment operating income to decline by mid-single digits in the fourth quarter versus the prior year, reflecting these underlying dynamics” , the company said in its press release.
The company added that Disneyland Paris will be hit by a reduction in normal consumer demand trends due to the Olympics, along with some cyclical weakening in China. The company said it continues to see “strong” demand for its cruises.
Meanwhile, the linear battle continued, with domestic revenues from linear networks falling 7%, driven by a decline in advertising revenues and lower affiliate revenues as more consumers cut the cord. Operating profit within the segment fell by 1%.
ESPN broke the downward trend and the sports giant’s domestic operating profit rose 1% thanks to growth in advertising and subscription revenue.
In February, Disney doubled down on its sports streaming business with the unveiling of an upcoming joint venture with Fox and Warner Bros. Discovery. The company is also working on a separate sports streaming platform for ESPN, which will debut in fall 2025.
Disney’s theatrical strength also appears to be back on track, with strong showings of films like “Inside Out 2” and the more recent “Deadpool & Wolverine.” It is also on track to lead the box office in the second half of this year with the upcoming releases of “Moana 2” and “Mufasa: The Lion King.” As a result, content sales and licensing revenue soared, reaching $245 million in the third quarter, compared to a loss of $112 million in the previous year.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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