Overall, pre-tax profit jumped to $3.1bn, compared with $700m a year earlier. Adjusted EPS rose to $1.45, well above forecasts ($1.18) and up significantly from last year ($1.21).
Streaming drives growth
In February, the company warned of a slight decline in Disney+ streaming subscribers this quarter, while reporting lower attendance at its domestic theme parks. Disney shares have fallen by 17% since the start of the year, much worse than the decline of nearly 4% for the S&P 500 index.
Concerns about the future of linear television are fading, buoyed by strong results from streaming platforms.
Disney+ surprised with 1.4 million new subscribers, much better than analysts' expected decline of 1.1 million, according to StreetAccount. Hulu also grew with 1.1 million additional subscribers, likely helped by its integration into Disney+.
The success of strong content such as Moana 2, Mufasa: The Lion King and the series Daredevil: Born Again (7.5 million views in five days) partly explains this performance.
American linear TV channels are still experiencing a decline this quarter, but operating profit is up 20%. The strategy seems clear: divest. The group has announced fewer new shows, lower technology costs and lower marketing costs.
Key takeaway: Operating profit for the entertainment division jumped 61% year-on-year. This segment accounted for 45% of the group's revenue this quarter.
US parks in good shape
The Experiences segment, which includes theme parks, represents 37.7% of revenue and grew by 6%. Against all odds, the US market is weathering the uncertainty. Operating income on domestic grounds rose by 13%, but international performance was disappointing, down 23%.
The Sports segment, which accounts for just under 20% of revenue, recorded a 5% increase in revenue. However, operating income fell by 12%, affected by the abandoned joint channel project with Fox and Warner, which was blocked for legal and competitive reasons.
The icing on the cake
The group is heading to the Middle East, with Disney announcing the upcoming opening of a theme park in Abu Dhabi, the first in the region. Located on Yas Island, the complex is aimed at a regional and international audience, close to a major air hub (120 million passengers annually via Dubai and Abu Dhabi).
We don't know any more about the name or the opening date, but we'll settle for that.
Bright prospects
While caution is the order of the day for most companies, Disney is maintaining its targets and even raising them. The group now forecasts EPS of $5.75 for the year, up 16%. Just a few months ago, however, the group expected single-digit growth.
Disney forecasts double-digit growth for its entertainment and sports divisions over the year, and a moderate increase in Disney+ subscribers in the next quarter.
The coming months should further strengthen this momentum, with the highly anticipated release of the film Fantastic Four and the new Avatar movie.
The group also expects to record a non-cash tax benefit of approximately $3.3bn related to the termination of Hulu's tax status in the next quarter.
