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WD

Walt Disney Co (DIS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 revenue rose 5% to $24.69B, diluted EPS increased 35% to $1.40, and adjusted EPS rose 44% to $1.76; total segment operating income climbed 31% to $5.06B, aided by strong studio performance (Moana 2), improved DTC profitability, and resilient Experiences despite hurricane impacts .
  • Entertainment segment operating income nearly doubled to $1.70B (+$0.8B YoY), with DTC swinging to $293M operating income and Content Sales/Licensing turning positive on theatrical releases; Sports improved to $247M as domestic ESPN ad revenue grew 15% YoY .
  • Management reiterated FY2025 targets (high-single digit adjusted EPS growth; $15B cash from operations) and added Q2 specifics: Sports OI headwinds ($100M college sports + $50M Venu exit) and Disney Cruise pre-opening expense ($40M), while guiding modest Disney+ subscriber decline for Q2 .
  • Near-term catalysts include the ESPN tile on Disney+ (live content engagement) and the ESPN flagship DTC launch in fall 2025; management emphasized technology enhancements (personalization, ad tech, AI) to lower churn and drive streaming growth .

What Went Well and What Went Wrong

What Went Well

  • Entertainment OI rose to $1.703B (+$0.8B YoY) on stronger DTC ($293M, +$431M YoY) and Content Sales/Licensing ($312M, +$536M YoY) driven by Moana 2; CEO: “We further improved the profitability of our Entertainment DTC streaming businesses” .
  • Domestic ESPN advertising revenue grew 15% YoY; ESPN+ ARPU increased to $6.36 (from $5.94) sequentially, reflecting pricing and ad revenue strength .
  • CFO signaled confidence in Experiences guidance (6–8% FY OI growth) and noted strong Disney Treasure launch with early cruises “off to a spectacular start” and expected profitability from the first quarter in-water .

What Went Wrong

  • Experiences domestic OI declined 5% due to hurricane closures and ~$75M cruise pre-opening costs; total Experiences OI flat as hurricanes reduced YoY growth by 6 percentage points ($120M impact) .
  • DTC advertising revenue fell 2% YoY due to Disney+ Hotstar decline; Disney+ total subscribers decreased by 0.7M sequentially (to 124.6M), partly offset by Hulu growth (+1.6M sequential) .
  • Effective tax rate increased to 27.8% (vs. 25.1% YoY) due to a non-cash tax charge linked to the India JV; equity income fell to $92M (from $181M) on lower A+E and India JV losses; corporate/unallocated expenses rose $152M on a legal settlement .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$23,155 $22,574 $24,690
Diluted EPS ($)$1.43 $0.25 $1.40
Adjusted EPS ($)$1.39 $1.14 $1.76
Total Segment Operating Income ($USD Millions)$4,225 $3,655 $5,060
Cash Provided by Operations ($USD Millions)$2,602 $5,518 $3,205

Segment revenues and operating income trend:

Segment Revenue ($USD Millions)Q3 2024Q4 2024Q1 2025
Entertainment$10,580 $10,829 $10,872
Sports$4,558 $3,914 $4,850
Experiences$8,386 $8,240 $9,415
Segment Operating Income ($USD Millions)Q3 2024Q4 2024Q1 2025
Entertainment$1,201 $1,067 $1,703
Sports$802 $929 $247
Experiences$2,222 $1,659 $3,110
Total Segment OI$4,225 $3,655 $5,060

KPIs (sequential, Q4 2024 → Q1 2025):

KPIQ4 2024Q1 2025
Disney+ Total Subs (Millions)125.3 124.6
Disney+ Domestic ARPU ($)$7.70 $7.99
Disney+ International ARPU ($)$6.95 $7.19
Disney+ Core ARPU ($)$7.30 $7.55
Hulu Total Subs (Millions)52.0 53.6
Hulu SVOD ARPU ($)$12.54 $12.52
Hulu Live TV + SVOD ARPU ($)$95.82 $99.22
ESPN+ Subs (Millions)25.6 24.9
ESPN+ ARPU ($)$5.94 $6.36

Guidance Changes

MetricPeriodPrevious Guidance (Nov 2024)Current Guidance (Feb 2025)Change
Adjusted EPS growthFY2025High-single digit High-single digit Maintained
Cash provided by operationsFY2025~$15B ~$15B Maintained
Entertainment segment OI growthFY2025Double-digit; DTC OI +~$875M (incl. ~$200M prior-year India adverse) Double-digit; DTC OI +~$875M (same caveat) Maintained
Sports segment OI growthFY2025+13% reported; adjusted for India, OI expected to decrease ~10% +13% Maintained (no adjusted detail)
Experiences segment OI growthFY2025+6–8%; Q1 adverse ~$130M hurricanes and ~$90M cruise pre-launch +6–8%; Disney Cruise Line pre-opening ~$200M FY Expanded detail (pre-opening total)
Disney+ Core subscribersQ1 FY2025Modest decline vs Q4 Q2: modest decline vs Q1 Rolled forward to Q2
Sports OI headwindsQ2 FY2025Not specified+$100M adverse (college sports + one extra NFL game), +$50M from exiting Venu Sports JV New specifics
Disney Cruise Line pre-openingQ2 FY2025Not specified~$40M New specifics
Capital expendituresFY2025~$8B Not reiterated in Q1 PRN/A in Q1 PR

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
ESPN flagship DTCPositioned for early fall 2025; strong advertiser interest in live; tech-driven personalization ahead Fall 2025 launch reaffirmed; tile added to Disney+ to boost engagement and act as on-ramp; focus on bundling and one-app experience Execution steps underway; clearer product path
Streaming tech & AIHire of Adam Smith; priorities include personalization, ad tech, password sharing; double-digit SVOD margin target by FY2026 Active rollout of paid sharing, personalization, ad tier work; “variety of different AI initiatives”; engagement improvements visible Accelerating implementation
AVOD/pricingShift toward AVOD to raise ARPU; pricing increases and ad tech monetization Domestic Disney+ ARPU up; global AVOD mix growing; ESPN+ ARPU up on pricing/ads Positive monetization momentum
Experiences demand & capacityModeration in Q3; FY2025 acceleration expected; booking strength into back half; investments in cruise/parks Hurricanes/launch costs weighed Q1; CFO reiterates 6–8% FY OI growth and summer bookings up; Disney Treasure strong Short-term weather headwinds; medium-term confidence
India JVStar India deconsolidation; ownership in high-30s% with Reliance; modeled in guidance Q1 equity loss of $33M; FY equity loss ~ $300M expected from purchase accounting Transition impacts; clarity on accounting
Linear vs streamingLinear remains an asset; integrated programming and ad sales; DIRECTV deal bespoke CEO: linear not a burden; strategy to grow ESPN via streaming; focus on distribution across bundles Continued integration; streaming-led growth
NBA contract economicsKnown in guidance; sports OI growth in FY2026 low single digits Ratings noise dismissed; long-term growth sport; fiscal cadence unchanged Steady execution plan

Management Commentary

  • CEO: “In fiscal Q1 we saw outstanding box office performance… we further improved the profitability of our Entertainment DTC streaming businesses… added an ESPN tile on Disney+… Overall, this quarter proved to be a strong start to the fiscal year, and we remain confident in our strategy for continued growth.” .
  • CEO: On ESPN flagship and distribution strategy: “Make ESPN available however the consumer wants it… bundle with Disney+ and Hulu… one-app experience… we’re bullish.” .
  • CFO: On Experiences outlook: “No change to the guide… strong Q1 increases our level of confidence… bookings are up in the summer… Disney Treasure is off to spectacular start… profitable in the first quarter in the water.” .
  • CEO: On streaming technology roadmap: “Using technology more and more for personalization… ad tech… a variety of different AI initiatives… more dynamic home screen to increase engagement and lower churn.” .

Q&A Highlights

  • ESPN strategy and bundles: Management pivoted from Venu to distributing ESPN through multiple skinny bundles and merging Hulu Live with fubo’s channel business to enhance UX and focus on flagship launch and bundling with Disney+/Hulu .
  • DTC profitability cadence: Q1 DTC OI ~$300M; FY target “a little over $1B”; potential to overdeliver, but premature to raise guidance after one quarter .
  • Experiences bookings and new products: Disney Treasure performing strongly; Lightning Lane Premier rollout cautious to maintain park experience; summer bookings up .
  • AVOD/pricing and subscriber growth: ARPU improvements, expected modest sub growth for the year aided by paid sharing and film slate; price increases saw lower-than-expected churn .
  • NBA economics and FY2026 Sports guidance: Contract terms contemplated in guidance; low-single-digit OI growth in FY2026 reaffirmed; advertising tailwinds and disciplined rights/cost management highlighted .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2025 EPS/revenue was unavailable due to access limits at the time of analysis. Values retrieved from S&P Global could not be provided for estimate comparison due to a daily request cap (tool error).
  • Given the absence of consensus, we cannot formally label beats/misses versus estimates for Q1 FY2025 at this time.

Key Takeaways for Investors

  • Q1 marked a strong start: revenue growth, robust adjusted EPS, and a sharp rebound in Entertainment OI driven by DTC profitability and theatrical hits; stock catalysts include ESPN tile engagement and fall flagship launch .
  • Near-term headwinds: Q2 Sports OI will face ~$150M adverse items, and Disney Cruise pre-opening costs continue; modest Disney+ subscriber decline guided for Q2 .
  • Medium-term thesis: Streaming economics improve via pricing, AVOD mix, personalization/ad tech; management targets sustained adjusted EPS growth trajectory and DTC margin expansion, with FY2026 double-digit adjusted EPS growth previously outlined .
  • Experiences resilience with hurricane impacts contained; confidence in 6–8% FY OI growth and summer bookings offers defensive ballast amid macro and competitive park openings .
  • India JV transition introduces equity losses in FY2025 (~$300M) but reduces volatility tied to Hotstar and clarifies segment reporting; monitor equity income trajectory .
  • Focus areas to watch: ARPU trajectory, churn improvements from tech upgrades, ESPN flagship product features/ad load, and DTC subscriber trends as paid sharing scales .