Q1 2025 Earnings Summary
- Disney's Direct-to-Consumer streaming services achieved a $300 million operating profit in Q1 and are expected to generate over $1 billion for the full year, demonstrating strong growth and improving profitability in this key segment.
- The Experiences segment, including parks and cruises, is showing robust performance with summer bookings up and positive initial results from the Disney Treasure launch, indicating continued revenue growth in this high-margin business.
- The upcoming launch of the ESPN flagship streaming service aims to expand Disney's sports business by reaching new generations of consumers and leveraging technological enhancements, potentially driving subscriber growth and long-term profitability.
- Earnings Growth Expected to Decelerate: Despite achieving over 40% earnings growth in the first quarter , Disney is maintaining its guidance for high single-digit earnings growth for the year, indicating an anticipated slowdown in earnings momentum in the subsequent quarters.
- Rising Sports Rights Costs May Pressure Profitability: The upcoming step-up in NBA rights costs next year could strain ESPN's margins. Disney is guiding for only low single-digit operating income growth in fiscal '26, down from 13% growth this year, suggesting that higher sports costs may impact profitability.
- Flattening Disney+ Subscriber Growth: Disney+ is experiencing minimal subscriber growth in the first half of the year. The company expects subscriber gains mainly in the second half, relying on the crackdown on password sharing and content additions , which may present execution risks.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS Growth | FY 2025 | High single-digit | High single-digit | no change |
DTC Operating Profit | FY 2025 | no prior guidance | a little over $1 billion | no prior guidance |
Experiences and Parks Revenue Growth | FY 2025 | no prior guidance | 6% to 8% | no prior guidance |
ESPN Operating Income Growth | FY 2025 | no prior guidance | 13% | no prior guidance |
Disney+ Subscriber Growth | FY 2025 | no prior guidance | expected subscriber growth | no prior guidance |
ESPN Operating Income Growth | FY 2026 | no prior guidance | low single-digit | no prior guidance |
-
Disney+ Subscriber Growth
Q: Outlook for Disney+ subscriber growth this year?
A: Disney expects to grow Disney+ subscribers for the year, with slight growth anticipated in the first and second quarters. They are particularly optimistic about the second half as paid sharing initiatives take hold and new movie content from the back half of '24 is added to the streaming service in '25, which they believe will drive subscriber growth. They are bullish about turning streaming into a growth business due to technological advances, a strong content pipeline, and the ability to successfully bundle Disney+, Hulu, and ultimately ESPN. -
Earnings Growth Guidance
Q: Can you discuss the cadence of earnings growth for the rest of the year?
A: Despite delivering results that exceeded expectations in the first quarter, with over 40% earnings growth, Disney is maintaining its guidance of high single-digit earnings growth for the year. The strong first quarter increases their level of confidence, but given the rapidly evolving macro environment, they believe it is premature to change the guidance. They are not afraid to overdeliver if business momentum justifies it. -
ESPN Flagship Objectives
Q: Is ESPN flagship aimed at growing or preserving the sports business?
A: ESPN flagship is designed to grow the sports business by adapting to changing consumer behaviors, especially among young viewers who are leaning into streaming. By offering a streaming product that serves consumers well, ESPN aims to enhance its business in an evolving market. They are extremely excited and bullish about this initiative. -
NBA Contract Profitability
Q: How do you view the path to profitability with the new NBA contract?
A: Disney believes in the NBA long term and is happy to have it as a marquee part of ESPN's offering for the next eleven years. They do not focus on year-to-year ratings but view the NBA as a growth sport. They have considered all aspects of the NBA contract in their guidance for ESPN and remain committed to their earnings outlook. -
Parks and Experiences Outlook
Q: Can you update on bookings and outlook for Experiences?
A: Bookings for Experiences are up for the summer, and Disney feels positive about this trend. The strong performance in the first quarter increases their confidence in the guidance for the year. They are off to a great start but believe it's premature to change the guidance at this point. -
Disney+ Platform Enhancements
Q: What platform enhancements will drive Disney+ business?
A: Disney is rolling out various technological advances over the next 12 months, including addressing paid sharing, improving personalization and algorithms, enhancing ad tech, and developing their flagship offerings. They are focused on making the home screen more dynamic to draw in users and increase engagement. Significant progress is expected by the end of the year. -
Cost-Cutting Initiatives
Q: Can you update us on cost-cutting initiatives?
A: Disney continually identifies opportunities to spend money more efficiently as part of their daily management practice. They focus on redeploying funds to make the company higher growth and more profitable but did not provide specific details on the cost-cutting measures. -
Live Content Strategy
Q: What's Disney's competitive advantage in live streaming?
A: Disney's competitive advantage in live streaming lies in their ability to offer live programming every day through ESPN. Live content is extremely attractive and will be a major component of their growth as they provide consumers with a one-app experience. They've placed an ESPN presence on the Disney+ home screen to increase engagement and lower churn, and plan to integrate ESPN flagship into the Disney+ and Hulu experience. -
Disney Treasure Launch
Q: How is the Disney Treasure launch performing?
A: The Disney Treasure is off to a spectacular start, with rooms selling out and guests rating their experience as excellent. The expectation is for the ship to be profitable in its first quarter in service, which aligns with their expectations moving forward. -
Lightning Lane Premier Rollout
Q: How is the rollout of Lightning Lane Premier progressing?
A: Lightning Lane Premier is being launched as a premium product, marketed gently in its initial phase. The take rates are very much in line with expectations. Disney is moving slowly to ensure it's a great experience for both purchasers and other guests in the park. They feel great about it and expect it to build over time.