Disney (NYSE: DIS) released its fiscal Q1 2025 earnings today before the markets opened. While the entertainment giant posted better than expected earnings for the quarter, the shares are trading lower in US price action. Here we’ll discuss the key takeaways from the company’s quarterly report.
Disney’s fiscal Q1 revenues rose 5% YoY to $24.69 billion and were slightly ahead of the $24.62 billion that analysts were expecting. The company’s adjusted EPS rose 44% to $1.76 and easily surpassed the $1.45 that analysts were modeling.
Key takeaways from DIS’s earnings
Looking at the different business segments, Disney’s Experiences segment, which houses its hugely profitable parks business, posted revenues of $9.4 billion which was 3% higher YoY. The segment’s operating profit was however flat at $3.1 billion during the quarter.
While there have been concerns over the segment, it has performed better than expected. Disney expects the segment’s operating profits to grow by between 6%-8% in the current fiscal year. The management was pleased with the performance of the segment and CFO Hugh Johnston said, “In fact, the consumer is a bit stronger than we would have expected.” He added, “I think what we’re seeing is consumers are just very value focused, and you deliver value to them, they’re willing to pay the price for it.”
Notably, ever since Iger returned as the CEO in 2022, he embarked on a turnaround plan, including increasing the outlay towards the parks. He announced a massive $60 billion expansion plan spread over 10 years to expand the company’s parks and improve customer experience. The announcement came after many visitors complained of long queues and poor experiences at the parks, which are Disney’s lifeblood.
The sports segment posted a profit
Disney’s Sports segment which includes ESPN and Star India reported revenues of $4.85 billion in the fiscal first quarter which was similar to the corresponding quarter last year. The segment however posted an operating profit of $247 million as compared to operating loss of $103 million in the corresponding quarter last year.
Disney is looking to launch a streaming app for ESPN this fall. During the earnings call, Iger said, “We’re obviously leaning into the development of what is now called ‘Flagship,’ which is essentially ESPN with multiple, mulitple elements to it.”
Disney lost streaming subscribers in the quarter
While streaming rival Netflix added a record 19 million subscribers in the December quarter, Disney actually lost subscribers in the quarter and warned of a “modest decline” in the current quarter also.
Speaking with Yahoo! Finance, Johnston said, “Netflix obviously had a big quarter in terms of content, both with some of the sports activities and some distribution deals they had done outside the US. But from our perspective, we’re managing the business in a way where we’re trying to grow subs and we’re trying to improve margins at the same time, and we’re very much on track.”
He added, “We do expect a combination of more and better content [for Disney+] as we get toward the latter part of the year. The ESPN+ flagship will be an option, that will be a part of Disney+. In addition to that, paid sharing is certainly going to be a driver.”
Disney has followed Netflix’s strategy
Notably, Disney followed Netflix’s strategy and launched an ad-supported tier. It is now looking to crack down on password sharing and launch paid sharing.
Disney’s streaming business had been posting losses and quarterly operating losses peaked at around $1.5 billion before Iger took over. He changed the company’s strategy and Disney started targeting streaming profitability instead of chasing subscriber growth. The strategy has paid off and Disney’s streaming business has now turned profitable.
In the fiscal Q4, Disney’s streaming business posted an operating profit of $293 million, its second consecutive profitable quarter.
Iger on DIS’s linear business
Disney’s linear entertainment business has been in a secular decline and in the past the company has faced questions on whether it is looking to exit that space, which Iger denied.
During the Q1 earnings call, Iger said, “We actually are at a point where the linear networks at our company are not a burden at all. They’re actually an asset.”
Iger added, “We are programming them, and we are funding them at levels that actually give us the ability to enhance our overall television business that obviously includes and leans into streaming, which, let’s face it, is really the future of the television business.”
He went on to add, “So. while I won’t rule out the possibility some of the smaller networks in some form or another being configured differently in terms of how we bring them to market, maybe even ownership, but we’re not right now. We actually feel good about the hand that we have and the manner in which we’re managing both the linear and the streaming businesses across the board.”
Disney has cut costs
Disney has cut costs aggressively over the last couple of years which has helped spur its profits. “I think we’re doing a nice job of eliminating unnecessary cost and at the same time investing back in the business in all of the right ways,” said Johnston.
Disney had a strong performance at the box office last year and became the first studio to gross $5 billion in total collections. Its “Inside Out 2” became the highest-grossing movie of all time surpassing the previous record set by its “Frozen 2.” Its Moana 2” and “Mufasa: The Lion King also fared well in the holiday season and helped the company wrap up a solid year.
Notably, Iger cut down on the number of movies that Disney produces and instead focused on quality instead of quantity. The strategy has paid off well looking at the recent box office performance of its movies.
Meanwhile, despite the strong earnings, Disney’s subscriber loss spooked investors and the shares are trading lower today.
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Mohit Oberoi
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