Disney stock surges on streaming growth, guidance

• Disney reported its fiscal fourth-quarter earnings Thursday.
• Revenue for the entertainment segment – which includes the traditional TV networks,  direct-to-consumer streaming and films – increased 14% year over year.
• During Disney's fiscal 2025, the company expects high-single-digit adjusted earnings growth compared with the prior fiscal year.

Disney reported its fiscal fourth-quarter earnings Thursday, narrowly beating analyst estimates as streaming growth helped propel its entertainment segment. 

The streaming business' growth and profitability — combined with a blockbuster summer at the box office and further investments in the company's theme parks business — comes during a time of turmoil across the media industry. Disney has been restructuring the Mouse House under the stewardship of returnee CEO Bob Iger, who's getting the company into shape before handing it off to a successor in early 2026.

Company executives on Thursday touted Disney's significant progress during the last year and said they're "confident in the long-term prospects for the business," issuing guidance that includes its fiscal 2025, 2026 and 2027.

During Disney's fiscal 2025, the company expects high-single-digit adjusted earnings growth compared with the prior fiscal year. The company expects double-digit adjusted EPS growth in both fiscal 2026 and 2027.

"I think the fact that we have had such a strong '24 overall has been an important part of the guidance we are getting," said Chief Financial Officer Hugh Johnston in an interview Thursday with CNBC's "Squawk Box." "If you think of the big initiatives we have invested, putting creativity back at the center of the company, and on top of that, we said we wanted to improve profitability and we are clearly doing that in a substantive way."

Disney's stock was up more than 9% in early trading.

Here is what Disney reported compared with what Wall Street expected, according to LSEG

• Earnings per share: $1.14 adjusted vs. $1.10 expected
• Revenue: $22.57 billion vs. $22.45 billion expected

Disney's net income increased to $460 million, or 25 cents per share, from $264 million, or 14 cents per share, during the same quarter last year. Adjusting for one-time items, including restructuring and impairment charges, Disney reported earnings per share of $1.14. Disney's overall revenue was up 6% to $22.57 billion compared with the same prior fiscal quarter.

Total segment operating income increased 23% to $3.66 billion compared with the same period in 2023.  

Revenue for the entertainment segment – which includes the traditional TV networks, direct-to-consumer streaming and films – increased 14% year over year to $10.83 billion after a hot summer at the box office.

Disney Pixar's "Inside Out 2" became the highest-grossing animated movie of all time this summer, surpassing Disney's "Frozen II" at the box office. Meanwhile, its "Deadpool & Wolverine" became the highest-grossing R-rated film of all time, surpassing Warner Bros. Discovery's "Joker."

The films added $316 million of profit for the entertainment segment during the quarter. Overall, the entertainment segment reported nearly $1.1 billion in profit.

Disney became the first film studio to cross $4 billion globally in 2024, executives said in a release Thursday, adding they are encouraged by the momentum going into the holiday season with the upcoming releases of "Moana 2" and "Mufasa: The Lion King."

Disney anticipates double-digit percentage growth in operating income for its entertainment segment for fiscal 2025.

Streaming strides

Five years since Disney+ launched, the streaming service has stemmed annual losses of $4 billion as recently as fiscal 2022, and is now profitable.

Disney's combined streaming business, which includes Disney+, Hulu and ESPN+, reported operating income of $321 million for the September period compared with a loss of $387 million during the same period last year. 

Company executives said in the release they are confident streaming "will be a significant growth area" for Disney.

Disney also joined its peers, including Warner Bros. Discovery, Netflix, Comcast and Paramount Global in adding streaming subscribers during the most recent quarter. 

Disney+ Core subscribers – which excludes Disney+ Hotstar in India and other countries in the region – grew by 4.4 million, or 4%, to 122.7 million. Hulu subscribers grew 2% to 52 million. 

Average revenue per user for domestic Disney+ customers dropped from $7.74 to $7.70, as the company had a higher mix of customers on its cheaper, ad-supported tier and wholesale offerings. 

Company executives said more than half of new U.S. Disney+ subscribers are choosing the cheaper, ad-supported tier, adding this "bodes well for the future." Media companies have been focused on advertising as a measure to drive profitability in the streaming business.

During the fiscal fourth quarter Disney's streaming entertainment ad revenue was up 14% due to Disney+, and executives expect it to be a driver of streaming revenue going forward.

However, they expect a "modest decline" in Disney+ Core subscribers during the fiscal first quarter of 2025 compared with the prior quarter, due to higher pricing and the end of a recent promotional offer.

Full-year profit in the entertainment streaming business, which excludes ESPN+, is expected to see an increase of roughly $875 million compared with the prior fiscal year and to increase by a double-digit percentage in its fiscal 2026.

Meanwhile the company's traditional TV networks business continued to decline in the most recent quarter as consumers leave pay TV bundles behind in favor of streaming. Revenue for the networks was down 6% to $2.46 billion. Profit for the segment sank 38% to $498 million. 

Revenue for Disney's sports segment, made up primarily of ESPN, was flat. ESPN's profit fell 6% due in part to higher programming costs associated with U.S. college football rights as well as fewer customers in the cable bundle. 

Theme parks update

Disney's experiences segment, which includes the theme parks as well as consumer products, saw revenue grow 1% to $8.24 billion. 

Recently, theme parks have experienced a slowdown, particularly in the U.S., following the post-Covid surge in attendance. Companies have warned the lull will carry over to future quarters. Comcast recently reported its Universal theme parks revenue decreased during the most recent quarter due to lower attendance.

Disney's domestic parks' operating income rose 5% to $847 million, helped by higher guest spending at the parks and cruise lines. 

Operating income at the international parks, however, fell 32% due to a decline in attendance and in guest spending as well as increased costs. 

Disney executives noted that the experiences business reported record fiscal full-year revenue and profit, "despite some industry challenges that emerged in the second half of the fiscal year." Still, they remain confident in its future with the expansion of its cruise line and additions to its theme parks.

Disney's experience segment is expected to see 6% to 8% profit growth in the coming fiscal year compared with the prior year. Disney noted the fiscal first quarter will see a $130 million hit due to the impact of hurricanes Helene and Milton, as well as a $90 million impact from Disney Cruise Line prelaunch costs.

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC, and is a co-owner of Hulu.