Disney (DIS): Strength in streaming and sports offset softness in experiences in Q3 2024

Shares of The Walt Disney Company (NYSE: DIS) dropped over 2% on Wednesday. The stock has dropped 17% over the past three months. The entertainment behemoth delivered third-quarter 2024 revenue and profits that beat expectations, and raised its earnings outlook for the full year.

The company’s combined streaming business turned profitable during the quarter and it saw momentum in sports but its parks & experiences business was impacted by higher costs and a moderation in consumer demand.

Better-than-expected revenue and profits

In the third quarter of 2024, Disney’s revenue and earnings grew on a year-over-year basis and exceeded expectations. Revenues increased 4% to $23.2 billion, surpassing projections of $23.04 billion. Adjusted EPS grew 35% to $1.39, beating estimates of $1.19.

Streaming profitability and strength in sports

In the third quarter, revenues in Disney’s Entertainment segment grew 4% YoY to $10.6 billion, helped by double-digit growth in the Direct-to-Consumer (DTC) business. DTC revenues grew 15% to $5.8 billion in Q3. The DTC segment saw growth in subscription revenue driven by price increases and subscriber growth in Disney+ Core. It also benefited from an increase in advertising revenue.

At the end of the third quarter, Disney+ Core had 118.3 million subscribers while Disney+ Hotstar had 35.5 million subscribers. Total Hulu subscribers stood at 51.1 million. Average monthly revenue per paid subscriber for Disney+ Core was $7.22.

Disney’s combined DTC streaming business, which comprises the Direct-to-Consumer line of business at the Entertainment segment and ESPN+ at the Sports segment, turned profitable in Q3. Revenues rose 15% YoY to $6.4 billion. The business posted operating income of $47 million which compares to a loss of $512 million last year.

Total Sports revenues increased 5% YoY to $4.6 billion. Total ESPN revenues grew 5% to $4.3 billion, helped by a 5% growth in domestic revenue and a 6% rise in international revenue. Operating income grew 4% to $1.1 billion.  

Softness in Experiences 

In Q3, revenues in the Experiences segment increased 2% to $8.4 billion. Revenue growth was impacted by a higher-than-expected ebbing in consumer demand. Operating income decreased by 3% to $2.2 billion.

Domestic parks & experiences revenue grew 3% while operating income fell 6% in Q3. The results were impacted by higher costs due to inflation, higher technology spend, and new guest offerings. International parks & experiences revenue increased 5% while operating income grew 2%. Consumer products revenue fell 5%.

Updated guidance

Disney updated its earnings guidance for the full year of 2024 based on its strong Q3 performance and balanced portfolio of assets. The company now expects FY2024 adjusted EPS to increase by approx. 30% YoY versus the prior expectation of over 25%.

Disney expects the profitability of its combined streaming businesses to improve in the fourth quarter of 2024, with both Entertainment DTC and ESPN+ expected to be profitable in the period. It also expects a modest growth in Disney+ Core subscribers in Q4. Within Experiences, the company believes the demand moderation seen in the domestic business during the third quarter is likely to impact the next few quarters as well.