Disney reports that its streaming services are close to breaking even, yet its stock fell by 10% due to weak future earnings projections.

Disney's streaming services are nearing profitability, but the company's stock dropped 10% following forecasts of weaker future earnings.

**Key Points:**

- Disney exceeded earnings expectations while achieving revenue close to analyst forecasts.

- For the first time, Disney+ and Hulu reported a combined quarterly profit.

- Including ESPN+, the streaming division posted a $18 million loss for the quarter.

- Traditional TV and box office revenues declined.

**Detailed Summary:**

Disney's fiscal second-quarter earnings surpassed analyst estimates by narrowing streaming losses. However, Disney shares fell 10% due to missed revenue projections for the fourth consecutive quarter and weaker third-quarter guidance in the experiences sector.

The company's segment operating income rose 17%, bolstered by profitable streaming operations via Disney+ and Hulu. Despite a slight loss when including ESPN+, the streaming losses significantly narrowed from the previous year's $659 million.

Streaming revenues, excluding ESPN+, increased by 13% to $5.64 billion, with operating income turning a profit of $47 million from a previous year's loss of $587 million. This improvement was attributed to a rise in Disney+ subscribers and higher average revenue per user.

Subscribers for Disney+ Core grew by over 6 million to 117.6 million worldwide. Hulu's total subscribers increased by 1% to 50.2 million, though ESPN+ saw a 2% decline to 24.8 million subscribers.

Disney CEO Bob Iger highlighted that the company's results were driven mainly by the Experiences segment and the streaming business. He confirmed that entertainment streaming was profitable this quarter and that they anticipate overall streaming profitability by the fourth quarter.

**Financials:**

- Adjusted earnings per share: $1.21 vs. $1.10 expected

- Revenue: $22.08 billion vs. $22.11 billion expected

Revenue from U.S. parks and experiences grew by 7% to $5.96 billion, and international sales surged 29% to $1.52 billion, driven by higher attendance and prices, especially at Hong Kong Disneyland Resort. However, the Disneyland Resort in California saw a profit decline attributed to cost inflation and higher labor expenses. The company also expects third-quarter challenges due to increased expenses and normalization of attendance.

Disney reported a narrow company loss of $20 million, in contrast to the previous year's profit, primarily due to restructuring and impairment charges.

**Industry Trends:**

Disney's traditional TV business faces challenges as cable TV subscriptions decline annually. Although ESPN's revenue increased by 3%, its operating income fell by 9% due to a decrease in cable subscribers and increased programming costs from the College Football Playoff. Advertising revenue helped mitigate some subscriber losses.

Revenue from content sales, licensing, and other areas, including the box office, decreased by 40% to $1.39 billion, partly because there were no blockbuster releases comparable to the previous year's "Avatar: The Way of Water."

Despite the temporary stabilization in subscriber numbers, Disney anticipates a return to growth in the fourth quarter, helped by a new cable deal that integrates Disney+ subscriptions into some Charter Communications cable packages, though this has slightly diluted average revenue per user.

Source: CNBC