Disney (DIS) earnings Q4 2022

Bob Chapek, Disney CEO at Boston College Chief Executives Club, November 15, 2021.

Charles Krupa | AP

Disney missed expectations for profit and key revenue segments during the fiscal fourth quarter on Tuesday and warned that strong streaming growth for its Disney+ platform may slow going forward.

The company’s shares fell about 8% in after-hours trading.

The company’s quarterly results missed Wall Street expectations on the top and bottom lines, as both its parks and media divisions underperformed estimates. And CFO Christine McCarthy tempered investor expectations for the new financial year, predicting revenue growth in 2023 of less than 10%. The company reported fiscal 2022 revenue growth of 22%.

Revenue at Disney’s media and entertainment division fell 3% year over year to $12.7 billion during the fiscal fourth quarter as the company’s direct-to-consumer and theater businesses struggled. Analysts had expected segment revenue of $13.9 billion, according to StreetAccount estimates.

The company also had lower content sales because it had fewer theatrical films on its calendar and therefore fewer films to place in the home entertainment market.

Here’s how the company fared in the period from July to September:

  • Profit per stock: 30 cents per share adj. vs. expected 55 cents, according to a Refinitiv survey of analysts
  • Income: $20.15 billion versus expectations of $21.24 billion, according to Refinitiv
  • Disney+ total subscriptions: 164.2 million against expected 160.45 million according to StreetAccount

Disney+ added 12.1 million subscriptions in the period, bringing the platform’s total subscriber base to 164.2 million, higher than the 160.45 million analysts had predicted, according to StreetAccount estimates.

However, growth is expected to slow in the first quarter of the fiscal year, Disney executives warned on Tuesday’s conference call.

At the end of the fiscal fourth quarter, Hulu had 47.2 million subscribers and ESPN+ had 24.3 million. Combined, Hulu, ESPN+ and Disney+ have over 235 million streaming subscribers. Netflix, long the leader in streaming, had 223 million subscribers at its latest count.

Disney CEO Bob Chapek said in the company’s earnings release that Disney+ will break even in fiscal 2024. The direct-to-consumer division lost $1.47 billion during the most recent quarter. It also reported a 10% drop in domestic average revenue per user (ARPU) to $6.10.

The company is set to raise prices for the service in December and is planning an ad-supported tier, which is expected to boost revenue.

Chapek has been on a mission to better connect the company’s divisions as a single organization and accelerate its direct-to-consumer strategy.

The company reported record results in its parks, experiences and products segment, Chapek said. The division, which includes the company’s theme parks, resorts, cruise lines and merchandise businesses, saw revenue increase more than 34% to $7.4 billion during the quarter.

Still, Wall Street had slightly higher hopes for the division: Analysts expected revenue of $7.5 billion, according to StreetAccount.

Operating income for the division rose more than 66% to $1.5 billion as spending increased at its domestic and international parks and consumers booked trips on its new cruise ship, the Disney Wish. The park unit, specifically, brought in $815 million in operating income, well shy of the $919 million that StreetAccount had expected.

Disney cited higher costs and said they were only partially offset by higher ticket revenue, driven by the introduction of Genie+ and Lightning Lane guest offers.

CFO McCarthy said Tuesday that Disney is looking for “meaningful efficiencies” and is actively examining the company’s cost base.

— CNBC’s Alex Sherman contributed to this report.

Leave a Comment