The Walt Disney Company (NYSE: DIS)

The Walt Disney Company delivered strong financial results in the second quarter of fiscal 2025, with revenue increasing 7% to $23.6 billion from $22.1 billion in the prior-year quarter. This growth was primarily driven by the Entertainment and Experiences segments, which continued to build momentum throughout the fiscal year.

Total segment operating income showed robust growth, increasing 15% to $4.4 billion compared to $3.8 billion in Q2 fiscal 2024. This improvement reflected the company’s effective cost management initiatives and strategic investments across its business segments, particularly in direct-to-consumer platforms and domestic parks & experiences.

Income before income taxes saw a significant increase, rising to $3.1 billion from $0.7 billion in the prior-year quarter. This dramatic improvement was largely due to the absence of substantial restructuring and impairment charges that affected the prior-year quarter, as well as overall operational improvements across the business.

Diluted earnings per share (EPS) improved dramatically to $1.81, compared to a loss per share of $0.01 in Q2 fiscal 2024. On an adjusted basis, excluding certain items, EPS increased 20% to $1.45 from $1.21 in the prior-year quarter, reflecting the company’s enhanced profitability and disciplined approach to capital allocation.

Cash provided by operations increased 84% to $6.8 billion in the quarter, while free cash flow more than doubled to $4.9 billion. This substantial improvement in cash generation provides Disney with increased financial flexibility to invest in growth initiatives, reduce debt, and return capital to shareholders through its share repurchase program, of which $1 billion was executed during the quarter.

Entertainment segment delivered a strong performance with operating income increasing 61% to $1.3 billion on revenue of $10.7 billion, up 9%. This significant improvement was primarily driven by the Direct-to-Consumer business, which achieved operating income of $336 million, a substantial increase from $47 million in the prior-year quarter. The Content Sales/Licensing and Other business also saw an impressive turnaround, reporting operating income of $153 million compared to a loss of $18 million in Q2 fiscal 2024.

Sports segment faced challenges, with operating income declining 12% to $687 million, despite a 5% increase in revenue to $4.5 billion. The decrease was primarily attributable to higher programming and production costs, including expenses related to airing three additional College Football Playoff games and an additional NFL game. Domestic ESPN advertising revenue increased by an impressive 29%, reflecting the benefits of the expanded College Football Playoff format and additional sports content.

Experiences segment continued its strong trajectory with a 9% increase in operating income to $2.5 billion on revenue of $8.9 billion, up 6%. Domestic Parks & Experiences was the standout performer, with operating income growing 13% to $1.8 billion, driven by higher volumes in theme park attendance, occupied room nights, and Disney Vacation Club unit sales, as well as increased per-guest spending. Consumer Products also performed well, with operating income increasing 14% to $443 million.

The performance across segments reflects Disney’s strategic focus on enhancing its direct-to-consumer offerings, optimizing content monetization, and expanding its high-margin experiences business, while managing the evolving sports media landscape. Despite some challenges in the International Parks & Experiences business, which saw a 23% decline in operating income, the overall segment diversification has provided resilience to the company’s financial results.

Disney’s Direct-to-Consumer business continued to show strong progress toward profitability, with significant improvements in both financial results and subscriber metrics:

Key Streaming Metrics

• Disney+ Total Subscribers: 126.0 million, an increase of 1.4 million versus Q1 fiscal 2025
• Hulu Total Subscribers: 54.7 million, an increase of 2% versus Q1 fiscal 2025
• ESPN+ Subscribers: 24.1 million, down 3% from Q1 fiscal 2025
• Combined Subscriptions: 180.7 million Disney+ and Hulu subscriptions, a net increase of 2.5 million versus Q1 fiscal 2025

The DTC business achieved substantial financial improvement with operating income increasing to $336 million from $47 million in the prior-year quarter. This performance was driven by subscription revenue growth from both higher effective rates and increased subscriber counts, as well as growth in advertising revenue due to increased impressions, partially offset by lower rates.

Average monthly revenue per paid subscriber showed positive trends across most services:

• Disney+ Domestic: $8.06, up 1% from $7.99 in Q1 fiscal 2025
• Disney+ International: $7.52, up 5% from $7.19 in Q1 fiscal 2025
• Disney+ Overall: $7.77, up 3% from $7.55 in Q1 fiscal 2025
• Hulu SVOD Only: $12.36, down 1% from $12.52 in Q1 fiscal 2025
• Hulu Live TV + SVOD: $99.94, up 1% from $99.22 in Q1 fiscal 2025
• ESPN+: $6.58, up 3% from $6.36 in Q1 fiscal 2025

These improvements demonstrate the effectiveness of Disney’s streaming strategy, including strategic pricing actions, bundling initiatives, and content investments. The modest increase in Disney+ subscribers for Q3 fiscal 2025 guidance suggests a focus on sustainable growth and improved monetization rather than subscriber acquisition at any cost.

The Experiences segment continues to be a significant profit driver for Disney, with strong performance across most business units:

Domestic Parks & Experiences

• Operating Income: $1.8 billion, up 13% year-over-year
• Key Drivers: Higher volumes (increased theme park attendance, occupied room nights, passenger cruise days, and Disney Vacation Club unit sales) and increased guest spending
• Fleet Expansion: Additional passenger cruise days reflecting the launch of the Disney Treasure in Q1 fiscal 2025
• Cost Pressures: Increased costs primarily attributable to the fleet expansion at Disney Cruise Line and inflation

International Parks & Experiences

• Operating Income: $225 million, down 23% year-over-year
• Challenges: Lower theme park attendance at Shanghai Disney Resort and Hong Kong Disneyland Resort, along with increased costs

Consumer Products

• Operating Income: $443 million, up 14% year-over-year
• Growth Drivers: Higher licensing revenue, including a benefit from the release of the licensed game, Marvel Rivals

The performance of the Experiences segment demonstrates Disney’s ability to drive growth through exceptional guest experiences, strategic pricing, and expansion of its cruise line business. The segment is well-positioned for future growth with “an unprecedented number of expansion projects underway,” as noted in CEO Robert Iger’s statement.

Despite challenges in international markets, the overall segment delivered solid results with operating income of $2.5 billion, representing a 9% increase year-over-year. Capital expenditures for Experiences increased significantly to $3.6 billion for the six months ended March 29, 2025, with substantial investments in cruise ship fleet expansion.

Disney provided the following guidance and strategic outlook for the remainder of fiscal 2025:

Q3 Fiscal 2025 Guidance

• Disney+ Subscribers: Modest increase compared to Q2 fiscal 2025

Full Year Fiscal 2025 Guidance

• Adjusted EPS: $5.75, an increase of 16% over fiscal 2024
• Cash from Operations: $17 billion, a $2 billion increase over prior guidance
• Entertainment: Double-digit percentage segment operating income growth
• Sports: 18% segment operating income growth
• Experiences: 6% to 8% segment operating income growth
• Disney Cruise Line Pre-opening Expense: ~$200 million, with ~$40 million in Q3 and ~$50 million in Q4
• Equity Loss from India JV: ~$300 million driven by purchase accounting amortization

CEO Robert A. Iger highlighted several strategic initiatives on the horizon that position the company for continued growth:

• Theatrical Slate: A promising lineup of upcoming movie releases
• ESPN Direct-to-Consumer: The launch of ESPN’s new DTC offering
• Experiences Expansion: An unprecedented number of expansion projects underway in the Experiences segment
• Share Repurchases: $1 billion in share repurchases during Q2, on pace to repurchase $3 billion for the year

The company maintains an optimistic outlook for the remainder of fiscal 2025, while acknowledging ongoing macroeconomic uncertainty. Management’s guidance reflects confidence in the company’s ability to execute across its strategic priorities and deliver sustainable growth.