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Disney Q2 revenue misses estimates as Disney+ subscribers fall short

Disney (DIS) reported mixed fiscal second-quarter results after market close, with the entertainment giant missing Wall Street's revenue expectations as its streaming service added fewer new subscribers than expected. Shares of Disney, a Dow component, dropped about 4% in late trading.


Here were the main results from Disney's report, compared to consensus estimates compiled :

Revenue: $15.61 billion vs. $15.85 billion expected and $20.86 billion Y/Y

Adjusted earnings per share: 79 cents vs. 32 cents expected and $1.53 Y/Y

Disney's myriad businesses have been unevenly impacted by the COVID-19 pandemic and start of the reopening process in the U.S. The company's streaming platform, Disney+, has been viewed as the unambiguous beneficiary of stay-in-place orders, which drove a surge in sign-ups for the service last year.

Disney reported in early March that Disney+ topped 100 million subscribers for the first time, crossing that milestone just 16 months after its late-2019 launch. That speedy growth trajectory has made the company a formidable competitor to long-time streaming incumbent Netflix (NFLX), which boasted more than 208 million worldwide subscribers as of the end of its first quarter.

However, the company exited its second quarter with 103.6 million subscribers, missing estimates for 110.3 million, according to Bloomberg data. Disney's direct-to-consumer streaming platforms also lost $290 million in the quarter, though it is expected to be profitable by the end of fiscal 2024, Disney's management has said.

Disney's media and entertainment distribution unit, which as of late 2020 included Disney+ as well as its legacy studio and linear networks businesses, posted revenue of $12.44 billion in the second quarter, missing estimates for $12.64 billion. The segment's operating income, however, topped estimates at $2.87 billion, coming in well above the $1.87 billion expected.

The post-pandemic economic reopening has called into question streaming platforms' near-term growth prospects, with in-person activities returning and competing for consumers' time and attention. Netflix's disappointing latest quarterly results served as a portent of this phenomenon, with the company adding only 3.98 million paid subscribers in the first quarter, coming in sharply below the 6.3 million expected. It also guided below consensus estimates for current-quarter streaming additions.

However, unlike Netflix, Disney also has major business segments that stand to benefit from increased consumer mobility. The company's parks and experiences business segment has suffered over the course of the past year, with theme park closures, halted cruises and other in-person activities curbed. The company's parks and experiences segment – once the biggest source of profit for Disney – posted a fourth straight operating loss. For the latest quarter, losses amounted to $406 million, coming in wider than the about $369 million loss expected.

So far this year, Disney has already begun reopening some of its most heavily visited parks, suggesting a near-term turnaround in this segment. Disneyland Paris and Disneyland and California Adventure in Anaheim, Calif. were closed throughout Disney's fiscal second quarter, meaning the company will still likely see a dent from that lost traffic in Thursday's report. But Disney's California theme parks just reopened at the end of April with a 25% capacity limit and California resident-only visitor restrictions. During the company's last earnings call in February, CEO Bob Chapek said he expected mask-wearing and social distancing to stay in place at Disney's parks at least through the end of this year, and likely into next year.

Shares of Disney have fallen 1.8% for the year-to-date through Wednesday's close, underperforming against the S&P 500's 8.2% gain over that period.


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