Disney’s earnings boosted by streaming services and box office success

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The record-setting box office performance of Inside Out 2 boosted Disney’s third-quarter earnings and revived confidence in the Pixar animation studio, but the company warned that slowing consumer demand at its US theme parks could continue into next year.

Inside Out 2 has taken in more than $1.5bn at the global box office since its June 14 release, making it the highest-grossing animated film of all time. That performance, along with improvement at its Disney+ and Hulu streaming services, helped push operating income at Disney’s entertainment division to $1.2bn in the fiscal third quarter, up from $408mn a year earlier.

Disney’s diluted earnings of $1.39 a share were well ahead of Wall Street expectations of $1.19 and up from $1.03 a year earlier. Revenue of $23.2bn rose from $22.3bn a year earlier. The company raised its full-year target for adjusted earnings per share.

The theme parks have been Disney’s growth engine since pandemic restrictions began to lift, but the company said revenues and operating income were hit by a “moderation of consumer demand . . . that exceeded our previous expectations” towards the end of the June quarter.

Sales of consumer products dropped 5 per cent at the theme parks from the same period a year earlier. In response, the group said it planned to “aggressively manage” costs at the parks.

Disney’s chief executive Bob Iger acknowledged that theme park and cruise line performance was “softer” in the quarter, but praised the progress in the entertainment businesses, which had suffered from a dearth of box office hits and losses at its streaming services.

“This was a strong quarter for Disney, driven by excellent results in our entertainment segment both at the box office and in [streaming],” he said.

Together Disney’s three streaming services — Disney+, ESPN+ and Hulu — reported an operating profit of $47mn in the quarter, compared with a $512mn operating loss a year ago.

After a scarcity of breakout hits at the box office in 2022 and 2023 — including by Pixar and Marvel — Iger last year called for a focus on quality over quantity.

Marvel’s Deadpool & Wolverine, released on July 26, has been a breakout hit with nearly $900mn in box office revenues ahead of its third weekend.