Disney Boasts Surprisingly Strong Earnings for Q2 2023
The Walt Disney Company just announced its earnings for the second quarter of 2023.


Photo: Disney
As has become the norm, Disney theme parks crushed it. Here’s what you need to know.
Why This Earnings Report Matters
Disney currently finds itself in an odd position.
The company is undergoing three phases of layoffs, two of which have already occurred.


Cinderella Castle
CEO Bob Iger committed to this path as a way to stave off activist investor Nelson Peltz, who was trying to force his way onto Disney’s Board of Directors.
Obviously, Disney wouldn’t be laying anybody off if its financial standing were rock-solid. Instead, the company has struggled a bit recently.


Image: Disney
Aspects of the pandemic have caused lingering problems, most notably with Disney’s streaming service.
Former CEO Bob Chapek committed to transitioning Disney into a digital company with its streaming services at the forefront.


Source: CNBC.com
Disney willingly tolerated financial losses as a method to increase subscriber numbers.
Now, Disney claims the largest streaming subscriber base thanks to its three services – Hulu, Disney+, and ESPN+.


Photo: Hulu
However, the service operates at a substantial net loss. During Disney’s fiscal third quarter of 2022, the Direct-to-Consumer (DTC) business lost $1.474 billion.
Not coincidentally, Bob Chapek lost his job within days. Iger has since righted the ship a bit. In the fiscal first quarter, DTC dropped to $1.1 billion in losses.


Photo: Patrick T. Fallon/Bloomberg
Still, nobody in business likes to lose a billion dollars every three months. All eyes were on Disney’s earnings, especially in the DTC division.
Disney’s Quarterly Earnings
As usual, Wall Street made its own projections for Disney’s quarterly earnings.
Analysts projected revenue of $21.8 billion, with adjusted earnings per share (EPS) of $0.93.
Disney will report its quarterly earnings today after market close. Wall Street projections (via @business):
Revenue: $21.8 billion
Adj. earnings per share (EPS): $0.93
Disney+ subscribers: +2.2 million
Parks, Experiences and Products revenue: $7.6 billion pic.twitter.com/y8W4g45FbS— Scott Gustin (@ScottGustin) May 10, 2023
Also, observers projected Disney+ subscriber growth of 2.2 million. I found that estimate a bit unreasonable, as Disney faces sustained 2023 erosion in a key market.
Disney recently lost cricket – yes, cricket! – streaming rights in India. Most consumers there pay annually.


Photo: Disney
So, they’ll gradually drop Disney+ each month when their current subscriptions end. Believe it or not, this matters greatly to Disney+ subscriber numbers.
Also, analysts held lofty expectations for Disney’s Parks, Experiences and Products division, the crown jewel of Mickey Mouse’s empire.


EPCOT
Wall Street expected earnings of $7.6 billion in this division for a single quarter.
For the same quarter in 2022, Disney earned $6.652 billion.


Disney World
During the first quarter of fiscal 2023, a timeframe including the Christmas season, the parks grossed $8.736 billion.
So, Wall Street expected numbers squarely between those totals. This number would reflect steady year-over-year growth.


Guardians of the Galaxy: Cosmic Rewind
However, the estimate wouldn’t require Disney to earn more in January-March than it did in October-December, which is a nearly impossible ask.
As usual, Disney was more than up to the task. Disney reported quarterly earnings of $21.815 billion. That’s an increase of 13.3 percent year-over-year.


Magic Kingdom crowds in March
In terms of diluted earnings per share, Disney exactly matched expectations with $0.93 EPS.
Compared to the same quarter in 2022, Disney increased/decreased its revenue by $2.566 billion.


Hollywood Studios crowds in March
Also, we should put these numbers in perspective. Five years ago, Disney’s six-month (!) revenue total was $29.899 billion.
The company now earns almost as much in three months as once required half a year. That’s what steady growth looks like on a balance sheet.
Answering the Big Issues about Disney
Obviously, analysts worried them most about DTC and held the loftiest expectations for the parks.
I’m happy to report that the Parks crushed the earnings once again. For the quarter, your favorite Disney division grossed a jaw-dropping $7.776 billion.


EPCOT crowds in March
That’s an astounding increase of 16.9 percent from the same timeframe in 2022.
Circling back to 2018, Disney’s fiscal second quarter earnings at the parks totaled $4.879 billion for three months. For that half-year, Disney managed $10.033 billion.


Cinderella Castle
Contrast that to the last six months when Disney parks have grossed $16.512 billion.
We’re talking about $6.5 billion more in revenue in just five years!
When we evaluate the parks from this perspective, we recognize how much Disney has grown.


Magic Kingdom February crowds
Part of the growth stems from five years of inflation and price increases, but most of it happens due to sustained interest in visiting Disney parks.
As for DTC, Disney announced increased revenue of $5.514 billion and a more modest loss of $659 million.
So, that’s yet another hugely positive step relative to the end of Chapek’s tenure.


Photo: Chip Somodevilla/Getty Images
Disney+ looks to have struggled the most this quarter, as it lost four million subscribers.
However, the company earned roughly 20 percent higher average revenue per user in North America, its core market.
This growth stems from a full quarter of the previous price increases plus Disney’s new ad tiers.


Photo: THIERRY CHESNOT/GETTY IMAGES
Other News and Notes
Disney’s other two divisions showed the sharp contrasts in the various entertainment industries.
Disney Media and Entertainment Distribution (DMED) grossed a dazzling $14.039 billion, which is what happens when you release a film like Avatar: The Way of Water.
Sometimes, a movie performs so well at the box office that its results skew the entire quarterly report for a division.


Photo: Walt Disney Co./Courtesy Everett Collection
Disney previously experienced this with Black Panther and Avengers: Endgame. Now, history has repeated itself with Avatar 2.
Thanks to The Way of Water, the second quarter, which was otherwise lacking in good content, increased more than three percent from the same quarter in 2022.
James Cameron is really good.


Source: 20th Century Studios
Meanwhile, Disney’s Linear Networks continued their gradual erosion. This division reported revenue of $6.625 billion, which is down 6.9 percent from 2022’s $7.116 billion.
Nobody should be surprised by this outcome. Ad revenue has dropped across all industries since the start of 2022.


Image: Disney
Disney feels the stress more than most since so much of its business connects with the traditional television revenue model.
That’s precisely why Disney has committed to its streaming services as temporary loss leaders. It knows that linear television is in the world’s slowest death spiral.


Photo: MickeyBlog
Thanks for visiting MickeyBlog.com! Want to go to Disney? For a FREE quote on your next Disney vacation, please fill out the form below, and one of the agents from MickeyTravels, a Diamond Level Authorized Disney Vacation Planner, will be in touch soon!