Disney Defies Expectations
The Walt Disney Company faced plenty of questions on Wednesday as it reported its fiscal second quarter results.
Many business analysts had already written their stories about the economy negatively impacting Disney’s results.
Walt Disney Company
I’m not calling anybody out, but you can read a few of the early reports and tell where business writers had planned an angle that never came to fruition.
That’s because Disney defied expectations with a stunning showing of strength. And then the company announced a new theme park.
Walt Disney Company
Disney is taking a huge victory lap right now…and rightfully so. Let’s discuss a triumphant day for Disney.
Everything Is Up*
The Marvel movie “Thunderbolts” was primarily filmed in Atlanta, Georgia, with additional scenes shot in Kuala Lumpur, Malaysia, and Utah, USA.
Photo: Marvel
Okay, I’m using the Thunderbolts asterisk now that it’s apparently a thing.
Technically, not everything increased year-over-year. There was one minor, albeit expected blemish on Disney’s resume.
Photo: Marvel
The Linear Networks division, formerly the backbone of Disney’s financial empire, continued its gradual erosion into oblivion.
Disney CEO Bob Iger anticipated this problem nearly a decade ago during his first tenure. So, he created Disney’s streaming outlets.
Photo: Disney
Now, Iger is reaping the benefits, with Direct-to-Consumer increasing its operating income from $47 million to $336 million.
As far as growth goes, it doesn’t get much better than that, at least from a percentage increase perspective. That’s more than a factor of seven.
Photo: Deadline
As for Linear Networks, Disney declined from $2.765 billion to $2.418 billion, a 13 percent drop.
So, Disney’s second quarter earnings in these two divisions matched Iger’s plan perfectly.
Forbes
The revenue growth from Disney streaming almost exactly offset the predicted losses from linear television, the cable and network channels.
In another quarter or two, that may be exactly what happens, as Disney is once again predicting subscriber growth for the current quarter.
Even better, Disney’s average revenue per user (ARPU) increased to $7.77. It’s starting to reach the predicted levels.
Not that long ago, the ARPU for Disney+ was hovering around $4. So, Disney has improved this total by about 91 cents annually since 2021.
Photo:Disneycoupon.jpg
At the current rate of improvement, Disney+ ARPU should pass $10 by the end of 2028.
Of course, an x-factor may accelerate that growth. Iger spoke about ESPN Flagship, the over-the-top streaming service debuting later this year.
Families Streaming Disney+
We should find out more about them next week, but presuming all goes well, they’ll juice Disney’s streaming business.
Great News at the Parks
Photo: History.com
As a Disney fan who understands Wall Street, I feel dread every time there’s a fiscal earnings report.
I consider the entire infrastructure of this system preposterous, as no company should be judged harshly at three-month intervals.
AP Photo/Richard Drew, File
An established business should think long-term, not stress over stock movement based on quarterly growth.
So, early on Wednesday, I pored over every Disney document, trying to find the data that would cause Wall Street to turn on the company.
Photo:NYpost.com
And as I mentioned, that was the expectation, with several pre-written articles requiring a last-minute adjustment.
Here’s an example: “Americans, struggling with rising costs, have been looking for ways to cut back on nonessential spending.
“But Disney, so far at least, apparently does not count as a discretionary expense.”
You can almost taste the disappointment that Disney numbers exceeded projections…and again, Disney did it virtually everywhere.
Photo: vecteezy.com
For example, the film division, Disney Entertainment, claimed $10.682 billion in revenue, an increase of nine percent from last year’s $9.796 billion.
Even better, operating income increased by roughly $470 million to $1.258 billion.
Photo: Getty
Why am I pointing this out? The fiscal second quarter ended on March 29th, 2025.
So, Disney Entertainment’s losses include the disappointing performances of Snow White and Captain America: Brave New World.
Photo: Marvel
At the end of the year and even into 2026, you’ll read, hear, and watch stories about how much money these movies lost at the box office.
Well, here’s the actual financial reports proving that Disney did just fine anyway. It was that kind of day for Disney. Oh, and one last thing…
Iger’s Ace in the Hole
Photo: Variety
With so many critics lined up to assail Disney, Iger scrutinized the board and discovered a masterstroke.
On Wednesday morning, with no warning whatsoever, Iger appeared on CNBC for an interview.
Photo: Willow Bay on Instagram (via PEOPLE)
During this conversation, Iger confirmed that Disney will construct a new theme park in Abu Dhabi.
Throughout the discussion, Iger looked smug and decidedly self-satisfied…and why wouldn’t he be?
Photo: Kevork Djansezian/Getty Images
In one deft move, Iger eviscerated all potential criticisms of his company for an indefinite amount of time.
This was the head of Disney plotting the future of the company, and it mirrors an agreement from more than 40 years ago.
At the time, the Oriental Land Company (OLC) persuaded Disney to license its entire theme park brand in exchange for a licensing fee.
Since then, Tokyo Disney Resort has become a revered theme park with a claim to the best theme park in the world, Tokyo DisneySea.
Part of the reason for this park’s excellence is that whenever OLC builds anything, it must gain approval from Disney.
This strict oversight process has ensured the quality of Tokyo Disneyland for decades now. For Disney, it’s passive income, too.
With the global economy potentially in crisis (again), Wall Street investors have fretted over Disney’s weird market position.
As with the pandemic, Disney appears particularly susceptible to a trade war between China and the United States.
Photo: Playbuzz.com
An economic downturn should ostensibly punish Disney more than most.
So, what does Iger do? He changes the game. Disney will gain new passive income from a stable company in the United Arab Emirates (UAE).
Defying Expectations
There will be no accusations of Disney taking unwelcome revenue from something like the Saudi Public Investment Fund, a criticism some American companies have faced.
Miral is a well-regarded hospitality corporation currently adding a Harry Potter themed land to an existing theme park at Yas Island.
Experience Abu Dhabi
This tourist area is exploding in popularity, with several theme parks with powerful intellectual properties like Ferrari and Warner Bros.
The Disney theme park will dwarf these, yet Disney won’t spend a dime. Iger affirmed that while Disney will receive money, it won’t invest any.
Disney
In short, there’s literally nothing to criticize about this deal. And it distracts away from any ongoing concerns about American tourism.
Disney’s international diversification already seemed prescient before this week.
(Charley Gallay / Getty Images for Disney)
Now, Iger has just doubled the number of international theme parks paying licensing fees.
Two obvious side benefits from this transaction are that OLC will work even harder to prove it’s better than Miral.
Photo: Disney
The competition between the two businesses will elevate the quality of each one.
Then, there’s the side topic that Disney loves to duplicate theme park attractions and even themed lands at other parks.
Photo: Disney
With two different businesses paying Imagineers to build new experiences, Disney doubles its odds of finding E-ticket attractions.
Holistically, Miral and OLC will PAY DISNEY to create these rides. Then, Disney can copy them cheaply at the theme parks it owns.
So, Disney will save a fortune on future research and development while its American theme parks will gain new ideas for attractions.
Very few business attractions represent clear wins with no downside. That’s what the Abu Dhabi theme park is to Disney, though.
Combined with the fiscal earnings report, this was one of Disney’s best weeks in recent memory.
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