Disney said its streaming profit surged in the December quarter, while warning that fewer foreigners are visiting its U.S. theme parks, as investor attention turns to an expected announcement of its next chief executive as soon as this week.
US shares of the company rose 4% in premarket trading on Monday.
The entertainment giant said operating income for its Disney+ and Hulu streaming services grew 72% from the same quarter a year ago to $450 million, well above Wall Street analysts' estimates and the company's guidance.
Chief Financial Officer Hugh Johnston in an interview attributed the growth to strong viewership of older films like "Avatar" and "Zootopia" that had sequels come out last year as well as general entertainment shows like ABC's "High Potential." The company also saw lower cancellation rates from people who bundled Disney+ and Hulu with its new direct-to-consumer ESPN service.
Growing streaming profitability is critical for entertainment companies as their linear network businesses continue to decline because of cord-cutting. Disney's nonstreaming entertainment operating income plummeted 55% last quarter to $650 million. Sports operating income fell 23% to $191 million, which it attributed in part to a $110 million hit from a 15-day blackout on YouTube TV, when the two companies were locked in a battle over rates.
Disney's next CEO will be charged with continuing its shift toward streaming, while managing traditional TV's expected continued decline and further stoking growth in the experiences business, which generates most of the company's profits.
Disney said operating income growth in its experiences business, which includes theme parks, cruises and consumer goods, would be modest in the current quarter due in part to what it called "international visitation headwinds at our domestic parks."
Johnston declined to detail the reasons for the slowdown, which is occurring as the Trump administration's diplomatic tensions with allies and policies including tariffs and enhanced visa vetting have raised concerns about foreign tourism. The CFO said the company is shifting more of its marketing efforts for California's Disneyland and Florida's Walt Disney World to domestic visitors in response.
Revenue for the experiences unit rose 6% in the December quarter to $10 billion and operating income increased 6% to $3.3 billion. The company attributed the increases in part to a 1% rise in attendance at its domestic parks along with a 4% increase in per capita guest spending, as well as more bookings on its cruise line, which added a new ship.
In total, Disney reported $25.98 billion in revenue for its fiscal first quarter ended Dec. 27, up 7% from a year earlier. Net income of $2.4 billion was down 6%. Both revenue and earnings per share excluding certain items were above analysts' expectations.
Disney's board of directors is meeting this week at its Burbank, Calif., headquarters, where it is expected to vote on who will succeed Bob Iger as chief executive officer.
Uncertainty over how Disney will handle CEO succession has hung over it for the past three years, a period in which its shares have stagnated. The company's last try in 2020, when Iger handed the reins to Bob Chapek, was a fiasco that resulted in Iger returning less than three years later.
People close to the company believe the race has come down to two internal candidates: experiences Chairman Josh D'Amaro and entertainment Co-Chairman Dana Walden. Speculation about who will get the job and whether the other person will be offered an enhanced role has consumed Disney employees and much of Hollywood for the past several months, while supporters of both executives have been quietly jockeying behind the scenes.