Disneyland Paris is part of the division that accounted for more than half of Disney’s profit last quarter. – Martin Sekanina/CTK/ZUMA PRESS
Disney shares fell nearly 8% Thursday, as efforts to turn around a yearslong stock slump with growth in its streaming and experiences businesses failed to impress investors.
The entertainment giant reported roughly flat revenues of $22.46 billion in its fourth quarter that ended in late September, short of Wall Street analysts’ expectations. Companywide segment operating income fell 5% to $3.48 billion, driven by weakness in the television and movie businesses, while parks and streaming posted profit gains.
The company’s shares have been hovering between about $80 and $125 since early 2022 after reaching nearly $200 in 2021. Its stagnant stock price has been a long-running concern for shareholders and employees about Disney Chief Executive Bob Iger’s efforts to turn around the company since he returned in late 2022.
Despite consistent profit growth, investors remain worried about Disney’s ability to manage the transition from linear television to streaming and to execute on the multibillion-dollar investments it is making in theme parks and cruise ships. Disney’s “valuation gap versus the market has widened even as [earnings per share] has continued to outpace the market in recent years,” analysts at Bernstein wrote this week.
In a move to return more cash to investors, Disney said Thursday it would double share repurchases to $7 billion in the current fiscal year and increase its dividend by 50% to $1.50 per share.
The company also focused heavily on what it said were strong prospects for its streaming business. Iger said on a call with analysts that he sees Disney+ as not just a growing content platform, but as a way to use artificial intelligence to let people shop for products, engage with theme parks and cruise ships, play games, and produce and consume user-generated content based on Disney properties.
“The opportunity here is enormous in terms of increasing our engagement with Disney fans,” he said.
Disney Chief Executive Bob Iger has been working to turn around the company’s performance. – Gilbert Flores/Variety/Getty Images
Total subscriptions to Disney+ and Hulu rose 12.4 million during the quarter to 195.7 million. About half of the increase came from a new deal offering Disney streaming apps to Charter’s cable customers. Most of the rest came from overseas.
The company said it expects profitability in its streaming business to grow to 10% in the current fiscal year from about 5% in fiscal 2025.
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Direct-to-consumer revenue grew 8% last quarter to $6.25 billion. Operating income for the segment rose 39% to $352 million, nearly matching the $391 million profit from linear networks, which fell 21%.
Disney’s TV business was affected by a drop off in political advertising compared with last year’s presidential election and a loss in revenue from India due to a merger of some of its assets there last year.
Disney didn’t provide data on the performance of a new ESPN streaming service that launched in August, but Iger said early signs were positive. He said 80% of subscribers got the new service through a bundle including Disney+ and Hulu. Disney has used discounts to push consumers to package its streaming services together, which makes cancellations less likely.
The company’s channels haven’t been available on YouTube TV for nearly two weeks due to a dispute with Google over the fees Disney charges to carry them. Chief Financial Officer Hugh Johnston told analysts Disney hedged its financial guidance in case of a prolonged blackout. “We’re ready to go as long as they want to,” he said on CNBC.
Experiences, including Disney’s parks, accounted for more than half of the company’s profits in the quarter, as that business’s operating income increased 13% to $1.88 billion. Growth there came largely from overseas theme parks including Disneyland Paris, which is undergoing a significant expansion, and the cruise line business.
The company is in the midst of a $60 billion, 10-year investment in its parks and experiences business that includes new attractions and lands at its parks and a more than doubling its line of cruise ships to 13.
Box office revenue dropped as Disney’s biggest release in the quarter, Marvel’s “The Fantastic Four: First Steps,” proved to be a modest disappointment, particularly compared with 2024’s summer hit “Deadpool & Wolverine.”
After starting the current quarter with the flop “Tron: Ares,” Disney had a solid opening this past weekend for “Predator: Badlands” and has high hopes for Thanksgiving’s “Zootopia 2” and December’s “Avatar: Fire and Ash.”
Write to Ben Fritz at ben.fritz@wsj.com