Disney pre-market rose over 8%! Strong performance in theme parks and streaming business, Q2 results exceeded expectations and significantly raised full-year profit guidance

Disney's Q2 performance exceeded expectations, and it raised its full-year profit forecast, mainly benefiting from strong performances in its theme parks and streaming businesses.

On Wednesday before the U.S. stock market opened, Disney announced its Q2 results, with both revenue and profit surpassing expectations, leading the company to significantly raise its full-year profit guidance. Specifically:

Revenue and earnings per share both exceeded expectations: Disney's Q2 revenue was $23.62 billion, higher than the expected $23.05 billion, representing a 7% year-on-year increase; adjusted earnings per share were $1.45, also above the expected $1.20, marking a substantial year-on-year growth of 20%.

Full-year profit forecast significantly raised: Disney expects adjusted earnings per share for the full year to grow 16% year-on-year to $5.75, exceeding the market expectation of $5.44, approximately double the previous expected growth. Additionally, Disney anticipates full-year operating cash flow of $17 billion, higher than the previously estimated $15 billion and above the market estimate of $14.8 billion.

The stronger growth outlook has spurred a significant rise in Disney's stock, with a pre-market increase of 6.76%.

Strong Performance in Theme Parks and Streaming Business

First, looking at the theme park business, Disney's "Experiences" segment (including resorts and cruises) performed exceptionally well. Visitor numbers increased at parks in California and Florida, holiday package sales were strong, and the launch of the Disney Treasure cruise line also brought in more bookings.

In Q2, Disney's experiences segment reported operating revenue growth of 9%, reaching $2.49 billion. This segment contributed the majority of the company's operating revenue and performed outstandingly in this strong quarter for the entertainment giant. Notably, operating revenue from domestic parks in the U.S. grew by 13%. However, due to macroeconomic pressures, operating revenue at Shanghai Disneyland and Hong Kong Disneyland saw declines.

In terms of streaming business, price increases for Disney+ and Hulu positively impacted the profitability of the direct-to-consumer (DTC) streaming segment, which achieved profitability for the fourth consecutive quarter, with profits reaching $336 million, far exceeding the $47 million from the same period last year.

As more consumers shift from traditional pay-TV packages to DTC services, achieving sustained profitability in the streaming sector is crucial for Disney and other media giants. The company aims for streaming profits of approximately $875 million in fiscal year 2025.

Additionally, Disney+ added 1.4 million subscribers this quarter, far exceeding the 1.25 million subscriber loss anticipated by analysts in a Bloomberg survey. The company reported a loss of 700,000 paid subscribers for Disney+ in the first quarter due to recent price increases. Management indicated that for the current third quarter, they expect a slight quarter-on-quarter increase in Disney+ subscribers.

In the film business, the movie segment benefited from box office revenues from "Moana 2" and "The Lion King," which were released at the end of last year, but box office performance for "Captain America 4: Brave New World" and "Snow White," released in February and March, was weak

Good Growth Prospects but Facing Tariff Pressure

Disney CEO Bob Iger stated that the company is confident about the future; however, it also faces some challenges.

Disney is actively repurchasing shares, having repurchased $1.8 billion worth of stock so far this fiscal year. The company expects its parks business to see an operating income growth of 6% to 8% in fiscal year 2025, with stronger performance anticipated in the second half.

Bob Iger also mentioned that Disney will continue to enhance the profitability of its online video platform and expects the company to earn $1 billion from streaming this year.

Notably, the company reported a content impairment expense of $109 million for this quarter. Due to its exit from the Venu Sports joint venture earlier this year, the company reported an expense of about $50 million in the first quarter.

Due to the uncertainty brought by Trump's tariffs on imported goods, many large companies have withdrawn their performance forecasts for 2025. Earlier this week, according to CCTV News, on the 4th local time, U.S. President Trump posted on social media that he has authorized the U.S. Department of Commerce and the U.S. Trade Representative to immediately initiate procedures to impose a 100% tariff on all films produced abroad and entering the United States.

Disney, which owns theme parks, cable networks, and film studios, is very sensitive to weak consumer spending. However, Disney benefits from the better-than-expected growth of its namesake theme parks and streaming business, noting that these strong performances will enhance its earnings expectations