Disney earnings: Surge in Disney+ subscriptions leads to surprise profit

MW UPDATE: Disney earnings: Surge in Disney+ subscriptions leads to surprise profit

By Jon Swartz

Disney+ grows to 94.9 million subscribers, leading a revenue rebound from the previous quarter as Disney continues to double-down on direct-to-consumer sales

Walt Disney Co.'s streaming service, Disney+, proved again to be a big plus during a pandemic that has all but shuttered the Magic Kingdom's other businesses. And that had Disney shares up 2% in after-hours trading Thursday.

A surge in Disney+ subscriptions, to 94.9 million, led a revenue rebound from the previous quarter as the media giant continues to double-down on direct-to-consumer sales.

Disney $(DIS)$ reported a surprise fiscal first-quarter profit of $17 million, or 2 cents a share, on sales of $16.25 billion, up from $15.8 billion in the year-ago quarter.

After adjusting for restructuring charges and other effects, Disney reported earnings of 32 cents a share, down from $1.53 a share in the year-ago quarter. Analysts on average expected Disney to report an adjusted loss of 34 cents a share on sales of $15.9 billion, according to FactSet.

"We believe the strategic actions we're taking to transform our company will fuel our growth and enhance shareholder value, as demonstrated by the incredible strides we've made in our DTC business, reaching more than 146 million total paid subscriptions across our streaming services at the end of the quarter," Disney Chief Executive Bob Chapek said in a statement announcing the results.

The sustained strength of Disney+ has impressed Wall Street analysts despite stiffening competition from Apple Inc.'s $(AAPL)$ Apple TV+, Netflix Inc. $(NFLX)$, AT&T Inc.'s $(T)$ HBO Max, Comcast Corp.'s $(CMCSA)$ Peacock, Amazon.com Inc.'s $(AMZN)$ Prime Video, and others.

"The new Marvel TV slate, upcoming Star launch, and broader price increases are key catalysts, with Parks recovery central to earnings revisions," Morgan Stanley analyst Benjamin Swinburne said in a note Wednesday that maintained an overweight rating on Disney shares.

Because Disney is investing heavily on its streaming business -- it plans to plow $14 billion to $16 billion across all of its services in 2024 -- it isn't expected to be profitable until at least 2023. Disney+ is expected to deliver more revenue in March, when the monthly fee rises by $1 to $7.99 in the U.S. and by 2 euros to 8.99 euros a month in Europe.

Subscriber growth at Disney+, ESPN+, Hulu, and Hotstar remains the focus instead -- and for good reason. During its Dec. 10 investor day, Disney management indicated those services could reach some 350 million subscribers by 2024.

Disney shares rose 2% in the extended session Thursday. The stock has improved more than 35% in the past year, including 24% since its investor day in December. The Dow Jones Industrial Average , -- which counts Disney as a component -- has advanced 7% over the past year.

-Jon Swartz; 415-439-6400; AskNewswires@dowjones.com

$(END)$ Dow Jones Newswires

February 11, 2021 16:23 ET (21:23 GMT)

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