Disney returned to a profitable third quarter as its combined streaming business started making money for the first time and the movie Inside Out 2 did well in theaters.
Operating income for the entertainment segment nearly tripled to $1.2bn thanks to better performances from its direct-to-consumer and content sales/licensing and Other segments.
The Walt Disney Co earned $2.62bn, or $1.43 per share, in the period ended 29 June. A year earlier, it lost $460m, or 25 cents per share.
Total revenue for the Burbank, California, company rose 4% to $23.16bn, beating Wall Street’s estimate of $22.91bn.
The company made $254m in operating income from content sales and licensing – helped by the strong performance of Inside Out 2 at movie theaters, which is now the highest-grossing animated film of all time. Disney+ said the original Inside Out, which came out in 2015, helped drive more than 1.3m Disney+ sign-ups and generated over 100m views worldwide since the first Inside Out 2 teaser trailer dropped.
The combined streaming businesses, which includes Disney+, Hulu and ESPN+, achieved profitability for the first time thanks to a strong three months for ESPN+ and a better-than-expected quarterly performance from the direct-to-consumer unit.
Disney said in May that it expected its overall streaming business to soften in the third quarter, due to its platform in India, Disney+ Hotstar. The company also said at the time that it anticipated its combined streaming businesses to be profitable in the fourth quarter, so the money-making quarter was a surprise.
In the Experiences division, which includes theme parks, revenue climbed 3% in the third quarter. International rose 5%. Domestic parks and experiences operating income fell 6%, while international operating income edged up 2%.
Disney said that the decline in operating revenue for domestic parks and experiences was because of increased costs driven by inflation, technology spending and new guest offerings.
The company cautioned that the moderation in demand it saw in its domestic parks in the third quarter could linger for the next few quarters. It anticipates fourth-quarter Experiences operating income falling by mid single digits compared with the prior-year period, due to the domestic parks moderation, as well as cyclical softening in China and fewer people at Disneyland Paris due to the impact of the Olympics on normal consumer travel.
Disney now anticipates full-year adjusted earnings per share growth of 30%. Shares in the company sank 3% during early trading in New York on Wednesday.