Philip Hernandez breaks down Disney’s latest earnings call
Disney continues its parks-first strategy with a new announced expansion in the Middle East as streaming turns profitable.
By Philip Hernandez
Disney’s Q2 FY25 earnings revealed a company leveraging its core strengths in experiences while expanding globally. The announcement of Disneyland Abu Dhabi served as the crowning achievement of a strong quarter. The stock jumped approximately 7% following an earnings call, signaling investors’ positive response to Disney’s pivot back to its experiential offerings.
The parks-led approach is paying dividends, as evidenced by a 9% increase in Experiences segment operating income to $2.5 billion and record-high returns on invested capital in this division. This impressive performance occurred despite softness in Disney’s China operations, where guests are “tightening their belts,” according to CFO Hugh Johnston.
Parks & Experiences: The Core Growth Engine
Disney’s domestic parks and experiences business showed particular strength, with operating income growing 13% to $1.8 billion. This improvement reflected higher volumes from increases in theme park attendance, occupied room nights, Disney Vacation Club unit sales, and higher guest spending at theme parks.
The company highlighted strong forward-looking indicators, with Walt Disney World bookings up 4% for Q3 and 7% for Q4 year-over-year, suggesting continued momentum despite macroeconomic uncertainties and competitive pressures from Universal’s new Epic Universe park opening.
Bob Iger emphasized the company’s commitment to strategic parks investments: “We already have more expansion projects underway domestically and around the world than at any time in our history,” he noted on the earnings call, referencing the approximately $30 billion earmarked for expansion in Florida and California.
International parks results were more mixed, with operating income declining 23% compared to the prior-year quarter due to lower results at Shanghai Disney Resort and Hong Kong Disneyland Resort, reflecting what Disney described as “softness we are continuing to see in China.”
Abu Dhabi: Disney’s Seventh Global Destination
The most significant announcement was the new strategic partnership with Miral to develop Disney’s seventh global theme park destination in Abu Dhabi. The arrangement follows Disney’s licensing model, similar to Tokyo Disney Resort, with Miral providing capital and construction resources while Disney oversees design, licenses IP, and provides operational expertise.
Iger, speaking from the UAE during the earnings call, highlighted the strategic rationale: “It was very obvious to us that there were many people — basically hundreds of millions… — where a trip to one of our six [current] locations was pretty lengthy and expensive. So, we felt the best way… is to bring our product to them.” He noted that the Middle East region offers “500 million income-qualified people within a four-hour flight” and Abu Dhabi alone is projecting 39 million annual tourists by 2030.
According to Iger, the park will be “authentically Disney and distinctly Emirati,” and he emphasized Miral’s strong track record operating attractions on Yas Island, including SeaWorld, Ferrari World, and Warner Bros. parks. Design work is already underway, and the park is expected to be “largely indoor,” following the precedent of other Yas Island attractions.
Disney Cruise Line Expansion
Disney Cruise Line continues to be a growth driver for the Experiences segment. Operating income at domestic parks and experiences was bolstered by Disney Cruise Line’s fleet expansion, with Q2 reflecting the first full quarter of operations for the Disney Treasure, which launched in December 2024.
The company reported approximately $35 million in pre-opening expenses related to the Disney Destiny and Disney Adventure, which will join the fleet later in 2025. The Adventure will sail from Singapore, with Iger noting that “the first quarter sold out in a matter of days,” demonstrating strong demand in Southeast Asia.
Disney expects full-year fiscal 2025 pre-opening expenses for Disney Cruise Line of approximately $200 million, with $40 million in Q3 and $50 million in Q4. Ultimately, the fleet will grow to 13 ships by 2031, more than doubling its pre-2024 size.
Streaming: Finally Profitable
After years of investment, Disney’s streaming business has turned the corner toward profitability. Direct-to-Consumer operating income increased $289 million to $336 million, marking the third consecutive profitable quarter. Total Disney+ and Hulu subscriptions reached 180.7 million, despite recent price increases.
“Not only is engagement up, but churn is down — and significantly,” Iger said, crediting the broader content on Disney+ (which now includes Hulu series and some sports) for boosting retention.
Disney+ ended Q2 with 126 million subscribers, an increase of 1.4 million compared to Q1, while Hulu added 1.1 million subscribers to reach 54.7 million. Average revenue per user also showed improvement, with Disney+ domestic ARPU increasing from $7.99 to $8.06.
To drive streaming into its next phase, Disney is pursuing a three-pronged approach:
1) enrich the product with more content and better technology
2) continue disciplined cost management
3) invest in local content in key international markets.
This strategy appears to be paying off as Disney’s confidence in streaming as a growth driver has noticeably increased.
Movie Business: Quality Over Quantity
Disney’s theatrical business showed renewed strength, with Thunderbolts from Marvel Studios opening number one worldwide and described as “the best-reviewed Marvel film in years.” The company has a strong upcoming slate for calendar 2025 including Lilo & Stitch, Elio, Fantastic Four, Zootopia 2, and Avatar: Fire & Ash.
Iger addressed recent turbulence in Marvel’s output and the strategy going forward: “We had Marvel produce a lot more. We’ve also learned over time that quantity does not necessarily beget quality.” He admitted “we lost a little focus by making too much,” especially on the Disney+ side, and confirmed that Marvel is now “consolidating around fewer, better projects.”
Content Sales/Licensing and Other operating income increased $171 million to $153 million in Q2, driven by higher TV/VOD distribution results, including an increase in sales of episodic content, and improved home entertainment distribution driven by the performance of Moana 2.
Sports: ESPN+ Preparing for Flagship Launch
ESPN continues to be a bright spot, with primetime TV viewership up 32% in the key 18-49 demographic, marking “ESPN’s most watched Q2 in primetime ever.” Sports advertising revenue was up over 20% for the quarter, though operating income fell due to higher programming and production costs for additional College Football Playoff and NFL games.
The company is preparing to launch its direct-to-consumer ESPN offering “in a few months,” with pricing details expected to be announced next week at the Upfronts. The service will be bundled with Disney+/Hulu, and linear ESPN subscribers will get access at no extra fee.
Financial Outlook
Disney delivered 7% revenue growth to $23.6 billion and 20% growth in adjusted EPS to $1.45 in Q2. The company raised its full-year adjusted EPS guidance to $5.75, up from $5.30 previously and representing a 16% increase over fiscal 2024.
For Experiences specifically, Disney now expects operating income growth for fiscal 2025 to be at the high end of the previously guided 6-8% range compared to the prior year.
Looking Ahead
With Disneyland celebrating its 70th anniversary beginning this week and Hong Kong Disneyland marking its 20th anniversary next month, Disney continues to balance maintaining its heritage with ambitious expansion plans.
The earnings results demonstrate Disney’s renewed focus on its parks business as a core competitive advantage while simultaneously stabilizing streaming and recalibrating its content strategy. With strong domestic parks performance, the Abu Dhabi announcement, and continued cruise line expansion, Disney is signaling that experiences remain the heart of its growth strategy for the foreseeable future.
However, there are two clouds on the horizon: China and Tariffs. Per Cap spending in China is down, as consumers reevaluate spending in light of a rough economy. Can Disney maintain pricing power in mainland China? And, of course, Tariffs. Remember that this earnings report is a trailing indicator, all pre-tariff. With costs rising, inbound travel falling, and consumer sentiment falling – will Disney’s bookings and per cap remain strong? Disney seems to be betting that the live entertainment and seasonal overlays will keep guests coming, and we’ll have to wait and see. With its diverse portfolio and strong performance, Disney appears to be in the best position to weather any storm.
Disney should be congratulated for its turnaround in streaming, just in time to refocus on its most profitable segment. Disney’s IP flywheel is now safe from cable’s decline, and its poised to bring renewed energy to its experiences.
Philip Hernandez is a journalist reporting on the haunted house industry, horror events, theme parks, and Halloween. He is also the CEO of Gantom Lighting and Founder / Publisher of the Haunted Attraction Network, the haunted attraction industry’s most prominent news media source. He is based in Los Angeles and co-founded/co-hosts the Green Tagged podcast
