The company’s stock slipped almost 5% in after-hours trading due to the report. It had fallen a fraction during the trading day to close at $174.53 and has now fallen into the red for 2021 to date. In 2020, despite the company’s theme park, movie studio and sports operations suffering major damage from Covid, the company’s shares managed a major rally.
Disney’s total revenue in the quarter ending October 2 came in at $18.5 billion. That was up 26% compared with a year ago, but below analysts’ expectations, with adjusted earnings per share of 37 cents missing by 12 cents. The company recorded a loss of 20 cents a share in the year-ago period.
Streaming, increasingly the central strategic focus of the company, proved a letdown in the quarter. Disney+ added only 2.1 million subscribers, reaching 118.1 million around the world. The growth was sharply lower than in the previous quarter. CEO Bob Chapek had sought to get out in front of the numbers, signaling in September that low-single-digit growth would be likely.
Direct-to-Consumer revenue increased 38% to $4.6 billion in the quarter, but and operating losses widened from $400 million to $600 million. The increase in red ink was blamed on higher losses at Disney+ and, to a lesser extent, ESPN+. Improvement at Hulu partly offset those downturns.
The Parks, Experiences and Products division saw revenue nearly double compared with a year ago, to $5.45 billion. The theme park portfolio, a longtime profit engine, slowed almost to zero during the early months of the pandemic, with major sites like Disneyland only opening back up recently.
Bottom-line results in the parks unit were less encouraging. Operating income totaled $640 million, which narrowly missed Wall Street expectations. Disney blamed increased costs, noting that it had taken a $1 billion hit due to more extensive government regulations and Covid safety measures for employees as well as visitors.
Media and Entertainment Distribution revenue ticked up only 9% to $13.1 billion, with linear networks losing ground compared with 2020 in part due to the absence of political ad spending at ABC.
Box office and film studio results are no longer broken out as specific line items under the company’s revamped reporting structure. While the industry-leading studio operation is back on its feet, it suffered a notable misfire last weekend with Eternals, the worst-reviewed Marvel release yet. Its $161 million global launch ($71 million of that in North America) was solid but a bit softer than some had expected, at least domestically.