Disney Q2 FY25 Earnings Analysis (5/7/25)

K

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Key Updates

  • The Experiences division is growing, announcing its seventh park to be built in Abu Dhabi. 
    • Disney is partnering with experience company Miral to develop this park. Disney will lead design, have oversight of brand/experience and provide operational guidance; while Miral will provide all funding. Disney is essentially licensing its IP and will receive a royalty, but specifics for the royalty were not disclosed. 
    • Iger stressed how Abu Dhabi is a crossroads to the world, with hundreds of millions within a four-hour flight to Abu Dhabi and 120M will come through Abu Dhabi and Dubai just this year.
  • ESPN “Flagship” had an announcement about an announcement. Iger noted that ESPN President Jimmy Pitaro next week will announce the name and pricing for the standalone, DTC ESPN product.
  • Iger and Disney see a healthy ad market, with live sports particularly doing well as ESPN’s ad sales were up over 20% this past quarter. Restaurants & Health Care have considerable demand for advertising. DTC ad market is more challenging, moreso due to new entrants (e.g. Amazon) as opposed to demand issues. 

Strategy Plans

  • Iger noted Streaming remains a key priority and sees three paths for growth
    1. Integration: Hulu integration within D+ has been successful, with engagement up and churn down. There are plans to make it even more integrated. With the forthcoming release of ESPN DTC, Iger believes their bundled packaged (D+, Hulu, ESPN) has variety that can’t be matched. 
    2. Technology: overall tech improvements coming in the near term, with more customization and personalization, ad tech upgrades and paid sharing for Hulu. 
    3. Investment in Content: prioritizing the development of local content in markets outside the US, to invest more in local content outside the US. Iger did not mention specific markets but the Earnings Report Prepared Commentary called out the UK, Korea, Japan and Mexico.
  • The introduction of ESPN’s standalone streaming service will just be another addition to the many different products/bundles that Disney offers but Iger noted they will limit the number of SKUs and make it very clear the offer value between products/bundles. The DTC version of ESPN will have more “bells and whistles” than linear, but all linear subscribers will have access to the standalone product as Disney wants to avoid any further harm to the linear bundle. 

Market Initial Reaction

$DIS rose 10.76% throughout the trading day of 5/7/25, closing on 5/6 at $92.17 and closing on 5/7 at $102.42.

K’s Take

This positive surge in the stock price is likely due to a variety of factors, including besting EPS expectations, growth in the Experiences vertical (with confident remarks regarding consumer behaviors & current booking trends for the remainder of the year) and continued growth in Streaming. The strength in Experiences (Parks, Cruises, etc.) allows Disney more flexibility in building its Streaming platform, which will never be the Linear cash cow, but might be able to get to a place of solid margins.

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