Disney Q1 Earnings Beat Estimates Despite $110M YouTube TV Blackout Hit; Succession Decision Looms
Disney delivered a solid financial performance for its fiscal first quarter, surpassing Wall Street expectations, though a high-profile carriage battle with YouTube TV left a $110 million dent in its bottom line. The media giant reported revenue of $25.98 billion for the quarter ended December 27, a 5% year-over-year increase. Adjusted earnings per share reached $1.63, beating analyst forecasts of $1.58 on revenue of $25.6 billion.
The results were announced in an unusual pre-market window on Monday, shifting focus to the board's quarterly meeting this week, where the long-awaited selection of a successor to CEO Bob Iger is expected to be finalized. Josh D'Amaro, head of the powerhouse Experiences division, is widely seen as the frontrunner.
Segment Performance: A Mixed Picture
The financial report revealed a tale of two Disneys. The Sports segment, home to ESPN, saw operating income fall 23% to $191 million. The company cited soaring programming costs and lower affiliate revenue, which overshadowed a 10% gain in advertising. A significant factor was the 15-day blackout of ESPN, ABC, and other channels on YouTube TV during peak football season, which was resolved in mid-November but cost the division $110 million.
In contrast, the Experiences unit—encompassing theme parks, resorts, and cruise lines—broke records, surpassing $10 billion in revenue for the first time and generating $3.3 billion in operating income. Domestic park attendance grew modestly, while per-guest spending rose 4%.
The Entertainment division saw revenue rise 7% to $11.6 billion, but a crowded slate of theatrical releases—including Zootopia 2 and Avatar: Fire and Ash—drove up costs, leading to a 35% drop in the unit's operating income. Management emphasized that the box office success of these tentpoles will benefit future quarters.
Streaming provided a bright spot. The combined direct-to-consumer business (Disney+ and Hulu) posted operating income of $450 million, far exceeding internal targets and buoyed by price hikes. The company, following industry leader Netflix, has ceased quarterly reporting of subscriber counts and average revenue per user.
Analyst & Investor Reactions
"The underlying strength in parks and streaming is undeniable, but that YouTube TV dispute was a painful, self-inflicted wound," said Michael Torres, a media analyst at Crestview Advisors. "It highlights the ongoing fragility in the linear TV ecosystem, even for a titan like Disney."
Sarah Chen, a portfolio manager at Longview Capital, offered a more optimistic take: "Beating on both top and bottom lines is what matters. The $110 million hit is a one-time event, while the $10 billion park quarter is a milestone that speaks to enduring brand power. The market will be more focused on the succession news."
A more critical voice came from David R. Miller, host of the 'Media Unspun' podcast: "This is classic Iger-era spin. They bury a nine-figure loss from bungling a carriage deal in the middle of football season, while touting streaming profits that came largely from raising prices on frustrated subscribers. The board picking an insider as successor suggests more of the same, not the transformation this company needs."
In the earnings release, Iger reflected on his return to the CEO role in 2022: "As we continue to manage our company for the future, I am incredibly proud of all that we’ve accomplished over the past three years." The coming days will determine who is tasked with building on that legacy.