The Walt Disney Company recently released its fourth-quarter and full-year earnings for fiscal 2024, ending September 28. This earnings cycle concludes a turbulent year for the entertainment industry, with Disney navigating significant challenges and opportunities in a rapidly evolving market. The company reported a 6% increase in revenues, reaching $22.6 billion, compared to $21.2 billion in the same quarter of the previous year. For the full year, revenue rose by 3%, from $88.9 billion in 2023 to $91.4 billion in 2024.
Despite the revenue growth, income before income taxes for Q4 saw a decline of 6%, decreasing to $0.9 billion from $1.0 billion in the previous year’s Q4. However, for the full year, pre-tax income surged by 59%, reaching $7.6 billion—a significant jump from $4.8 billion in fiscal 2023. Diluted earnings per share (EPS) in Q4 experienced substantial growth, up by 79% to $0.25 compared to $0.14 in the prior year. This positive trend was mirrored in the full-year EPS, which more than doubled to $2.72 from $1.29 in 2023. Adjusted earnings per share also demonstrated strong performance, increasing by 39% to $1.14 in Q4 and by 32% to $4.97 for the full fiscal year.
Five years after launching Disney+, Disney's Direct-to-Consumer (DTC) segment shows signs of sustained profitability following a period of significant losses. Despite Disney's stock being roughly 50% off its 2021 peak, the past three months have shown upward momentum, driven by optimism in the DTC business. Disney expects growing profits in this segment, although it remains to be seen if these gains will offset challenges in its parks and declining linear TV business.
The Entertainment division witnessed an operating income growth for Q4 to $1.1 billion—a $0.8 billion increase compared to the same quarter in 2023. A notable factor contributing to this was a 14% boost in ad revenue within the Direct-to-Consumer (DTC) streaming sector, resulting in $253 million in operating income for Q4. Disney's DTC streaming services, including Disney+ Core and Hulu, reached 174 million total subscriptions, with Disney+ Core alone contributing 120 million paid subscribers, an increase of 4.4 million over the previous quarter. This segment's growth was bolstered by Pixar's “Inside Out 2” and Marvel's “Deadpool & Wolverine,” which set numerous box office records and generated $316 million in operating income from Content Sales, Licensing, and Other streams in Q4.
Per Parrot Analytics regional subscriber estimates, Disney streaming lags far behind its major global SVOD competitors Netflix and Amazon Prime Video in Europe, Middle East, and Africa (EMEA) and Latin America (LATAM). Netflix has more than triple Disney+’s EMEA subscribers while Prime Video has more than double, according to Parrot Analytics Streaming Economics system. Netflix has more than double Disney+’s subscriber base in LATAM, while Prime Video has a 35% lead over Disney+.However, adding Disney+Hotstar onto the Disney+ core subscribers puts Disney within striking distance of Netflix and Amazon Prime Video in the Asia Pacific (APAC) region.
Netflix and Prime Video have prioritized heavily investing in local language content over the years, while Disney has focused more on exporting its English language content around the world.
The Sports division, anchored by ESPN, reported a Q4 operating income of $0.9 billion, down $0.1 billion compared to the same quarter in the prior year. While ESPN’s domestic advertising revenue grew by 7%, the segment faced pressures from increased college football rights costs and the impact of fewer NFL games aired during the quarter. Despite these challenges, the Sports division showed resilience with a modest 3% increase in revenues for the full year.
The Experiences segment, which includes Disney's theme parks and resorts, recorded a 1% revenue increase in Q4 to $8.2 billion. However, operating income for the quarter declined by 6% to $1.7 billion due to higher expenses and costs linked to new offerings, particularly in the Disney Cruise Line division. The domestic parks demonstrated stable attendance with higher guest spending, offsetting some of the cost increases. International parks, however, experienced a decline in operating income due to reduced attendance and increased expenses.
Disney’s financial health showed improvement with a 15% increase in cash provided by operations, amounting to $5.5 billion in Q4. For the full year, operating cash surged by 42%, reaching $14.0 billion. This improvement was largely driven by strategic adjustments in film and television production spending, timing of sports rights payments, and higher operating income within the Entertainment division. Consequently, free cash flow grew by 18% to $4.0 billion in Q4 and 75% for the full year, totaling $8.6 billion.
Looking ahead to fiscal 2025, Disney remains optimistic. The company projects high single-digit adjusted EPS growth and aims to generate $15 billion in cash from operations. Capital expenditures are expected to reach approximately $8 billion, with a focus on park expansions and new cruise ships. Disney also plans to increase dividend payouts in line with earnings growth and targets $3 billion in stock repurchases.
The Entertainment segment is anticipated to achieve double-digit operating income growth, with a strong first half projected due to anticipated gains in the DTC sector. The Sports segment is expected to grow by 13%, despite the anticipated decrease in profitability related to changes in the Indian market. The Experiences segment is forecasted to deliver 6% to 8% growth, particularly in the latter half of the year, driven by new projects and offerings.
Robert A. Iger, CEO of Disney, highlighted the pivotal nature of fiscal 2024, noting the company's emergence from a period of challenges with a stronger foundation. The focus on quality, innovation, and efficiency has differentiated Disney from traditional competitors. The company is leveraging its broad entertainment assets to continue delivering value, with plans to expand its offerings and maintain a solid position in the entertainment landscape.
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