Key points:

  • The company expects theme park attendance to decline in coming quarters.
  • Disney+, Hulu, and ESPN+ report first-ever profit.
  • “Inside Out 2” and “Deadpool & Wolverine” set box office records.

Despite the success of Pixar’s “Inside Out 2” and its TV business, Walt Disney Co. forecast some moderation in demand for its theme parks in the coming quarters.

The announcement sent the company’s shares down 1.1% on Wednesday. Disney warned that operating profit at its parks could decline by mid-single digits in the fiscal fourth quarter.

Theme park revenues are down

Chief Financial Officer Hugh Johnston told investors he expects revenue at the parks to decline in the fourth quarter, which he said is temporary and will not have a lasting impact. Analysts attribute the trend to a general slowdown in the U.S. economy as inflation rises and consumer spending declines.

Quilter Cheviot’s Ben Barringer points out that similar trends are being seen at other travel companies, indicating a decline in consumer interest in travel and vacations. Disney’s theme parks segment, which accounts for more than half of the company’s revenue, has already seen its operating profit decline by 3%.

Streaming services compensate for losses

At the same time, Disney saw strong growth in operating profit in its entertainment division, nearly tripling the figure. Moreover, the combined streaming services Disney+, Hulu, and ESPN+ became profitable for the first time. According to Emarketer analyst Paul Verna, Disney is well ahead of schedule in achieving profitability in the streaming segment, which is a significant achievement given the massive investments the company and its competitors have made in developing this area.

If Disney can maintain this trend, it will be a breakthrough in the industry. Despite these successes, the company expects operating profit to decline in the fourth quarter. However, the company’s adjusted earnings per share and revenue exceeded analysts’ expectations.

The success of films like Inside Out 2 has positively affected the popularity of original content on Disney+. CEO Bob Iger noted that the success of the streaming business is largely due to the creative achievements of the entertainment division and the television group.

Revival of the entertainment business

The overall picture shows that the Disney film studio is showing signs of emerging from the crisis. Record box office receipts for the films Inside Out 2 and Deadpool and Wolverine indicate the studio’s creative potential and its ability to create commercially successful projects is restored. The company’s financial results also confirm this trend.

The operating profit of the Entertainment division increased significantly, and the Disney+ streaming services showed profitability for the first time.

However, a number of factors could affect the results of the coming quarter, including the Olympic Games and changing market conditions in China.