Disney Stock Rises Earnings Beat Increases Cost-Cutting Plan $2BN Conservative Angle

Disney's quarterly revenue grew 5%, but fell short of expectations. The company announced an ambitious $7.5 billion cost-cutting plan.

Disney's revenues for the quarter and year increased by 5% and 7% compared to the prior-year quarter and prior year, respectively. However, they fell short of expectations at $21.2 billion, with only the Sports segment outperforming. On an operating income basis, Disney excelled, rising by 86% year-over-year to $2.98 billion, surpassing the estimated $2.62 billion. Earnings at the world's largest entertainment company also exceeded expectations at 82c, beating the anticipated 69c.

Bob Iger's first anniversary as the chief executive of the Walt Disney Company saw Disney+ subscribers surpassing expectations, rising by 7 million to 150.2 million, compared to the expected 147.07 million. However, ESPN+ and Hulu subscribers and ARPUs disappointed. Furthermore, subscriptions fell by 7% at Disney+ Hotstar in India, where Iger is considering selling stakes in its Disney Star businesses or potentially shedding its entire holding.

Despite this, Disney's streaming business, including ESPN+, saw narrowed losses of $387 million in the quarter, outperforming Wall Street's projections. The company announced a more ambitious plan for company-wide cost cuts and sharply narrowed losses in its streaming business. Disney is seeking $7.5 billion in annualized cost efficiencies, up from the $5.5 billion it targeted at the beginning of the year.

Robert A. Iger, Chief Executive Officer of The Walt Disney Company, stated, "Our results this quarter reflect the significant progress we've made over the past year. While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again. We have a solid foundation of creative excellence and innovation built over the past century, which has only been reinforced by the important restructuring and cost efficiency work we've done this year, and we're on track to achieve roughly $7.5 billion in cost reductions. Combined with our portfolio of valuable businesses, brands, and assets - and the way we manage them together - Disney has a strong hand that differentiates us from others in our industry."

Looking ahead, Iger emphasized four key building opportunities that will be central to Disney's success: achieving significant and sustained profitability in the streaming business, building ESPN into the preeminent digital sports platform, improving the output and economics of the film studios, and turbocharging growth in the parks and experiences business. Disney's shares have fallen more than 15% over the past year, prompting a renewed challenge from activist investor Nelson Peltz of Trian Partners. Despite this, Iger remains optimistic about the opportunities ahead to create lasting growth and increase shareholder value.

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