Walt Disney Co Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Abu Dhabi Theme Park: Announced agreement to bring a Disney theme park to Abu Dhabi, which will be authentically Disney and distinctly Emirati. Disney will oversee design, license IP, and provide operational expertise, while Miral provides capital, construction resources, and operational oversight.
• Theme Park Investments: Investing over $30 billion in Florida and California theme parks to enhance offerings, create jobs, and support the U.S. economy.
• Streaming Strategy: Hulu embedded in Disney+ has a positive impact on engagement (up) and churn (down). Plans to bundle ESPN direct-to-consumer smartly, improve technology (e.g., paid sharing, personalization), and invest in local content outside the U.S.
• Content Slate: Upcoming theatrical lineup includes live action Lilo & Stitch, Pixar's Elio, Marvel's The Fantastic Four: First Steps, and more, with strong confidence in the slate's quality.

Segment Performance:

• Experiences Segment: Delivered strong results this quarter, driven by outstanding performance from domestic businesses. Investments in this segment have achieved all-time high returns on invested capital.
• Entertainment Segment: Feature films like Thunderbolts (currently number one globally) have enjoyed success. Upcoming theatrical slate includes Lilo & Stitch, Elio, The Fantastic Four: First Steps, etc. General entertainment and news programming performed well. Sports viewership trends are healthy, with ESPN's Q2 primetime audience among the key 18 to 49 demographic up 32%.

Guidance:

• Fiscal 2025: Adjusted EPS was up 20% from the prior year, with a strong first half of fiscal 2025. Experiences segment had strong Q2 results, and bookings for Walt Disney World in Q3 were up 4% and Q4 up 7%.
• Long-term: The long-term guide for double-digit earnings growth in '26 and '27 remains intact based on the higher '25 EPS base.

Risks: Forward-looking statements are subject to risks including economic or industry conditions, competition, execution risks, the market for advertising, future financial performance, and legal/regulatory developments. Refer to SEC filings for more details on key risk factors.

Question and Answer: Q: Ben Swinburne asks about the impact of streaming content strategy on Disney+ engagement, sign-ups, and churn.

A: Bob Iger states that Hulu embedded in Disney+ and the addition of sports content have a positive impact, with churn down significantly. Plans include bundling ESPN direct-to-consumer, improving technology, and investing in local content outside the U.S.

Q: Stephen Khong inquires about the choice of Abu Dhabi location and park margins.

A: Bob Iger talks about Abu Dhabi's strategic location at the crossroads of the world with high tourist potential. Hugh Johnston mentions park margins are a combination of all businesses, not just cruise.

Q: Robert Fishman asks about the upcoming theatrical slate and Marvel's role.

A: Bob Iger highlights the strong upcoming slate including Lilo & Stitch, Elio, etc., and mentions Marvel focusing on films for better quality, as seen with Thunderbolts.

Q: Jessica Reif Ehrlich asks about advertising and Abu Dhabi ownership.

A: Bob Iger says the Abu Dhabi deal is a license arrangement, and Hugh Johnston talks about a healthy advertising market with strong demand for Disney advertising.

Q: David Karnovsky asks about ESPN flagship programming and features.

A: Bob Iger discusses the differences between linear ESPN and ESPN DTC in terms of features, and the critical mass of sports and studio programming available.

Q: Michael Morris asks about the Experiences segment outlook.

A: Hugh Johnston mentions strong demand in the U.S. with Q3 and Q4 bookings up, softness in China, and guidance for '26 remains intact.

Q: Michael Ng asks about cruise ship learnings and international park visitation.

A: Bob Iger talks about positive learnings from the Disney Treasure cruise ship, and Hugh Johnston mentions international attendance at domestic parks is in the double-digits but slightly impacted.

Q: Kannan Venkateshwar asks about Experiences expansion and streaming operating leverage.

A: Bob Iger talks about Abu Dhabi as a strategic expansion and future plans, while Hugh Johnston says streaming operating leverage comes from revenue growth and cost opportunities.