Financial Report Preview | Farewell to Burning Money for Expansion? Walt Disney Company (DIS.US) "Upgrade and Improve" Strategy Faces Key Test

The Walt Disney Company (DIS.US) is scheduled to announce its fourth-quarter earnings for fiscal year 2025 before the US stock market opens on Thursday (November 13). Investors are closely watching to see if CEO Bob Iger's restructuring plan, focusing on cost cutting, price increases, and streaming media transformation, is driving profit growth more sustainably. Despite challenges such as weakening cinema performance year-on-year, continued pressure on traditional TV business, and delayed delivery of new cruise ships, the strong performance of theme parks, cruise ships, and streaming media business is expected to partially offset these negative impacts. According to Wall Street forecasts, earnings for this quarter may temporarily decline, and revenue growth may also slow down. Specifically, the market generally expects The Walt Disney Company's Q4 total revenue to be $22.83 billion, compared to $22.57 billion in the same period last year; adjusted earnings per share to reach $1.07, compared to $1.14 in the same period last year. By business segment, entertainment revenue is expected to decrease from $10.83 billion in the same period last year to $10.49 billion, parks and experiences revenue to be $8.80 billion, an increase from $8.24 billion in the same period last year, and sports business revenue to reach $3.98 billion, compared to $3.91 billion in the same period last year. The Disney+ subscriber count is expected to increase from 125.3 million to 130.1 million. Key Points The department covering theme parks remains The Walt Disney Company's strongest profit engine. Analysts point out that despite competition from Universal Studios' new park "Epic Universe," The Walt Disney Company's domestic visitor volume remains stable, and the launch of new cruises and the fading impact of hurricanes continue to make the cruise business a growth driver. The scheduled launch of the "Walt Disney Company Exploration Ship" next month has been postponed to March 2026, which will reduce short-term profits, but will not affect long-term growth prospects. In the streaming media field, the direct-to-consumer department including Disney+ and Hulu is expected to achieve operating profitability for the second consecutive quarter, highlighting Iger's strategic shift from "pursuing subscriber growth" to "expanding profit margins." It is reported that the two platforms will officially merge next year. It is worth noting that this earnings update coincides with a new round of price increases for Disney+ and Hulu - the price adjustment took effect on October 21, marking the fourth consecutive year of price increases for the company. The management's previous target was to achieve over $1.3 billion in streaming operating profit by the end of the fiscal year in September. Morgan Stanley predicts that by the end of the fiscal year 2026, this number will climb to approximately $2.8 billion. Driving factors include the increase in average revenue per user (ARPU) and efficiency improvements brought about by the integration of Hulu and Disney+ technology architectures. However, analysts will still pay attention to the potential impact of the suspension of "Jimmy Kimmel Live" in September. Previously, controversial remarks by the host sparked boycotts from partners and calls from netizens to cancel subscriptions to The Walt Disney Company. Bank of America Corp believes that due to billing cycle factors and the quick resumption of the show, this event may only lead to a slight loss of users in the fourth quarter and have a relatively mild impact at the beginning of 2026. In terms of sports business, The Walt Disney Company launched the new streaming app ESPN Unlimited in August (with a monthly fee of $29.99), marking the company's biggest sports strategy innovation to date. Additionally, The Walt Disney Company announced on Wednesday plans to introduce the ESPN brand into the Asian market and gradually expand ESPN services through Disney+ to broadcast sports events. Morgan Stanley estimates that by the end of the fiscal year 2026, ESPN Unlimited will attract approximately 3 million users and generate about $500 million in new annual revenue, helping to mitigate the $60 million quarterly loss caused by disputes with YouTube TV for broadcast rights. Some affected users are expected to switch to Hulu+Live TV and ESPN Unlimited. Although the streaming media business has been a core focus for investors due to its continuous growth, the market will also closely monitor the performance of The Walt Disney Company's traditional TV networks. Recent quarterly reports from peer companies such as Warner Bros. Discovery Channel (WBD.US) show further contraction in TV network business (especially in advertising revenue) as viewers continue to shift from traditional TV packages to streaming media. The Walt Disney Company's past multiple quarters of financial reports have also indicated a downward trend in linear TV network operating profit and advertising revenue. Lastly, investors will also closely watch for updates on the selection of a CEO successor, with the company expected to announce the successor in early next year.