Disney is headed back to profit in the third quarter, largely lifted by the streaming services business segment. Inside Out 2 also clocked good numbers at the box office, adding to the income of the entertainment segment as well. More and more subscribers are being lured to Disney+. While the theme parks took a little knock, overall revenue was again way, way above the expected levels.

It’s the combined success of streaming and the blockbuster movie Inside Out 2 that has helped Disney return to profitability during the third quarter. It has been a kind of a breakthrough period for the entertainment giant in reflecting the strength of the multiple platforms and diverse entertainment that it offers.

A big part of this profitable quarter included Disney’s streaming services, which reaped the benefit of Disney+, Hulu, and ESPN+. The segment turned profitable for the first time. One of Disney’s largest profit contributors but probably less focused-on was ESPN+, which has racked up an extraordinary performance over the past three months. The direct-to-consumer unit has topped expectations, helped by the growing importance of streaming within Disney’s business model.

Inside Out 2’s Impact

Inside Out 2, a continuation of the last animation movie falling in everybody’s favor in 2015, was a mega success in the cinemas. The runaway show added nearly $254 million through the sale and licensing of its content. Proving to add bulls’ strength in the sale of movies in cinemas, Inside Out 2 now gets added to Disney Prime, which resulted in positive surges in this stock. The OG Inside Out, released in 2015, also did much to bring new subscribers to Disney+. That effort has amassed more than 1.3 million in sign-ups and over 100 million views worldwide after the teaser trailer of the sequel was publicized.

Financial Highlights

For the quarter ending June 29, Disney reported $1.2 billion in operating income for its said entertainment segment, almost tripling the amount from last year. It is also the direct-to-consumer and content sales/licensing segments that did so much better over the same period.

The Walt Disney Company this quarter posted earnings of $2.62 billion, or $1.43 per share—a lift from the previous year’s performance at the same time when the company took a hit of $460 million, amounting to 25 cents per share in the red.

Company revenues increased by 4%, amounting to $23.16 billion against the Wall Street estimates pegged at an estimate of $22.91 billion. This general financial outcome is a true essence of Disney’s diversified entertainment strategy.

Theme Park Challenges

While streaming and movies are overwhelmingly success stories, the theme part business had more mixed results. The Experiences segment, which includes the theme parks, was up 3% during the quarter. Revenue in the international segment was up 5%, but domestic parks and experiences were down 6% in operating income.

This was related to a decline in the operating income of domestic parks. According to the company, increased costs were pushed by inflation, technology spending, and new guest offerings. Disney also warned that moderation of its domestic parks demand seen in the third quarter might carry on into the following quarters. As such, the company expects its Experiences division to record a mid-single-digit percentage decline in operating income during the fourth quarter. It results from sustained moderation in domestic park demand, cyclically softer trends in China, and Disneyland Paris being impacted by the Olympics, which affects normal travel patterns.

Despite this, Disney is optimistic about the bigger growth picture. It now projects an increase of 30% in the adjusted earnings per share for the full year. But shares of Disney dropped by 3% in early New York trading on Wednesday, possibly reflecting some caution within the investment community.

The return of profitability of Disney in Q3 supports the success in execution of its broad strategic focus on streaming and content creation. The collective profitability of its streaming services and the box-office success of Inside Out 2 underscores the strength of the underlying business and the value proposition of Disney’s entertainment ecosystem.

As it is, the strong financial rebound for Disney made in the third quarter of 2024 indicates that it can shift and find a connection with a changing, rapid entertainment sphere. The success of streaming services and the blockbuster hit Inside Out 2 have fueled this rise. The challenge remains with the theme parks segment, where Disney’s diversified portfolio and a strategic digital content pivot promise further future growth. As it stays at the forefront of streaming and creative content, Disney continues to chart the course through this changing landscape of the new entertainment industry.