Walt Disney Co Q4 FY2025 earnings call

• Film Studios: Summer box office demonstrated global appeal of storytelling, with Lilo and Stitch as the highest-grossing Hollywood film in 2025 to date, achieving 14.3 million views on Disney Plus in its first five days. Retail sales for Stitch from consumer products eclipsed $4 billion in fiscal 2025. Upcoming titles include Zootopia 2, Avatar: Fire and Ash, The Devil Wears Prada 2, and more. <br>- Television Content: Strong viewership in Q4 fueled by series like Alien Earth, FX's biggest premiere ever on Disney Plus and Hulu, season two of High Potential, Tempest, and season 34 of Dancing With the Stars. Upcoming titles include new seasons of various series and Taylor Swift's docuseries and concert film. <br>- Entertainment Segment: Streaming is a core growth engine, with efforts to unify the user experience and expand internationally. Hulu as a global brand and content consolidation are key initiatives. <br>- Sports Segment: Launch of ESPN DTC service and enhanced app has been well-received, with positive response from fans and advertisers. <br>- Experiences Segment: Record operating income, new cruise ships, and theme park expansions are driving growth, with confidence in continued strategic investments.

Entertainment Segment: The streaming business had another quarter of profit growth, with operating income up 39% in Q4. For the full year, operating income hit $1.3 billion, up $1.2 billion from the previous year and $300 million ahead of original guidance. Hulu became the global general entertainment brand in October, and efforts are ongoing to consolidate domestic entertainment content into a single app for a unified user experience. International reach is being expanded through strategic investments in originals and local content licensing. <br>Sports Segment: Launched ESPN's full direct-to-consumer service and enhanced ESPN app, making ESPN's full suite of networks and services available directly for the first time. Viewership of ESPN networks, including ESPN on ABC, finished the quarter up 25% over the prior year quarter. <br>Experiences Segment: Delivered record operating income for both Q4 and the full year, with operating income up 13% in Q4 compared to the prior year and 8% for the full year. Two new cruise ships are set to join the fleet, including Disney Destiny launching next week and Disney Adventure home-ported in Asia in March. Expansion projects are underway at theme parks, with five additional cruise ships scheduled for launch beyond fiscal 2026 and a new theme park planned for Abu Dhabi.

• Fiscal 2026 is expected to deliver double-digit adjusted EPS growth compared to the prior year. <br>- Targeting $7 billion in share repurchases in 2026, double the $3.5 billion repurchased in fiscal 2025. <br>- Board declared a cash dividend of $1.5 per share, a 50% increase over fiscal 2025. <br>- Streaming operating income is expected to continue growing, and ESPN DTC service is seen as a positive step for future growth.

• Economic, geopolitical, operating, and industry conditions pose risks to future financial performance. <br>- Competition in the media and entertainment space is a concern. <br>- Carriage disputes, such as the ongoing negotiation with YouTube TV, could impact financial results. <br>- Legal and regulatory developments may affect the business operations and financial performance.

Q: Ben Swinburne asked about the ESPN direct-to-consumer launch, adoption, engagement, and cash flow guidance. <br>A: Robert A. Iger discussed the success of the ESPN launch, including new user sign-ups, high authentication rate of existing subscribers, and positive response to new features. Hugh F. Johnston talked about cash flow growth, noting an adjusted year-over-year increase due to tax timing and strong free cash flow growth. <br>Q: Steven Cahall asked about studio content growth and carriage dispute with YouTube TV. <br>A: Robert A. Iger was bullish on the studio slate, including upcoming titles like Zootopia 2 and Avatar: Fire and Ash. Hugh F. Johnston mentioned Q1 guide is about overlap timing and that guidance built in a hedge for YouTube TV negotiations, with dollar impacts involving unpaid and subscriber migration. <br>Q: Robert Fishman asked about Disney Plus roadmap and DTC revenue growth. <br>A: Robert A. Iger discussed ongoing product changes to make Disney Plus more personalized and engaging, with opportunities to use it as a portal for parks and other assets. Hugh F. Johnston stated aspiration for double-digit DTC revenue growth through revenue growth and operating leverage. <br>Q: Jessica Reif Ehrlich asked about M&A interest and advertising outlook. <br>A: Hugh F. Johnston said Disney is satisfied with its IP portfolio built over the decade and doesn't expect significant M&A. On advertising, he noted 5% growth last year, CPMs improving, and expected growth in 2026 despite political overlap. <br>Q: Michael Morris asked about Experiences segment drivers and NBA investment impact. <br>A: Hugh F. Johnston said Cruise is a meaningful contributor to Experiences growth in 2026. Bookings for parks are up 3% in Q1. On NBA, the rights cost creates bumpiness but the property attracts audience and advertisers. <br>Q: Kannan Venkateshwar asked about streaming bundling and ESPN bundling impact. <br>A: Robert A. Iger said bundling lowers churn, with 80% of ESPN subscribers in triple bundles. Discussions ongoing for more bundling. <br>Q: John Hodulik asked about parks demand and cruise margins. <br>A: Hugh F. Johnston said parks bookings up 3% in Q1. Cruise demand is strong, but margins aren't disclosed specifically. <br>Q: Kutgun Maral asked about DTC costs and fifty-third week impact. <br>A: Hugh F. Johnston said DTC revenue expected to grow double digits, with investment in content, product, and SG&A savings. Fifty-third week impact will be determined, and expectation of double-digit EPS growth in 2027 without adjusting for the week. <br>Q: David Karnovsky asked about generative AI for content licensing and cost efficiencies. <br>A: Robert A. Iger discussed productive conversations with AI companies, focusing on IP protection and engagement opportunities, with AI seen as beneficial for efficiency across the company.