Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Global Head of Investment Strategy
Investors found a bit of pixie dust sprinkled on their portfolios this morning, as Disney’s quarterly results blew past expectations, powered by robust theme parks and a surprise surge in streaming subscribers. Shares surged nearly 7% pre-market, suggesting the entertainment giant has rediscovered its magic touch.
The entertainment giant smashed market expectations:
Most eye-catching was Disney’s dramatic bottom-line turnaround: from a modest loss last year to a striking USD 3.28 billion net profit (USD 1.81 per share). Behind this reversal stood impressive subscriber growth in streaming and booming theme park revenues—clear signs of operational strength despite broader macroeconomic caution.
Disney+ emerged as the quarter’s standout performer. Contrary to earlier guidance predicting subscriber contraction, Disney gained 1.4 million subscribers to its flagship service, reaching 126 million globally—comfortably surpassing analyst expectations. Pricing power proved key, demonstrating that audiences remain willing to pay premium prices for quality content such as Moana 2 and Mufasa: The Lion King.
Disney’s experiences segment—encompassing parks, resorts, and cruises—also impressed. Revenue rose 6% to USD 8.89 billion, bolstered by strong domestic park attendance and consumer willingness to spend. The debut of the Disney Treasure cruise ship significantly boosted performance, highlighting resilient demand for premium leisure experiences. However, international parks, particularly in Shanghai and Hong Kong, felt headwinds from lower attendance and geopolitical tensions, indicating ongoing vulnerabilities abroad.
Another corner of the Disney kingdom that failed to sparkle was traditional TV, where revenues continued their decline—dropping 13% to USD 2.42 billion. This underscores Disney’s strategic urgency in fully pivoting toward streaming and direct-to-consumer models.
Disney’s upbeat results came with an equally bullish outlook. The company raised its full-year adjusted EPS guidance to USD 5.75, forecasting an impressive 16% annual growth—double the earlier expectations of high single digits.
CEO Bob Iger emphasised robust movie releases, ambitious park expansions, and a highly anticipated ESPN streaming service launching later this year. These strategic bets underline Disney’s commitment to aggressive investments, even amidst economic caution, solidifying its market leadership.
Still, Iger acknowledged the broader economic uncertainties: "We’re confident but cautious, ambitious yet realistic. We’re closely monitoring global trade tensions and FX volatility, recognising their potential impact."
Disney faces several headwinds despite its strong performance, particularly internationally. Persistent US-China trade tensions and tariffs threaten to impact attendance at parks and profitability of its studio business. Foreign exchange volatility, especially across European and Asian markets, adds another layer of uncertainty. Additionally, increased competition from Universal’s new Epic Universe theme park opening soon in Orlando could pressure domestic park attendance and margins, while already reduced visitor numbers in Asia highlight ongoing sensitivity to global economic slowdowns. Investors should remain vigilant, as these factors could dampen Disney’s otherwise robust growth outlook.
Disney’s quarter was impressive not just for its strong numbers, but for what it symbolises: the company’s ability to deliver exceptional performance even amid a stormy economic backdrop. For investors, Disney’s renewed confidence is encouraging. Yet, as every Disney enthusiast knows, the magic is truly in the details—and right now, the details look very promising indeed.
In Bob Iger’s own words, “We’re confident but cautious, ambitious yet realistic—and absolutely committed to creating value for our investors.”
Disney might just be proving it can weather economic turbulence and emerge stronger than ever—a magical prospect for investors hoping the fairy tale continues.