Disney returns to profit in 4Q, but streaming gains slow

The Walt Disney Co. returned to a quarterly profit as it once again got a bump from reopened parks, but subscriber gains to its Disney+ streaming service slowed.

Disney had closed or limited capacity at its theme parks during the pandemic, weighing on revenue. The parks have all reopened, with Disney World in Florida open since last summer and California’s Disneyland only since the end of April.

Burbank, California-based Disney on Wednesday reported that its net income was $159 million in the three months through Oct. 2, compared with a loss of $710 million in its fiscal fourth quarter a year ago. Earnings per share came to 9 cents, or 37 cents after one-time items. Revenue climbed 26% to $18.53 billion.

Analysts polled by FactSet predicted earnings of 52 cents per share, excluding one-time items, on revenue of $18.8 billion. Disney shares dropped 4.9% to $165.98 in aftermarket trading.

The company ended its fiscal year with 118.1 million Disney+ subscribers, up 60% from the previous year but only 2 million higher than the previous quarter and less than analysts' forecast of 126.2 million. It's the lowest number of quarter-over-quarter subscriber gains since the service launched two years ago.

Disney CFO Christine McCarthy said she expects “meaningfully higher” subscriber gains in the second half of the fiscal year that started in October than in the first six months.

Some analysts have warned that growth is lagging and Disney+ could miss its target of 230 million to 260 million subscribers by 2024. Disney CEO Bob Chapek on Wednesday backed the company's forecast in a call with investors.

The company has about 179 million total streaming subscribers including Disney+, ESPN+ and Hulu, and Disney says its streaming business is its top priority as cord-cutting reduces the viewing universe for traditional TV networks. Still, Disney's networks business, which includes ABC, ESPN and FX, brings in a lot of money — $8.41 billion in profit this fiscal year.

The pandemic caused changes to film operations at Disney and other movie studios. Several big releases were steered to streaming services like Disney+ while many movie theaters were closed or had limited capacity due to COVID restrictions.

Disney has said recently that it is returning to theatrical releases for the rest of the year's films. Chapek said Wednesday that the theater industry is seeing some recovery. Disney's “Shang Chi and the Legend of the Ten Rings” smashed the record for Labor Day openings, earning $90 million over the four-day weekend.