Disney's Q2 2022 earnings report has shown that the media giant continues to make progress in its efforts to streamline and reset its strategy, with the company reporting a narrower loss in its streaming division and strong performance from its international parks. However, the earnings missed Wall Street's consensus estimates by a penny per share and Disney+ subscriber growth fell short of expectations.
The earnings report is the first since Disney announced a new three-pronged business reorganization in an effort to slash $5.5 billion in costs this year. CEO Bob Iger's hyper-focus on profitability has shifted investor attention away from subscriber growth and towards margins. Disney's direct-to-consumer division, which includes Disney+, Hulu, and ESPN+, shed over $4 billion in its fiscal year 2022 ended October 1, 2022, after spending an estimated $33 billion on content last year.
To improve profitability, Iger has worked to establish new revenue streams such as Disney's recently launched ad-supported tier, as well as implementing price increases to lift metrics like average revenue per user (ARPU). Domestic ARPU at Disney+ improved 20% sequentially to reach $7.14 in Q2 2022. The company reported domestic ARPU of $5.95 in the prior quarter.
The earnings report revealed that Disney+ subscribers missed expectations amid recent price hikes, with total subscribers reaching 157.8 million versus the expected 163.1 million. However, streaming losses narrowed to $659 million in the second quarter, above consensus estimates of $850 million, from a loss of $887 million in the year-ago period. The parks side of the business saw strong performance, with operating income beating expectations of $2.14 billion to hit $2.17 billion.
While the future of Hulu remains uncertain, Iger has reaffirmed the company's outlook of reaching streaming profitability by 2024, and analysts have remained largely bullish on Disney's parks business despite heightened risks to margins amid inflation. The company has also made efforts to improve the parks experience for consumers, including updates to its parks reservation system and annual passholder program earlier this year.
Overall, Disney's Q2 2022 earnings report shows progress towards the company's goal of sustained growth and success, despite some areas falling short of expectations. Investors will be closely monitoring any additional commentary on the earnings call regarding the future of Hulu and Iger's overall streaming vision.
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