Disney’s stock drops as company works to turn streaming business profitable

Disney’s streaming business has hit a major milestone, with the direct-to-consumer segment turning a profit for the first time in the company’s fiscal second quarter. However, the entertainment giant warned of weaker results in the current quarter, causing its stock to plummet nearly 10% on Tuesday.

CEO Bob Iger’s turnaround plan has been gaining traction with investors, but the forecast for the streaming segment has raised concerns. The company reported operating income of $47 million in the DTC portion of its entertainment segment, a significant improvement from the $587 million loss in the same period last year.

Despite the positive news, Disney expects losses in the third quarter, driven by its Indian brand Disney+ Hotstar. The company also revealed that not all of its streaming services were profitable in Q2, with total direct-to-consumer losses amounting to $18 million.

On a brighter note, Disney exceeded analysts’ expectations with adjusted earnings of $1.21 per share and revenue of $22.1 billion. The company raised its guidance for full-year adjusted earnings growth to 25%, up from the previous 20%.

However, Disney did face challenges after merging its Star India business with Reliance Industries, resulting in an impairment charge of over $2 billion. Analysts remain cautiously optimistic about Disney’s future, noting that the company is in the midst of a much-needed turnaround.

In the second quarter, Disney also saw an increase in Disney+ subscriber additions and strong results in its parks business. With ongoing efforts to boost streaming profitability and navigate changing consumer trends, Disney is working towards a more sustainable future in the digital entertainment landscape.