Disney Reports Jump in Disney+ Subscribers in Latest Quarter

The world’s largest entertainment company posted $19.25 billion in revenue for the quarter ended April 2, compared with $15.61 billion a year earlier.

Disney said it had $20.27 billion in total segment revenue when including $1.02 billion from an early contract-license termination. Analysts were expecting the company to report revenue of $20.05 billion.

Sales at its theme parks and consumer products division—which includes Walt Disney World and Disneyland resorts—logged $6.65 billion, above analysts expectations of $6.29 billion.

The company recorded earnings of $470 million, or 26 cents a share, in the second quarter, down from $901 million, or 49 cents a share, a year earlier. Adjusted earnings were $1.08 a share, below analysts’ expectations of $1.19.

Shares of Disney rose 2.9% in after-hours trading Wednesday. The stock closed the regular session at $105.21, down 2.3%.

Before the report, Disney shares were trading at two-year lows, falling more than 30% this year. The reasons for Disney’s nosedive are threefold, analysts say: fears of a looming recession, overall stock market volatility, and Netflix.

For the first year and a half of the coronavirus pandemic, the streaming video business model was the toast of Wall Street. Then last month, Netflix reported its first net subscriber loss in a decade, with some 200,000 customers pulling the plug. Those results sent Netflix shares tumbling by nearly 50%, erasing nearly $80 billion in market value at the world’s biggest streamer and putting pressure on the shares of Netflix’s streaming competitors.

Disney, which launched its flagship streaming platform Disney+ just months before the pandemic hit, and which has now bundled it with more adult-focused entertainment on Hulu and live sports programming on ESPN+, has reaped the fruits of streaming to the sofa-bound as well. The shift helped make up for Covid-19-related closures at its theme parks, which had been the best performing division of the company. In the most recent quarter, attendance at Disney’s parks rebounded.

But the company’s emphasis on its streaming business could become a pressure point as consumers shift their behavior amid high inflation and more options of where to spend their entertainment budgets, analysts say.

“The reason you own Disney, first and foremost, is the parks business,” said Markus Hansen, a portfolio manager at

Vontobel Asset Management,

which owns Disney shares. “The obsession of the markets with streaming is a product of Covid. The parks, the bread and butter of the business, were shut down.”

No one knew how long the parks’ shutdowns would last, and many investors were relying on streaming to generate the company’s revenue growth, Mr. Hansen said.

“I want the company to differentiate,” he said. “The problems at other streamers are very specific to those companies. I want to hear Disney say, ‘By the way, we are a theme park business, it’s our bread and butter, and the company has this amazing ability to take a piece of intellectual property and monetize it in different ways.’ ”

One hopeful sign for Disney is the return of the cinematic box office. In its opening weekend, “Dr. Strange in the Multiverse of Madness,” the first blockbuster to come out this year from Disney’s Marvel Studios brand, grossed $185 million in North America, making it the second-highest grossing film of the pandemic and marking a robust return to theaters by fans of superhero movies.

Marvel movies have been a reliable revenue generator for Disney for over a decade, and once they start streaming on Disney+ are seen as a key retainer of subscribers.

“It’s a strange time we’re in,” said Jessica Reif Ehrlich, a media analyst who follows Disney for Bank of America Merrill Lynch. “Normally if we were on the cusp of recession, most of us would be walking away from the stock. But this isn’t a normal recession. People have been cooped up. Demand from travel, for entertainment, for getting out of the house, it’s just incredible right now.”

Analysts and investors may hear more Wednesday from leaders at Disney, including chief executive

Bob Chapek,

about the Florida legislature’s recent repeal of a special tax privileges district that houses the Walt Disney World theme park. The district owes $1 billion in municipal debt, which is now entangled in a legal mess over how bondholders will be paid back under the new arrangement.

The bill repealing the tax treatment came amid controversy over Disney’s response to Florida’s Parental Rights in Education Bill, signed into law last month, which addresses how gender and sexuality are taught in schools. Mr. Chapek initially chose to stay mum about what opponents call the “Don’t Say Gay” bill, but after pressure from some employees and critics, changed course and vowed to fight against the legislation and similar measures in other states, and promised to stop all political donations in Florida.

—Denny Jacob contributed to this article.

Write to Robbie Whelan at [email protected]