Earnings Glamour Dimmed by Disney’s Streaming Slowdown

Wall Street was only concerned about one thing, according to Disney’s Q2 results report: the company’s shares dropped as much as 11%. Disney told investors that its streaming division will turn a profit by the end of its fiscal fourth quarter, reported better-than-expected profits, and only slightly missed revenue targets.

It also increased its full-year earnings growth projection from 20% to 25%. But investors ultimately turned their attention to Disney’s conservative growth projection for streaming.

Disney+ saw 6.3 million new members during the quarter, but its total streaming subscriber count of 153.6 million fell short of Wall Street projections by almost 2 million. The sudden decline demonstrates the high bar Wall Street has set for Disney’s streaming lineup, which includes Hotstar in India, Hulu, ESPN, and Disney+.

Given its expanding streaming business, Disney investors would like to see the media behemoth earn a price multiple like to Netflix. But for that to happen, Disney would need to perform at a level that rivals Netflix’s, able to allay investor concerns about its dwindling legacy TV business.

Disney’s streaming division is generally headed in the right direction, but it will probably take some time before the division turns a profit. Hugh Johnston, the CFO at Disney, stated during the company’s earnings call that there is no straight road to long-term profitability. Many Wall Street analysts praised Disney despite the company’s bad day, stating that the optimistic thesis on its shift to a streaming-focused business just required more time.