Disney World Expects “Small Impact” from Epic Universe; Domestic Parks Down, International Up
The Walt Disney Company reported its first quarter fiscal 2025 earnings, with the company’s Experiences (Parks & Resorts + Consumer Products) reporting $9.4 billion in revenue from October through December. This covers the good & bad of these results as they relate to Walt Disney World & Disneyland, including comments about Lightning Lanes, Epic Universe, park attendance, and more.
Company-wide, Disney’s earnings beat on the top and bottom lines, with earnings per share of $1.76 adjusted versus $1.45 expected and revenue of $24.69 billion versus $24.62 billion expected. Net income increased nearly 23% to $2.64 billion, or $1.40 per share, from $2.15 billion or $1.04 per share, during the same quarter last year. That number jumps to $1.76 after adjusting for one-time items.
Although not really relevant to this site save for the long shadow it casts over everything else, the company’s streaming business reported another quarter of profitability despite a 1% decline in subscribers for Disney+. However, domestic subscriptions for the streaming service increased by 1%, as international numbers declined 2%. This was in line with previous warnings from the company, which were reiterated again on this call as Disney advised investors it expects another “modest decline” in subscribers during the second quarter. Total paid Disney+ subscriptions stand at 124.6 million; total Hulu subscriptions rose 3% during the quarter to 53.6 million.
Disney’s Experiences division (which includes Parks & Resorts) revenue rose 3% during the quarter to $9.42 billion. Domestic theme park revenue accounted for 68% of the division’s total, or $6.43 billion. While that revenue marked a 2% improvement over the same quarter last year, the combination of Hurricanes Milton and Helene coupled with declines in attendance and investments in Disney’s fleet of cruise ships dragged down domestic operating income.
Previously, Disney warned that operating income would be adversely impacted by approximately $130 million due to Hurricanes Helene and Milton, the latter of which caused the parks to close and had a long tail of lower crowds due to cancellations in the days and weeks afterwards. In actuality, the adverse impact of the hurricanes was $120 million, along with another $75 million in pre-launch costs for the Disney Treasure. That amounted to a 6% negative impact on operating income growth for Disney Experiences.
All told, the Experiences division posted a 5% decline in domestic theme park operating income for the quarter, at $1.98 billion. The company attributed this to a modest decrease in attendance and flat occupancy, coupled with 4% higher per guest spending. That number would be significantly better but for the aforementioned hurricanes–the weeks around the two saw significantly lower crowds.
Meanwhile, the international parks were up a whopping 28% to $420 million. Disney attributes this to both higher attendance and guest spending, partially offset by higher costs due to new guest offerings.
The strong overperformance of the international parks is easily the biggest item of interest to me from the entire earnings call. Although Disney didn’t say as much, this is likely attributable in large part to Hong Kong Disneyland and Shanghai Disneyland, where it was the first full holiday seasons for World of Frozen and the Zootopia Land.
As we saw firsthand, the Arendelle area at HKDL is incredibly popular and the new Christmas offerings were a huge hit with guests. This yet again proves that the parks can play games trying to squeeze more spending out of guests, but the best way to improve the bottom line is building new attractions.
Up 28% on higher attendance and spending despite higher costs. All of that makes complete sense based on what we observed, with slammed gift shops full of people buying Frozen and Duffy stuff, along with more entertainment than you could shake a stick at. The type of win-win for guests and the company that you love to see. (Get Walt Disney World leaders on a plane to Hong Kong for a “research trip” to see how that approach benefits everyone!)
Also interesting was the forward outlook for 2025. In the Executive Commentary, the company reiterated that it expected fiscal 2025 growth for the Experiences segment during the full-year to be 6% to 8% as compared to 2024, with growth weighted in the second half of the year. This suggests that they’re still expecting May through October to be high-growth.
During an interview on CNBC and the earnings call itself, Disney CFO Hugh Johnston expressed enthusiasm for the Experiences segment, indicating it performed better than expected for the fiscal quarter. This, in turn, reinforces the company’s optimism for 6% to 8% growth.
When asked specifically about the opening of Epic Universe, Johnston responded that the company expected the new park to have a “small impact” on the fiscal year. The analyst who asked the question indicated that Epic Universe’s impact on Walt Disney World is the #1 question he receives. Despite that, Johnston didn’t really say anything of substance nor did he use the words “Universal” or “Epic Universe.”
Probably a smart move to avoid headline-grabbing quotes and depriving us of anything to talk about. Although we already know from the last earnings call that Bob Iger and Johnston believe that Universal’s Epic Universe will be “actually positive” and “beneficial” to Walt Disney World’s attendance and bottom line. This time, Johnston noted that the 6-8% growth factors in the “small impact” of Universal’s Epic Universe (but not by that name).
In fairness, Johnston also didn’t really discuss anything in the pipeline for Walt Disney World or Disneyland this summer, either, despite entertainment being likely drivers of attendance. He did say that the “consumer is a bit stronger than we would have expected.” He added that consumers are “very value focused, and if you deliver value to them, they’re willing to pay the price for it.” Interesting take, and one with which many fans would agree…albeit perhaps not in the way he’s making the point.
All of this mostly aligns with expectations. Previously, Disney CEO Bob Iger warned investors of attendance softness and “demand moderation” into 2025. That was nothing new, as the company has cautioned of a slowdown at Walt Disney World. They’ve previously attributed this to the end of “revenge travel,” lapping the 50th Anniversary, and poor weather.
The only other comments of interest from the earnings call came in response to a question about Lightning Lane Premier Pass and its uptake. Johnston declined to offer stats about its adoption rate, but described it as a premium product and emphasized that Disney is taking a measured approach to its rollout. He added: “It’s very much in line with our expectations, but we are moving gently with that product in order to make it a great experience, both for the purchasers of the product, and for the rest of our guests in the park. We feel great about it, and that it will build over time, but it is very much the early days.”
It’s interesting that the company still expects Lightning Lane Premier Pass to “build over time” given that it’s already had resort restrictions removed and is now available to all guests. So either Johnston didn’t know that had happened already (entirely plausible), it didn’t happen during the quarter being discussed so he didn’t mention it (equally plausible), or there’s further expansion of LLPP to come.
That last one is also a possibility, especially towards the start of the next fiscal year if Disney needs to identify opportunities for “growth” on flat or down attendance. The obvious options are a Multi-Park Lightning Lane Premier Pass or Lightning Lane Premier Pass Unlimited. Neither would surprise me, as the former is already available at Disneyland and the latter exists at Universal. As we’ve mentioned previously, the concerns would be cannibalizing VIP tour sales or decreasing length of stay. It’s not a net positive for the company if high-spending guests suddenly are doing shorter trips in pricey Deluxe Resorts.
Ultimately, it was a strong quarter for the company as a whole, but especially the Parks & Resorts division. Walt Disney World and Disneyland are still performing well enough, but it does seem increasingly clear that the story for the next couple of years will be finding ways to squeeze “growth” without actually growing the business.
Conversely, the actual growth and expansion of the international parks is really impressive. Hopefully that reinforces the company’s bullishness in the business, and investing $60 billion in Parks & Resorts over the next decade.
Remember when Disney actually increased spending on streaming, believing it was the future? It’d be awesome to see a rare win like that for Parks & Resorts, with Disney upping that number to $70 billion. Wishful thinking, I know–but it’s what should happen if years upon years of earnings results were dictating these decisions.
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YOUR THOUGHTS
Thoughts on the Walt Disney Company’s Q1FY25 earnings? What do you think about the company’s assessment that Epic Universe will have a “small impact” on Walt Disney World? Will the opening of Epic Universe result in lower attendance or does a rising tide lift all boats? Expect Lightning Lane Premier Pass to somehow expand again? Thoughts on the 28% growth of the international parks driven by actual expansion? Do you agree or disagree with our assessment? Any other thoughts or commentary to add? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!
Also Canadian, and also will be avoiding travel to the US. Might consider Disneyland Paris instead.
I obviously have no inside knowledge and certainly am no expert, but to me they are being quite optimistic with “small impact.” I understand the thinking that people who dont normally come to Orlando may come now for Epic universe and may also plan a day or 2 at WDW as part of the trip. But I think those wont be as many as previously seen. Let’s face it, things are expensive now. EVERYTHING is expensive now. Families dont have as much extra money and Universal is forcing multiple day stays to even get a look at epic universe. I think the discretionary spending families have is less now than it was during Potter world time, and that will affect the number of side trips to WDW as their limited resources will be focused on the main reason for the trip
Very interesting as usual ; do they provide a breakdown of lines ? ( ie cruises, domestic parks, etc.)
Do you think the closures and refurbishment are also likely to affect DisneyWorld? it feels like there are a lot of scheduled 6 month to year long refurbishments happening right now. With more to come if you rock n roller coaster and spaceship earth predictions are correct.
that’s before we go into possible well loved on here but less by public closures of Muppets and Rvers of America.
it feels like a lot of closures over the next few years. the resulting progres IF disney doesn’t cut it back will be worth it but do you see it affecting visitors or is that just a us site needs thing?
Our next trip is this: 1 day Epic, plus a 2-day ticket to the other two Universal parks, at a nearby Universal hotel. Add-on: Mickey’s Not So Scary party. That evening will be our only time in WDW on this trip. Our main reason for the trip: Our dd is turning 11 so we are taking her to Hogwarts. In fairness, there’s no way Disney can compete with that.
There are no doubt a ton of families like yours. Swap out Hogwarts for Nintendo or Dragons, too. Huge demos that Disney simply cannot compete with–at least when it comes to Hogwarts and Nintendo (probably less so with HTTYD or anything else in the park).
The question is whether Disney is losing more days to people like you, or gaining more days from the newcomers to Orlando who wouldn’t have visited but for Epic Universe and are adding on visits at Epic Universe. Disney is claiming it’s the latter, but they’ve based their modeling on the original WWoHP, which obviously is not the same as a brand-new park–especially one that is currently pushing vacation packages hard as the primary way to access Epic Universe.
My bet is that it ends up being somewhere in between: Magic Kingdom and Disney’s Hollywood Studios gain slightly or stay flat, EPCOT falls slightly, and Animal Kingdom drops significantly. Overall, I will be very surprised if Walt Disney World is up overall in 2025 attendance (distinct from revenue or guest spending, which can improve even as prices fall “thanks” to price increases).
There’s a good chance we’ll never know for sure, as Disneyland and Disney Cruise Line overperforming could mask underperformance for WDW. But that’s my theory for now.
This is the furthest thing from a political blog, but the problem with predicting the future impact of a new park opening is the unpredictable business climate in the US. At least for my small business, all of my clients have declined to schedule any work for 2025 until the business climate settles down, which means I’ve got zero money coming in for the foreseeable future. About 30% of my business is Canadian, and they are switching to my competitors. That business is never coming back, so that will probably mean the death of a 25-year-old company unless the revenue can be replaced with new US clients, which seems unlikely.
For now, I’ve laid off my two employees and canceled all vacation plans indefinitely. I have a planned Orlando trip in March that can’t be canceled, but I will be scaling that back. Currently, economists are predicting a drop in GDP growth, higher interest rates, and higher inflation for 2025, which would negatively affect Disney and Universal for 2025 at least, but those are wild guesses at this point. Guess we’ll find out as the year unfolds.
Yikes. I’m really sorry to hear all of that. Regardless of how anyone feels about the merits of the policies, it would’ve been nice if, at absolute minimum, policies would proceed with a defter touch to mitigate experiences like yours. Because it’s fair to say that, two months from now, everything will be resolved on a political level. But the damage to your, and other, businesses will be lasting.
Something I’ve wanted to discuss in a post is the costs of construction and supply of labor. While I wouldn’t anticipate anything on the scale of COVID, it’s entirely possible Walt Disney World scales back its plans as a result of the climate. But again, not really sure how to broach that topic without it–or the resulting comments–getting political, or at least, coming across that way.
Canadian here, and wanted to add that the idea of Canadians boycotting travel to the US is really picking up steam here given the events of the last week. Although there is hope that the trade war will be averted, much damage has been done. I know many people who are in the process of changing their spring break plans as a result. Even for those who are not boycotting, the Canadian dollar continues to take a dive and this is making any US travel prohibitively expensive. I know we are a small percentage of travellers but I do think we make up a statistically significant number of visitors to Florida and WDW. Will be interesting to see how this plays out for 2025.
Tom, what do you think the margins are for the Disney theme parks? Do you feel (or know) if they are high or low? Just curious. Thanks for all the work you do.
I am also interested in @John’s question Love Disney and have been a fan for 50+ years but it seems easier to see the “man behind the curtain” these days Would love to know about Disney economics even if some of it is you extrapolating Tom. Thanks for a TERRIFIC blog