Q3 2025 The Walt Disney Co Earnings Call
Carlos Gomez: Good day and welcome to The Walt Disney Company third quarter 2025 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. We do ask that you please limit yourself to one question. Please also note today's event is being recorded. I would now like to turn the conference over to Carlos Gomez, Executive Vice President, Treasurer, and the Head of Investor Relations. Please go ahead.
Good day and welcome to the Walt Disney Company. Third, quarter 2025 Financial results conference call.
All participants will be in listen-only mode.
Should you need assistance please signal a conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions.
To ask a question. You may press star 1 on your telephone keypad and to withdraw your question, please, press star. Then 2, we do ask that you, please let me hear yourself to 1 question.
please also note, today's event is being recorded
I would now like to turn the conference over to Carlos Gomez, Executive, Vice, President, Treasurer, and the head of investor relations. Please go ahead.
Carlos Gomez: Good morning. It is my pleasure to welcome everyone to The Walt Disney Company’s third quarter 2025 earnings call. Our press release, Form 10-Q, and management’s pre-recorded remarks were issued earlier this morning and are available on our website at www.disney.com/investors. Today’s call is being webcast, and a replay and transcript will be made available on our website after the call. Before we begin, please take note of our cautionary statement regarding forward-looking statements on our IR website. Today’s call may include forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Good morning. It's my pleasure to welcome everyone to the Walt Disney company's third quarter 2025 earnings call.
Our press release form 10q and Management's posted prepared remarks were issued earlier this morning and are available at our website at www.disney.com slash investors.
Today's call is being webcast and a replay and transcript will be made available on our website after the call.
Before we begin, please take note of our cautionary statement regarding forward-looking statements on our IR website.
Carlos Gomez: These forward-looking statements, including regarding the company’s future business plans, prospects, and financial performance, are not historical in nature and are based on management’s assumptions regarding the future and are subject to risks and uncertainties, including, among other factors, economic, geopolitical, operating, and industry conditions, competition, execution risks, the market for advertising, our future financial performance, and legal and regulatory developments. Refer to our IR website, the press release issued today, and the risks and uncertainties described in our Form 10-K, Form 10-Q, and other filings with the SEC for more information concerning factors and risks that could cause results to differ from those in the forward-looking statements. A reconciliation of certain non-GAAP measures referred to on this call to the most comparable GAAP measures can be found on our IR website.
Today's call may include forward-looking statements that we make pursuant to the safe harbor, provisions of the private Securities. Litigation Reform, Act of 1995,
these forward-looking statements including regarding the company's future business plans. Prospects and financial performance are not historical in nature and are based on Management's, assumptions regarding the future and are subject to risks and uncertainties including among other factors economic geopolitical operating and Industry conditions.
Competition, execution, risks, the market for advertising, our future, financial performance, and legal, and Regulatory developments.
Refer to our IR website, the press release issued today, and the risks and uncertainties described in our form 10K form 10q and other filings with the SEC. For more information concerning factors and risks that could cause results to differ from those in the forward-looking statements.
Carlos Gomez: Joining me this morning are Bob Iger, Disney’s Chief Executive Officer, and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. Following introductory remarks from Bob, we will be happy to take your questions. With that, I will now turn the call over to Bob.
A Reconciliation of certain non-gaap measures refer to on this call, to the most comparable gaap measures can be found on our IR website.
Joining me this morning are Bob Iger, Disney's chief executive officer and Hugh, Johnston senior, Executive Vice, President, and Chief Financial Officer.
Carlos Gomez: Thank you, Carlos, and good morning, everyone. Before we take your questions, I'd like to share some updates related to our strategic priorities, including a few exciting announcements. At a time of great change for our industry, when a number of companies are contracting, we are operating from a position of strength and building across our company with a continued focus on quality and innovation. We're building on the creative success at our film studios, resulting in the continued emergence of popular new franchises at a level that is unparalleled in the industry. We are building on Disney's value proposition in streaming by combining Hulu into Disney+ to create a unified app experience featuring branded and general entertainment, news, and sports, resulting in a one-of-a-kind entertainment destination for subscribers.
Following introductory remarks from Bob, we will be happy to take your questions. So with that, I will now turn the call over to Bob.
Thank you, Carlos, and good morning everyone. Before we take your questions, I'd like to share some updates related to our strategic priorities, including a few exciting announcements,
At the time of great change for our industry. When a number of companies are Contracting, we are operating from a position of strength in building, our company with a continued, focus on quality and innovation.
We're building on the creative success in our film studios. Resulting in the continued emergence of popular. New franchises at a level that is unparalleled in the industry.
Carlos Gomez: We are building ESPN into the preeminent digital sports platform with our highly anticipated direct-to-consumer sports offering launching on August 21st, and our just announced plans with the NFL that will expand ESPN's programming and content offerings for fans. We're building on our best-in-class parks and experiences businesses, with more expansions underway around the world than at any other time in our history. I'd like to dive deeper into the steps we're taking to drive growth for our company, beginning with our film studios. Our renewed momentum continued in Q3, adding to our popular brands and franchises and further demonstrating their ability to generate ongoing long-term value across our businesses. The live-action Lilo and Stitch recently crossed the $1 billion mark at the worldwide box office, making it Hollywood's first film to reach that milestone this year and Disney's fourth billion-dollar film in just over a year.
we are building on Disney's value proposition in streaming by combining Hulu into Disney plus to create a unified app, experience featuring branded, and general entertainment, news and sports, resulting in a
That will expand ESPN's programming and content offerings for fans.
We're building on our best-in-class parks and experiences businesses with more expansions underway around the world than at any other time in our history.
I'd like to dive deeper into the steps, we're taking to drive growth for our company, beginning with our films Studios,
Our renewed momentum continued in Q3 adding to our popular brands and franchises and further demonstrating their ability to generate ongoing long-term value across our businesses.
Carlos Gomez: Lilo and Stitch is on track to become the company's second-largest consumer products merchandise franchise this year, behind only Mickey Mouse, with more than 70% revenue growth compared to last year. Meanwhile, Marvel's The Fantastic Four: First Steps opened to rave reviews two weeks ago, successfully launching this important franchise into the Marvel Cinematic Universe. Later in the calendar year, we will release more highly anticipated titles, including Zootopia 2 and Avatar: Fire and Ash. Turning to our streaming business, today we are announcing a major step forward in strengthening our streaming offering by fully integrating Hulu into Disney+. This will create an impressive package of entertainment, pairing the highest caliber brands and franchises, great general entertainment, kids' programming, news, and industry-leading live sports content, all in a single app.
The live action Lilo and Stitch recently crossed the 1 billion dollar Mark at the worldwide box office, making it Hollywood's first film to reach that Milestone this year. And Disney's fourth billion dollar film in just over a year.
Leo and Stitch is on track to become the company's second largest consumer products. Merchandise franchise. This year behind only Mickey Mouse with more than 70% Revenue growth compared to last year.
Meanwhile Marvel's The Fantastic 4. First Steps opened to rave reviews 2 weeks ago, successfully launching this important franchise into the Marvel Cinematic Universe.
and later in the calendar year, we will release more highly anticipated titles including zootopia, 2 and Avatar fire and Ash
Turning to our streaming business today. We are announcing a major step forward in strengthening our streaming offering by fully integrating Hulu into Disney Plus
Carlos Gomez: By creating a differentiated streaming offering, we will be providing subscribers tremendous choice, convenience, quality, and enhanced personalization, while at the same time continuing to grow profitability and margins in our entertainment streaming business through expected higher engagement, lower churn, operational efficiencies, and greater advertising revenue potential. As we detail in our shareholder letter, Hulu will now become our global general entertainment brand, and in the fall, it will replace the star tile on Disney+ internationally. Over the coming months, we will be implementing improvements within the Disney+ app, including exciting new features and a more personalized homepage, all of which will culminate with a unified Disney+ and Hulu streaming app experience that will be available to consumers next year.
This will create an impressive package of entertainment pairing. The highest caliber Brands and franchises, great General entertainment. Kids programming news and industry-leading live sports content, all in a single app.
By creating a differentiated streaming offering, we will be providing subscribers with tremendous choice, convenience, quality, and enhanced personalization. At the same time, we will continue to grow profitability and margins in our entertainment streaming business through expected higher engagement, lower churn, operational efficiencies, and greater advertising revenue potential.
As we detail in our shareholder letter, Hulu will now become our Global General entertainment brand. And in the fall, it will replace the star tile on Disney plus internationally.
Carlos Gomez: The other key component of our streaming strategy is sports, and on August 21st, we will launch ESPN's direct-to-consumer offering, making ESPN's full suite of networks and services directly available to fans for the first time. The enhanced ESPN app will be a sports fan's dream, with key new features planned for launch, such as multiview, enhanced personalization, integration of stats, betting, fantasy sports, and commerce, and a personalized sports center. Fans with subscriptions to the Disney+, Hulu, and ESPN bundle will be able to watch ESPN content directly inside Disney+. In addition, yesterday, ESPN and the NFL announced plans for ESPN to acquire NFL Network and certain other media assets owned and controlled by the NFL. In exchange, the NFL will receive a 10% equity stake in ESPN.
Over the coming months, we will be implementing improvements within the Disney+ app, including exciting new features and a more personalized homepage, all of which will culminate with a unified Disney+, Hulu, streaming app experience that will be available to consumers next year.
The other key component of our streaming strategy is sports. And on August 21st, we will launch ESPN's direct to Consumer offering making ESPN's full Suite of networks and services directly available to fans for the first time.
The enhanced ESPN app will be a Sports Fan's dream with key new features planned for launch such as multi-view. Enhanced personalization, integration of stats, betting fantasy, sports, and commerce, and a personalized Sports Center.
And fans with subscriptions to the Disney Plus Hulu and ESPN bundle will be able to watch ESPN content directly inside Disney. Plus
In addition, yesterday, ESPN and the NFL announced plans for ESPN to acquire NFL Network and certain other media assets owned and controlled by the NFL.
Carlos Gomez: This announcement paves the way for the world's leading sports media brand and America's most popular sport to deliver an even more compelling experience for NFL fans in a way that only ESPN and Disney can. Separately, ESPN and the NFL reached an agreement which includes expanded NFL highlight rights within multiple fan engagement platforms and more interactive features for ESPN's DPC offering and the ESPN app, including betting and fantasy. ESPN will also gain the ability to sell and bundle NFL+ Premium, which includes NFL Red Zone to ESPN DPC subscribers, along with rights to additional non-exclusive preseason NFL games for its DPC offering, both starting in the 2025 season.
In exchange, the NFL will receive a 10% Equity stake in ESPN.
This announcement paves the way for the world's leading Sports media brand and America's most popular sport to deliver. An even more compelling experience for NFL fans in a way that only ESPN and Disney can.
Separately, ESPN and the NFL reached an agreement that includes expanded NFL highlights within multiple fan engagement platforms and more interactive features for ESPN's DTC offering and the ESPN app, including betting and fantasy.
Carlos Gomez: An additional agreement extends ESPN's NFL Draft rights with the ability to stream ESPN and ABC's Draft coverage on ESPN DPC, Hulu, and Disney+. We are also excited to announce that ESPN will be the exclusive home for WWE Premium Live Events, further expanding ESPN's rights portfolio, and we look forward to sharing more soon. Looking to our experiences segment, expansion projects are underway across every one of our theme parks globally, from a new world of Frozen Land opening at Disneyland Paris in 2026, to the villains and cards-themed areas at Magic Kingdom, to a Monsters Inc. area at Disney's Hollywood Studios, to an Avatar-themed destination at Disney California Adventure, in addition to a new theme park coming to Abu Dhabi. Disney Cruise Line continues to grow as we prepare for the launch of two new ships later this year.
ESPN will also gain the ability to sell and bundle NFL Plus premium, which includes NFL Red Zone to ESPN. DTC subscribers along with rights to additional non-exclusive preseason, NFL games for its DTC, offering both starting in the 2025 season.
And an additional agreement extends ESPN's NFL Draft rights, with the ability to stream ESPN and ABC's draft coverage on ESPN DTC, Hulu, and Disney+. Plus,
For WWE premium Live Events further. Expanding ESPN's rights portfolio and we look forward to sharing more soon.
Looking to our experiences segment expansion projects are underway across every 1 of our theme parks globally from a new world of Frozen land opening at Disneyland. Paris in 2026 to the villains and cars themed areas at Magic Kingdom to a Monsters Inc. Area at Disney's Hollywood Studios to an avatar themed destination at Disney, California Adventure, in addition to a new theme park, coming to Abu Dhabi.
Carlos Gomez: The Disney Destiny and the Disney Adventure are our largest ship ever and the first to be docked in Asia, bringing our fleet to a total of eight cruise ships operating around the globe. Taken in their totality, our efforts across the entire company reinforce that Disney operates in a league of its own, with a robust portfolio of growth businesses that work seamlessly together to generate value, supported by a deep library of beloved IP and enabled with cutting-edge technology. With ambitious plans ahead for all of our businesses, we are not done building, and we remain optimistic about the company's trajectory. With that, Hugh and I would be happy to take your questions.
And Disney Cruise Line continues to grow as we prepare for the launch of 2 new ships later this year.
The Disney Destiny and the Disney Adventure, our largest ships ever, are the first to be docked in Asia, bringing our fleet to a total of 8 cruise ships operating around the globe.
Taken in their totality. However, the entire company reinforced, the Disney operates in a league of its own, with a robust, portfolio of growth businesses, that work seamlessly together to generate value supported by a deep library of beloved IP, and enabled with Cutting Edge technology.
With ambitious, plans ahead, for all of our businesses were not done building. And we remain optimistic about the company's trajectory
Carlos Gomez: Thanks, Bob. As we transition to Q&A, we ask that you please try to limit yourself to one question in order to help us get to as many questions today as possible. With that, operator, we are ready for the first question.
and with that, you and I would be happy to take your questions.
Carlos Gomez: Thank you. As a reminder, it is star than one to ask a question. Our first question today comes from Ben Swinburne with Morgan Stanley. Please go ahead.
Thanks Bob, as we transition to Q&A. We ask that you, please try to limit yourself to 1 question in order to help us get to as many questions today as possible. And with that, operator, we are ready for the first question.
Ben Swinburne: Thanks. Good morning. A lot of news to digest this morning. Bob, I guess I would love to hear a little more on the NFL relationship. Clearly, strategically aligning with that league is good for ESPN. I think that is pretty obvious. You gave up 10% of the network from a value point of view. How does this agreement and the content you are getting help grow that business faster? Could you talk a little bit about how you see this playing out in terms of revenue growth, subscriber growth, and the benefits you think it means to the business? I just wanted to check with Hugh, is the 2026 guidance that you have given in the past still intact? So double-digit EPS growth and low single-digit growth OI at sports, given all the stuff we learned today? Thank you very much.
Thank you. And as a reminder it's started in 1 to ask a question. Our first question today comes from Ben swinburne with Morgan Stanley. Please go ahead.
Thanks. Good morning. A lot of news to digest this morning, um, Bob I I guess I'd love to hear a little more on the NFL relationship. Um, clearly strategically aligning with that league is good for ESPN. I think that's pretty obvious
But you know you gave up 10% of the network from a value point of view. How does this agreement and the content you're getting help? You know, Jimmy grow that business faster? Can you talk a little bit about how you see this playing out in terms of Revenue growth, subscriber growth and the benefits? You think it means to the business and I just wanted to check with you is, is the 26th guidance that you've given in the past still intact. So double digit, uh, EPS growth and low single digit growth. Oi at sports, uh, given all the stuff we learned today. Thank you, very much.
Carlos Gomez: Ben, there are a number of aspects of these deals. I say plural because there are two separate deals, one to license content and another to basically cover the asset exchange. Let me start with the fact that the result of these agreements will give ESPN more games, more NFL games than they have ever had before. Basically, there will be 28 windows for NFL games, which is an increase over what we have had before. Previously, there were 22. That obviously is of major significance in terms of both ESPN, but also in terms of the audience. We are basically giving ESPN, we are giving NFL fans more opportunities to watch NFL games than they have ever had before.
Then there are a number of aspects of these deals and I say plural, because there are 2 there, there are separate deals, 1 to license content. And another, to basically, cover the asset exchange, uh, let me start with the fact that the result of these agreements, uh, will give ESPN more games, more NFL games than they've ever had before.
Basically, there will be 28 windows for NFL games, which is an increase over what we've had before previously. There were 22
uh, that obviously is a major significance in terms of both ESPN but also in terms of the audience,
Carlos Gomez: Because of the acquisition of the NFL Network, not only will we continue to distribute it from a linear perspective, but it will be fully essentially included in or ingested within the ESPN direct-to-consumer app. So those games, the seven games that will be on the NFL Network, will all be part of ESPN's direct-to-consumer offering. That is obviously where the major value will come. In addition to that, there are a number of other elements we are calling features and functionality that will improve the quality of the experience and actually grow the quality experience of the fan on the ESPN app. That includes smooth integration with fantasy, with betting, and a combination of our fantasy businesses, by the way, with stats, with the ability to basically personalize SportsCenter with NFL highlights.
Uh, we're basically giving ESPN, uh, we're giving, uh, NFL fans, more opportunities to watch NFL games than they've ever had before.
Because of the, uh, acquisition of the NFL network, not only will we continue to distribute it from a linear perspective, but it will be fully, essentially, included in or ingested within the ESPN direct to Consumer app. So those games the 7 games that are on the edit will be on the NFL Network will all be part of ESPN's, direct to Consumer offering. That's obviously where the major value will come. But in addition to that, there's a number of other elements, we're calling features and functionality. That will improve the quality of the experience, and, and actually grow the quality experience, uh, of the fan on the ESPN app.
Carlos Gomez: I could go on and on, a commerce opportunity off of the ESPN app to buy NFL merchandise. All of it added up, obviously, gives ESPN the opportunity to go forward with a more compelling app. I should also note that from an economic perspective, even with this exchange of assets and the fact that the NFL obviously will be paid a dividend from ESPN's earnings, it will be accretive in the first year after it closes. I think that is significant. So the revenue that we will derive from distributing the NFL Network and from distributing other NFL properties will obviously increase our revenue and increase our operating income for the ESPN business. That does not even factor in a potentially lowered churn rate for the ESPN app once we go to market and once the NFL games are all included. Obviously, there is advertising value as well.
First year that after it closes and I think that's significant so that the revenue that we will derive from the Distributing the, uh, NFL Network and from, uh, Distributing other, NFL properties will obviously increase our revenue and increase our operating income for the ESPN business. That does not even factor in a potentially lowered churn rate for the ESPN app once we go to market and once the NFL games are all included.
Carlos Gomez: I probably could go on and on, but there are many different elements to this, but it is extremely exciting. I have talked about it being one of the most important steps ESPN has taken, really, since they went from half a season to a full season of the NFL back in 1987.
Hugh Johnston: Yeah. Hey, Ben, it's Hugh. Just as a reminder, we try to stay pretty disciplined about doing guidance for the following year on the fourth quarter call. The one thing I would say is, given we have the NFL deal and the WWE deal, if we had something of substance in terms of a change to that, we would be sharing that with you right now. The fact that we are not sharing with that should tell you that we do not see it as materially different. As Bob noted, we feel great about the NFL deal. It likely will not close until the end of next calendar year, but it will be about a nickel accretive before purchase accounting. So we certainly feel good about the financials of the deal.
Uh, and obviously there's advertising value as well. I probably could go on and on because but there are many different elements to this, but it's extremely exciting. I talked about it being 1 of the most important. Steps ESPN has taken really since they went from half a season to a full season of the NFL back in 1987
Yeah. Hey, Ben. It, it's you, uh, just as a reminder, we we try to stay pretty disciplined about, uh, doing guidance for the following year on the fourth quarter call. Uh, the 1 thing I would say is, uh, given we, we have the NFL deal and the, uh, the WWE deal. If we had something of substance, in terms of a change to that, we'd be sharing that with you. Right now, the fact that we're not sharing, what that should tell you that we don't see it as as materially different. And as Bob noted, we feel great about the NFL deal. It, it likely won't close until the end of next calendar year, but it'll be about a nickel. A
Carlos Gomez: Thank you so much. Thanks, Ben. Operator, next question, please.
Creative before purchase accounting. So we certainly feel good about the financials of the deal.
Thank you so much.
Carlos Gomez: Absolutely. Our next question comes from Robert Fishman at MoffettNathanson. Please go ahead.
Thanks Ben. Operator. Next question, please.
Robert Fishman: Thank you. Bob, can you talk more about how you can accelerate Disney+ growth by fully integrating Hulu into Disney+ and the related subscriber and advertising revenue opportunities? Just curious also, what does that mean for the future of Hulu as a standalone app? For Hugh, if I can, just again, back to the guidance, the strong Disney+ profitability and raised full-year guidance that we saw there. Any updates thinking to your double-digit margin target there on Disney+, especially with the opportunity to take out costs at Hulu now? Thank you.
Absolutely. Our next question comes from Robert Fishman at muffin Nathanson. Please go ahead.
Thank you. Um, Bob, can you talk more about how you can accelerate DTC growth by fully integrating Hulu into Disney plus and the related subscriber and advertising Revenue opportunities, just curious. Also, what what does that mean for the future of who has a standalone app? Um, and then for Hugh, if I can just again back to the guidance that the, the strong DTC profitability and raised full year guidance, that that we saw there any updated thinking to your double digit,
Margin Target there on DTC, especially with the opportunity to take out costs at Hulu and thank you.
Carlos Gomez: I think the way to look at the combination is to start with the consumer. You are going to end up with a far better consumer experience when those apps are combined by combining all of the program assets of both apps, both card apps. Obviously, with an improved consumer experience comes the ability to lower churn, which is something that we are very, very focused on and committed to doing. We obviously will deliver efficiencies when these are together. It will be on one tech stack, as for instance, one tech platform. We already sell the advertising together, but this will give our sales organization a chance to package them far more effectively than they have before. I imagine down the road, it may give us some price elasticity as well that we haven't had before.
I think the way to look at the combination is to start with the consumer. You're going to end up with a far better consumer experience. When those apps are combined by integrating all of the program assets of both apps, both cart apps, and obviously, with an improved consumer experience, comes the ability to lower churn, which is obviously something that we're very, very focused on and committed to doing. We obviously will deliver efficiencies when these are together; they'll be on one tech stack, as, for instance, one tech platform. We already sell the advertising together, but this will give our...
Carlos Gomez: It also provides us with a tremendous bundling experience because when you have the one app that has a significant amount of all of the Disney and the other Disney-branded programming with the general entertainment programming bundled, for instance, with the ESPN direct-to-consumer app, I think you end up with a proposition from not only a consumer perspective, but also from our perspective, that is far better than what we have had before.
Sales organization, a chance to package them, far more effectively than they have before. I imagine down the road, it may give us some price elasticity as well that we haven't had before. And it also provides us with a tremendous bundling experience because when you have the 1 app that has significant amount of all of the Disney and and the other Disney branded programming with the general entertainment, programming bundled, for instance, with the ESPN direct to Consumer app. I think you end up with a proposition from, not only a consumer perspective, but also from, uh, from our perspective that's far better than what we've had before.
Hugh Johnston: Yeah. Robert, no update on the guidance versus what we've talked about in the past. As I said, we'll talk about 2026 guidance on the Q4 call, but no update on DPC at this point.
Yeah, and Robert uh no no update on the guidance, versus what we've talked about in in the past. As I said, well, we'll talk about 26 guidance on the, on the Q4 call, but no update on DTC at this point.
Carlos Gomez: Thanks, Robert. Operator, next question, please.
Carlos Gomez: Absolutely. Our next question comes from Michael Morris at Guggenheim. Please go ahead.
Thanks Robert uh, operator next question, please.
Michael Morris: Thank you. Good morning, guys. So Hugh, I know you do not want to talk about 26 yet, but I have to ask. On the experiences side, your guide for the fourth quarter implies that you will be exiting the year at a high in terms of operating income growth. As we look to fiscal 26, can you give us any preview on how to think about any puts or takes with respect to the rate of growth next year that might be informed by the fourth quarter guide? Secondly, on the standalone ESPN app, I think there is a perception and a fear that when you launch an app like this, it is sort of all or nothing with respect to how people sign up. Clearly, you are going to make it available to your PayTV partners as well.
Absolutely, our next question comes from Michael Morris at Guggenheim please. Go ahead.
Thank you. Uh, good morning guys. Um,
So you I know you don't want to talk about 26 yet, but I have to ask on the experiences side. You, you know, your guide for the fourth quarter, implies that you'll be exiting the year uh at a high uh, in terms of operating income growth.
Michael Morris: I am curious if you can talk about your expectations for engagement with the app from people who come from outside the ecosystem, like cord cutters, versus those inside, and how it benefits you to have people who pay for PayTV to also engage with the app. Thank you.
Those inside and and and how um it benefits you to have people who pay for pay TV to also engage with the app. Thank you.
Hugh Johnston: OK. Let me talk about the 26. It'll, I'm sure shock you, Michael, that I am going to defer on talking about 26 until the Q4 call. The only thing I would remind you is we are launching a couple of ships at the tail end of this year and into next year. So we will have the costs associated with launch on those in the earlier part of the year, which obviously impacts the line of business. Regarding engagement generally with the deals and the ESPN app, look, we think it is all going to be additive. As a reminder, our goal with the ESPN is to basically reach sports fans as they choose to be reached. So if they choose to be reached through the ESPN app, great. If they choose to be reached through the Disney+ Hulu app, great.
Hugh Johnston: If they choose to be reached through cable, great. Our goal is to engage them where they are.
Carlos Gomez: Let me just add to that, if you do not mind, we are asked a lot about linear versus streaming. We are at a point, given the way we are operating our businesses, where we do not really look at being in the linear business and the streaming business. We are in the television business. What we are doing is we are giving our customers or our viewers a chance to watch our programming, really, as Hugh just said, wherever they want. If you are watching ABC primetime shows on the linear channel, great, through a multi-television provider, fantastic. Or if you want to go to streaming and watch it on the Disney+ and Hulu app, that is fine as well. The same is true for National Geographic, for FX, for the Disney channel, and that will also be true for ESPN.
Okay. Uh, let me talk about the 26, it'll, I'm sure. Sure, shock you Michael that. I'm, I'm going to defer on talking about 26 until the, uh, the Q4 call. The only thing I would remind you is we are launching, uh, a couple of ships at the, the tail end of this year and into next year. So we'll, we'll have the costs associated with launch on those, uh, in the earlier part of the year, which obviously impacts the uh the line of business uh regarding engagement generally with uh, the deals and and the ESPN app. We we we think it's it's all going to be additive. And as a reminder, our our goal with the ESPN is to basically reach sports fans as they choose to be reached. So if they choose to be reached through the ESPN app, great, if they choose to be reached through the Disney Plus Hulu, app. Great, if they choose to be reached through cable grade, our, our goal is to engage them, where, where they are
And let me just add to that, if you don't mind. Um, we write, we're asking a lot about linear versus streaming. We're at a point, given the way we're operating our businesses, where we don't really look at being in the linear business and the streaming business; we're in the television business. And what we're doing is we're giving our customers, or our viewers, a chance.
Carlos Gomez: I will say that the features and functionality of the ESPN app will have more on them or in the app than obviously any linear channel can provide. It will really be a sports fan's dream in terms of everything they will be able to do and watch on that channel. There will also be a far greater volume of sports covered on the ESPN app than is covered on their linear channels. We are, generally speaking, as a company now operating these businesses completely as one. That gives us an opportunity to not only run them more efficiently, but to aggregate subfees and advertising revenue across a very, very broad range of television distribution platforms.
To watch our programming really is you just said wherever they want. If you're watching ABC Prime Time Shows on the linear channel for great through a a multi- uh television uh provider, fantastic. Or if you want to go to a streaming and watch it on the Disney plus and Hulu app, that's fine as well. The same is true for National Geographic, for FX, um, for the Disney Channel and that will also be true for ESPN. Now, I will say that the features and functionality of the ESPN app will have more on them or in the app. Then obviously any linear channel can provide, it will really be a Sports Fan's dream in terms of everything. They'll be able to do and watch on that channel. They'll also be a far greater volume of sports covered on the ESPN app then is covered on their linear channels but we are generally speaking as a company. Now operating these businesses completely as 1 and that gives us an opportunity to not
only run the more efficiently but to aggregate Sub sub fees and advertising Revenue across a very very broad range of Television. Just distribution, uh, platforms,
Michael Morris: Thank you. Appreciate it.
Carlos Gomez: Thanks, Mike. Operator, next question, please.
Thank you, appreciate it.
Carlos Gomez: Absolutely. Our next question comes from Stephen Cahill with Wells Fargo. Please go ahead.
Thanks Mike. Operator. Next question, please.
Absolutely. And our next question comes from Stephen Kaho with Wells Fargo, please go ahead.
Ben Swinburne: Thanks. First on experiences, I think fiscal year-to-date, OI is up about 7%, and you raised the guidance to 8%. Hugh Johnston, I think on CNBC this morning, you were talking about the strong domestic per caps, which accelerated nicely in the quarter. Could you give us a little clarity on what you are seeing in both domestic parks and cruises that is driving some of that acceleration into the fiscal fourth quarter? It sounds like things there are pretty good, but there is always a little bit of economic uncertainty. Then a different fiscal 2026 question that maybe you can address. You have some new sports rights coming on. How do we think about overall cash content spend next year? My guess is sports are going to be going up with things like WWE. Of course, content is the lifeblood of The Walt Disney Company.
Ben Swinburne: Any good way to think about content spend as we look out for the next 12 months or so? Thank you.
Thanks. Uh, so first on experience, is I think fiscal year to date. Oi is up about 7% and, and you raised the guidance to 8%, um, Hugh. I think on CNBC this morning you were talking about the strong domestic per caps, uh, which accelerated nicely in the quarter. So could you give us a little color as to what you're seeing in both domestic parks and cruises? Um, that's driving some of that acceleration into the fiscal fourth quarter. Sounds, like, things there are pretty good, but there's always a little bit of economic uncertainty, um, and then, uh, a different fiscal 26, uh, question that that maybe you can address. So you have some new sports rights coming on. How do we think about overall cash content spend next year? Um, my guess is sports are going to be going up with things like WWE. Uh, and then of course, content is the lifeblood of the company. So any good way to think about content spend, uh, as we look out for the next 12 months or so. Thank you.
Hugh Johnston: Yeah. Good morning. A couple of things. In terms of experiences, obviously, we really have a terrific portfolio of experiences businesses. As I mentioned this morning, Walt Disney World just had a record Q3 revenue number as we emerged from last quarter. We certainly feel great about that. In addition to that, the Disneyland Paris business, we expect to do very well. As a reminder, we have some easier overlaps due to the Olympics last year. In addition to those laps, the business is performing strongly. China, as we have noted on past calls, is a little bit challenged, not so much from an attendance perspective, but from per caps perspective, as there is some stress with the China consumer. In addition to that, the cruise ships are doing extremely well right now.
Yeah, good. Good morning. Uh, a couple of things in terms of experiences. Obviously, we, we really have a, a terrific portfolio of of experiences businesses. Uh, as I mentioned this morning, uh, Walt Disney World, just had a record, Q3 Revenue number, uh, as, as we emerge from last quarter, so we, we
Hugh Johnston: Forward bookings look great, and we are running at very high occupancies in terms of the cruise ships. In terms of thinking about bookings for experiences for the fourth quarter, right now, they are up about 6%. We certainly feel positively about that as well. As regards to cash content spend for 2026, I know you are going to be shocked at this, but I am going to defer on talking about that until the Q4 call.
Thinking about bookings for experiences for the uh for the fourth quarter. Uh right now, they're up about uh about 6%. So we certainly feel positively about that as well. Uh, as regards cache content spent for 26. I know you're going to be shocked at this, uh but I'm going to defer on talking about that until the Q4 call.
Carlos Gomez: Thanks, Steve. Operator, next question, please.
Carlos Gomez: Yes, sir. Next question comes from Jessica Reif Ehrlich with Bank of America. Please go ahead.
Thanks, Steve Operator. Next question, please.
Speaker 7: Thank you. One follow-up on experiences, and then maybe move on to content. On experiences, I know everyone's trying to get some guidance for next year, but you do have a ship launching in Singapore, a large ship. Can you talk about how you see the impacts on that, moving to another region, another side of the world, and how you think about the impact of that ship on pretty much all of Disney's businesses? On content, you've given positive commentary, but the guide indicates a very tough fourth quarter. Can you talk a little bit about the ins and outs of what you see in content in the year ahead?
Yes, sir, my question comes from Jessica early with Bank of America, please go ahead. Thank you. Um,
1 follow up on.
Expenses. And then.
Maybe we'll find the content. Um, so unexperienced is, I know everyone's trying to get some guidance for next year. But you do have a ship launching in Singapore, a large ship, and you talked about how you see the impact on that, you know, moving to another region, another side of the world. And how you think about the impact of that ship on? Pretty much all of Disney's businesses. Um, and then on content, um, you you've given positive
Uh, commentary. But the guidance, okay, it's very tough, fourth quarter. Could you talk a little bit about the ins and outs of of what you see in content in the year ahead?
Carlos Gomez: Regarding the ship in Singapore, launching out of Singapore, Jessica, that is the biggest ship that we have ever built. To give it some perspective, our big ships today sail with about 4,000 passengers each. This will sail with about 7,000 passengers. We have said in previous calls that sales when we went to the market and started selling, trips on this ship were extremely robust, sold out very, very quickly over, I think, the first two quarters of operation.
Carlos Gomez: This will give us an opportunity to basically sail or float the Disney brand in all of its glory into a region that we think has huge Disney brand affinity, and it creates a huge opportunity for us. It is a floating, essentially, ambassador for the Disney brand because if you have been on any one of our ships, particularly the new ones, we effectively use our IP built into the entire experience. I think this will create a great opportunity for us in Asia, but particularly in Southeast Asia.
Uh regarding the the ship uh in Singapore, launching out of Singapore, Jessica, that's the biggest ship that we've ever built and to give it for you. Some perspective. Our big ships today sale with about 4,000 passengers each, this will sell with about 7,000 passengers. Uh, we've said in previous calls that sales when we when we went to the market and started selling uh uh trips on this ship were extremely robust, sold out very, very quickly over. I think the first 2 quarters of operation, uh, this will give us an opportunity to basically uh, sale or float, the Disney brand in all of its Glory into a region that we think has huge Disney brand affinity and it creates a huge opportunity for us. It was, it's a floating essentially Ambassador for the Disney brand because if you've been on any 1 of our ships, particularly the new ones and we we effectively use our IP built into the entire
experience. And so I think this is we'll create a great opportunity for us in Asia, but in particularly in Southeast Asia,
Hugh Johnston: Hi, Jessica. Regarding your question on content, I assume you are asking generally about CSLO and entertainment in Q4. The thing I would remind you of is we will be overlapping Inside Out 2 from last year, which is obviously a tough comp. All of that is considered in the guide that we gave you of 585 for The Walt Disney Company for the year.
Hi, Jessica. Yeah. And, and regarding your question, on, on content, I, I assume you're, you're asking generally about, uh, cslo and, and entertainment. And Q4 the, the thing I would remind you of is we will be overlapping, uh, Inside Out 2 from from last year, which is obviously a tough comp, but all of that is considered in the guide that we gave you of 585 for for the overall company for uh, for the year.
Carlos Gomez: Thanks, Jessica. Operator, next question, please.
Carlos Gomez: Our next question comes from David Karnovsky with JPMorgan. Please go ahead.
Thanks Jessica operator. Next question, please.
Speaker 7: Hi. Thank you. I wanted to follow up on your comments regarding theatrical franchises. You know, Disney's had great success recently with sequels and reboots. I am interested, though, in how you think about launching new IP into today's exhibition market. Is it a fair comment that that is a tougher proposition than in the past? Then separately for Hugh Johnston, it might be early, but can you discuss or even quantify potential tax benefits at Disney from the Big Beautiful Bill in return of the 100% bonus depreciation? Thanks.
Carlos Gomez: Thank you, David. We continue to be focused on creating new IP. Obviously, that's of great value to us long term. But we also know that the popularity of our older IP remains significant, and the opportunities to either produce sequels or to basically bring them forward in a more modern way, as we've done, or convert what was previously animation to live action, like we're doing with Moana in 2026, is just a great opportunity for the company and supports our franchise. So I wouldn't say that we've got a priority one way or the other. Our priority is to put out great movies that ultimately resonate with consumers. And the more we can find and develop original property, the better, of course. We are developing original property under the 20th Century Fox banner and under the Searchlight banner.
Our next question comes from David karnowsky with JP Morgan. Please go ahead. All right, thank you. Bob, I wanted to follow up on your comments regarding theatrical franchises. Uh, you know, Disney's had great success recently with sequels and reboots. I'm interested though in how you think about launching new IP into today's exhibition Market? Is it a fair comment that that's a tougher proposition, uh, than in the past and then, uh, separately for Hugh. Uh, it might be early, but can you discuss or, you know, even quantify potential tax benefits, it, uh, Disney from the big beautiful Bill and return of 100% bonus depreciation. Thanks.
Thank you, David. We're, we continue to be focused on creating new IP, uh, obviously, that's a great value to us, uh, long term, uh, but we also know that the popularity of our, uh, older IP and remains significant and the opportunities to either produce sequels or
Carlos Gomez: Look, you could even argue that Marvel continues to mine its library of characters for original property. Even though, for instance, there have been Fantastic Four movies before, we kind of consider the one that we did an original property in many respects because we're introducing those characters to people who are not familiar with them at all.
Hugh Johnston: Yeah. Regarding tax, I assume you are asking about the impact of OB-3. Basically, from a book tax perspective, it will not have any material impact on the company. From a cash perspective, it will be a positive to us. Again, we will talk about that more on the Q4 call. We do expect a positive cash tax impact, which obviously benefits us from a cash flow perspective.
To basically bring them forward in a more modern way as we've done or or convert. What was previously animation to live action like, we're doing with Moana in 2026, it's just a great opportunity for the company and supports our franchises. So, I wouldn't say that we've got a priority 1 way or the other, we, our priority is to put out great movies, that ultimately resonate with consumers and, um, and you know, the more we can uh, find and develop original property. The better, of course, we are developing original property for under the 20th Century, Fox banner and under the search light banner and look you could even argue that Marvel continues to mine. Its library of characters for original property. Even though for instance there have been Fantastic 4 movies before we kind of consider the 1 that we did a an original property in many respects because we're introducing those characters to people who were not familiar with them at all.
Yeah. And and regarding
Carlos Gomez: Thanks, David. Operator, next question, please.
And regarding, uh, tax. I assume you're asking about the impact of ob3. Uh, basically from the book tax perspective. It won't have any material impact on the company. From a cash perspective. It, it will be, uh, it will be a positive to us and again, we'll, we'll talk about that more on, uh, on the Q4 call. But we do expect a positive cash tax impact, which obviously, benefits us from a, a cash flow perspective.
Carlos Gomez: Absolutely. Our next question comes from John Hodulik with UBS. Please go ahead.
Thanks, David operator. Next question, please.
Speaker 7: Great. Thank you. Maybe just following up on the ESPN launch. Given the attractive pricing for the service from an ESPN D2C bundle standpoint, can the launch of the ESPN platform accelerate growth on the D2C side, either from a subscriber standpoint or from an engagement standpoint? Thanks.
Absolutely, our next question comes from John. Hood with UBS. Please go ahead.
Carlos Gomez: The answer is absolutely. We will not predict exactly how much, but for $29.99, you can get Disney+, Hulu, and ESPN, which is an incredible, incredible bargain for the consumer. We would hope that that will enable us to grow our subbase. Additionally, with ESPN and all of its programming bundled with Hulu and Disney+, we fully expect that engagement will increase as well, which we know is one of the key ways that you can reduce churn. We are very excited about those prospects. The other thing we have not even touched upon is that with the NFL deal, we have the ability to bundle NFL+ Premium service, which includes Red Zone digitally. We will bundle that with the trio bundle of Disney+, Hulu, and ESPN. That is also an opportunity to lower churn, increase engagement across basically the apps that we will be selling.
Great, thank you. Uh, maybe just following up on, on the, on the ESPN launch. Giving the attractive pricing for the for for the service from the ESPN DC bundle standpoint can. The launch of the ESPN platform accelerate growth on on the d2c side. Either from a subscriber standpoint, or from an engagement standpoint. Thanks
The answer is absolutely uh, we we all predict exactly how much but you know for 29.99 you can get Disney Plus Hulu and ESPN which is an incredible. Incredible bargain for the consumer and we would hope that that will enable us to grow our subbase. Additionally with the with ESPN and all of its programming bundled with Hulu and Disney. Plus, we fully expect that engagement will increase as well. Which we know is 1 of the key ways that you can reduce churns. So we're very
Speaker 7: Great. Thank you.
Excited about those prospects. The other thing, we haven't even touched upon is that with the NFL deal. We have the ability to bundle NFL premium NFL's Plus premium service, which includes Red Zone digitally. And we'll bundle that with the trio bundle of Disney Plus, Hulu and ESPN and with ESPN, and that's also an opportunity to lower churn increase engagement across the basically, the apps that will be selling
Carlos Gomez: Thanks, John. Operator, next question, please.
Carlos Gomez: Absolutely. Our next question today comes from Cuncan Merrill with Evercore ISI. Please go ahead.
Great. Thank you. Thanks, John operator. Next question. Please.
Speaker 7: Good morning. Thanks for taking the question. I have a follow-up on the cruise line, maybe not just the Disney Adventure, but more broadly about the business where you have laid out a transformational roadmap with the fleet set to double over the coming years. It feels like we are nearing a major inflection point, particularly with the Treasury launch last December and both the Disney and Adventure coming online later this calendar year. As we work through trying to better understand the financial implications, can you help frame the opportunity ahead? I am not trying to tease out 2026 guidance, and I understand that it might be too early to give specifics and that there are still unknowns around pricing, maybe cannibalization, and margins.
Absolutely. And our next question today comes from kotkin moral with evercore. Isi. Please go ahead.
Speaker 7: I am not sure if we should look at the current fleet's economics per ship or maybe stateroom and apply them to what you have coming ahead. The point is more that even with conservative assumptions, the potential operating income contributions look quite meaningful. I would appreciate any views you could share. Thank you.
Good morning and thank you for taking the questions. Um, I had a follow up on the cruise line, maybe not just the Disney adventure but more broadly about the business where you've laid out a transformational roadmap with the fleet that the double over the coming years. It feels like we're nearing a major inflection point, particularly with the treasure launched last December, and both the destiny and Adventure coming online. Later, this calendar year, as we work through, trying to better understand the financial implications. Can you help frame? The opportunity ahead? Do, I'm not trying to tease out 2026 guidance and I understand that it might be too early to give specifics and that they're still unknowns around pricing maybe candle and margins and I'm not sure if we should look at the current Fleet economics per ship or maybe State room and apply them to what you have coming ahead. But the point is more that even with conservative assumptions, the potential
Operating income contributions look quite meaningful. So would appreciate any of you as you could share. Thank you.
Carlos Gomez: Hugh, I will let you handle the economic side of that question. Let me just point out a few, I think, salient points regarding the expansion of the cruise ship line. First of all, we have discovered that many of the people who sail on our current ships have such a great experience that they are the first to want to sail on our new ships. So interestingly enough, what we are getting is, in effect, repeat visitation onto new ships. So when we are building a bigger base of consumers, it is also one of the best experiences that we offer across our experiences business. So that is one way to look at it. The other way to look at it, which I referenced with regard to Singapore, is that there are many destinations in the world that we have not visited.
Hey Hugh. I'll let you handle the economic side of that question. Let me just um, point out a few I think Salient points regarding the expansion of the cruise ship line. First of all, we've discovered that many of the people who sell on our current ships have such a great experience that they are the first to want to sell on our new ships.
Carlos Gomez: This gives us an opportunity to not only bring our brand to those destinations, but to attract customers from those regions who may want to sail in their region. So by expanding, we feel we expand the business in terms of our access to people around the world. We also give people who have sailed on our current ships an opportunity to sail again, but with a different experience because they are on a new ship.
So, interestingly enough, what we're getting is, in fact, repeat visitation onto new ships. So, and we're building a bigger base of consumers. It's also 1 of the best experiences that we offer across our experience as business. So that's 1 way to look at it. The other way to look at it is I referenced it with regard to Singapore is that there are many destinations in the world that we haven't visited and this gives us an opportunity to not only bring our brand to those destinations but to attract customers from those regions who may want to sell in their region. And so by expanding we feel we expand the business in terms of, uh, our access to people around the world. And we also give people who have sailed on our current shifts and opportunity to sail again, but with a different experience because they're on a, a new ship.
Hugh Johnston: Right. From a financial perspective, the best way to think about it, I think, really is in the multi-year guidance that we gave you back last fall for the experiences business. Obviously, we do not break out cruise ships, but we did contemplate all of the builds that we had coming on as a part of providing that guidance. The thing I can tell you in addition to that is, as Bob Iger noted, our cruise ships continue to be incredibly well received. As we sit here today, we are already basically half booked out for all of next year, and the newer ships are even higher in that regard. We feel terrific from the perspective of consumer receptivity to our new offerings.
Regards. So we we feel terrific from the perspective of consumer recept, uh, receptivity to uh, to our new offerings.
Carlos Gomez: Thanks, Duncan. Operator, next question, please.
Carlos Gomez: Absolutely. Our next question today comes from Peter Sapino with Wolf Research. Please go ahead.
Thanks, cut gun. Operator. Next question, please.
Speaker 7: Hello. Good morning. I wondered if you could comment on engagement trends regarding your existing subscribers on Disney+ and Hulu, and how your current DTC strategies could contribute to those trends. Then, a related longer-term question, not a 2026 guidance question. Your DTC segment reported 6% operating margins. As DTC surpasses your 10% margin objective, is there an opportunity to accelerate DTC content spending for the sake of market share over the long run? Thank you.
Absolutely. Our next question is, today comes from Peter, subpoena, with wolf research. Please go ahead.
Hello, good morning. I wondered if you could comment on engagement Trends regarding or of your existing subscribers on Disney plus and Hulu, uh, and how your current DTC strategies could contribute to those Trends and then a related longer term question, not a 2026. Guidance. Question your DTC segment reported 6% operating margins as DTC surpasses, your 10% margin objective. Is there an opportunity to accelerate DTC content spending for the sake of market share over the long run? Thank you.
Carlos Gomez: I will take the first part. Maybe I will take the second, too. When we gave people an opportunity to have a more seamless experience between Disney+ and Hulu, we saw engagement increasing. We would hope that when we take this next step, which is basically full integration, that engagement will go up even more. In addition to that, we have implemented a number of technological improvements that are designed to increase engagement. We are really pleased with what we are seeing already, but we also know that it is still a work in progress, and we have a lot more work to do. For instance, just the strength of our recommendation engine. We are also experimenting like crazy, where we are basically trying different elements out on consumers and getting data back from them in order to figure out what works the best.
Well, I'll take the first part. Maybe I'll take the second too. Um, you know what, when we combine, when we gave people an opportunity to have a more seamless experience between Disney plus and Hulu, we saw engagement increasing uh and we would hope that when we take this next step which is basically full integration that that in that that engagement will go up even more. In addition to that we've implemented a number of technological improvements that are designed to increase engagement. And we're really pleased with what we're seeing already, but we also know that it's still a work in progress.
Carlos Gomez: That includes basically the homepage experience and basically what they see when they open up an app. In addition, we have added streams, which was a technological advancement. There are some great streams you can watch, I think, 35 seasons or whatever it is of The Simpsons on one stream as a, for instance. That is also something that increases engagement. There is an ABC News stream that you can watch. There is some news on all the time on the service. What we are basically doing is, by one, combining them, we hope to increase engagement more. Two, with all the technological advances, we will increase engagement more. In addition to that, as it relates to content spend, I would say that from a domestic perspective, you should not expect that we need to increase the spend on content significantly.
And we have a lot more work to do. If, for instance, just the strength of our recommendation engine, we're also experimenting like crazy where we're basically trying different uh, elements out on consumers and and and getting data back from them. In order to figure out what works the best that includes basically the homepage experience and basically what they see when they open up an app. In addition, we've added streams, which was a technological advancement. There's some great streams, you can watch, I think, 30, some 5 Seasons or whatever it is of The Simpsons on 1 stream as a, as a, for instance, that's also something that increases engagement, there's an ABC News stream that you can watch. So there's some news on all the time on the service. So what we're basically doing is by 1, combining them. We hope to increase engagement more 2 with all the technological advances we're increasing. We will increase engagement more. In addition to that, as it relates to the content spend, I'd say that from a a domestic.
Carlos Gomez: Where we believe we should be investing is to grow our international businesses. So one, we are going to brand the general entertainment from Star to Hulu across the world, for instance. Two, these technological advancements will obviously help in markets where our engagement has not been as high as they need to be. Three, we probably will invest in very selected markets internationally where we really feel there is a potential to grow our bottom line, to grow subs, to grow advertising revenue, and to grow our bottom line.
Perspective, you shouldn't expect that. We need to increase the spend on content significantly where we believe we should be investing, is to grow our International businesses. So 1, we're going to Brand the general entertainment from Star to Hulu, across the country across the world. For instance, to these technological, advancements will obviously help in markets where our engagement is not been, as high as they need to be 3, we probably will invest in very selected markets International.
Hugh Johnston: The only thing I will add to Bob's comments is our objective with this business is to maximize OI over time through a growth-oriented strategy, not through cost management, although we will manage cost effectively, but through growing this business. We have a significant opportunity in the U.S. to grow through higher engagement, and internationally, we have a significant penetration opportunity. As we grow engagement and reduce churn in the U.S., that presents opportunities from a marketing spend perspective, some of which can be basically reinvested into international content. Our intent is to do that through a rifle shot approach with specific markets. We intend to be deep rather than broad in terms of the way that we do that in a number of markets around the world. As a result of that, I would tell you, we certainly don't intend to stop at 10% margin.
where we really feel, there's a potential to grow, our bottom line, to grow, Subs to grow, advertising revenue, and to grow our bottom line,
Yeah. And the the only thing I'll add to Bob's comments are what go our objective with this business is to maximize oi over time through a growth oriented strategy. Not not through cost management although we'll manage cost effectively but through through growing this business we have a significant opportunity in the US to grow through higher engagement and in international. And we have a significant penetration opportunity.
Hugh Johnston: We think there's still lots of margin opportunity once we hit double digits. We are going to do it through a growth-oriented strategy, not through a cost-oriented strategy.
Carlos Gomez: Thanks, Peter. Operator, next question, please.
As we grow engagement and reduce churn in the US, that pre pre pre pre presents opportunities from a marketing spend perspective. Some of which can be, uh, basically reinvested into International content. And our intent is to do that through, uh, a a rifle shot, uh, approach with specific markets. So, we we intend to be, uh, deep rather than Broad in terms of the way that we do that and a number of markets around the world. Uh, as a result of that, I, I would tell you we certainly don't intend to stop it at 10 margin. We think there's still lots of of margin opportunity once we hit double digits, but we're going to do it through a, a growth oriented strategy, not clearly through a cost oriented strategy.
Carlos Gomez: Our next question today comes from Michael Ng with Goldman Sachs. Please go ahead.
Thanks, Peter. Operator, next question, please.
Speaker 7: Hi. Good afternoon. Thanks for the question. I just have one on domestic theme park trends. The per caps in the quarter were up 8% year over year. I think that was the best growth in over two years. I was just wondering if you could talk about whether the per cap growth was impacted by the mix of attendance between local, out-of-state, international. Were there any divergent attendance trends between those cohorts of domestic park patrons, just given the noise around competitive park openings and international visitation to the United States? Thank you.
Our next question, today comes from Mike, with Goldman Sachs. Please go ahead.
Hi, good afternoon, thanks for the question. I just have um, 1 on on domestic theme park Trends. Um, you know, the the per caps in the quarter were, were up 8% year-over-year. I think that was the best growth in over 2 years. I was just wondering if you could talk about whether the, the per cap growth was
Hugh Johnston: Yeah. Hey, Mike. In terms of the mix of visitors, that is obviously one of the factors that plays into per caps. That said, the ones that you mentioned specifically, international, nothing material going on there. It is always going to be a mix of sort of local versus visitors from elsewhere. And there is not a particularly material trend that is worth trying to model or worth trying to note. Overall, we feel good, certainly about the per caps. But frankly, we feel good about the attendance as well, in light of the fact that there is a competitive offering in the marketplace. The fact that attendance came in as well as it did is something that we feel terrific about. So overall, as we have talked about in the past, the intent is to grow through both increased attendance and increased per caps in a balanced way.
And you know, were there any Divergent, uh, attendance Trends between those cohorts of, uh, domestic Park. Patrons just given, uh, the noise around, you know, competitive Park openings, and, um, International visitation to the United States. Thank you.
Hugh Johnston: And I expect that is what we are going to continue to do.
Carlos Gomez: Great. Thank you. Operator, one question, last question.
Yeah, hey Mike uh, in terms of uh, the the mix of visitors that that's obviously 1 of the factors that plays into into per cap. So that said, uh, the ones that you mentioned specifically International nothing material going on there. Uh, it's always going to be a, a mix of sort of local versus, uh, versus visitors from elsewhere. And there isn't a a particularly, uh, material Trend that that's worth trying to model or worth, trying to note, uh, overall. We we feel good, uh, certainly about the per caps, but frankly, we feel good about the attendance as well. Uh in light of the fact that there there's a competitive offering in the marketplace. Uh the fact that attendance came in as well as it did as 1 something that we feel terrific about. So overall as we've talked about in the past, the intent is to grow through both increased attendance and increased per caps in a balanced way. And I expect, that's what we're going to continue to do.
Thank you. My upper operator 1 question last question.
Carlos Gomez: Thank you. Our final question today comes from Kannan Venkateshwar with Barclays. Please go ahead.
Speaker 7: Thank you. Bob, with respect to the sports offering, in terms of your go-to-market strategy, what we see right now, how close is that to the potential end state? Is there an opportunity maybe to tier the product now that you have products like Red Zone, for instance, as a pay-per-view offering or a separate tier? Or even bundling with others, like Fox launching their own sports offering, for instance. Is that an opportunity for you to bundle other sports offerings in the market and consolidate streaming more broadly?
Thank you enter final questions with barklay please. Go ahead.
Thank you, lovely to speak to the sports offering uh in terms of your go to market strategy. Uh, what we see right now how close is that to the potential end State and is there an opportunity, maybe to tear the product. Now that you have products like red zone for instance, as a payer view offering or, uh, you know, a separate tier or even bundling with others, like Fox launching their own sports offering, for instance, is that an opportunity for you to bundle other sports offerings in the market and consolidate streaming more. Broadly
Carlos Gomez: Yes. We believe there may be opportunities for us to bundle other companies' sports offerings. We have actually had some discussions with some other companies on doing just that. Nothing to report on that. But obviously, we are not only interested in growing engagement and growing our own subs, but we are interested in serving consumers better as well. The more sports can be offered in one destination for the consumer, or if we can improve the ease of use for consumers, ease of finding things, because as a devoted sports fan, I often have to work to try to find what platform sports are on. If we can help consumers in that regard, we are certainly going to try.
Yes, we we we, uh, believe there may be opportunities for us to bundle other companies Sports offerings. We've actually had some discussions with some other companies on doing just that nothing to report on that. But uh, obviously we're not only interested in growing engagement and growing our own Subs, but we're interested in serving consumers better as well. And the more Sports can be offered in 1 destination for the consumer or what or at ease of if we can improve the ease of use for consumers, ease of finding things because as a as a devoted sports fan, I often have to work to try to find uh where what platform sports are on. If we can help that if we can help consumers in that regard we're certainly going to try.
Carlos Gomez: Thanks, everyone, for the questions. We want to thank you again for joining us this morning and wish everyone a good rest of the day.
Okay. Thanks everyone for the questions. Uh, we want to thank you again for joining us this morning and wish everyone a good rest of the day.
Carlos Gomez: Thank you. This concludes the conference call. You may now disconnect your
Thank you. This concludes the conference call. You may now disconnect your lines.