Disney’s streaming growth slows as pandemic lift fades, shares fall

Disappointing growth of Walt Disney Co’s namesake streaming service on Thursday overshadowed better-than-expected overall profits, driving down shares of the entertainment company.

Shares of Disney fell 3.7% in after-hours trading.

CEO Robert Chapek said that movie and television shows were resuming normal production and new offerings would help bring in new customers to Disney+, ESPN+, Hulu and Hotstar.

Adjusted earnings-per-share for the fiscal second quarter came in at 79 cents for January through April 3, Disney said. Analysts had expected 27 cents, according to IBES data from Refinitiv.

“(Disney+) growth is significantly decelerating as the initial pandemic boost has waned,” eMarketer analyst Eric Haggstrom said. “Given Disney’s content investments, subscriber growth should return strongly once this short-term turbulence ends.”

Upcoming Disney+ series include “Loki” about the Marvel villain and Star Wars series “The Book of Boba Fett.”

A total of 103.6 million customers subscribed to Disney+ as of early April, the company said. Two Marvel superhero series, “WandaVision” and “The Falcon and the Winter Soldier,” debuted during the quarter. Analysts had projected 109.3 million, according to FactSet.

Disney plans to launch Disney+ in Malaysia on June 1 and in Thailand on June 30, executives said on a call with analysts.

Overall revenue fell 13% to $15.61 billion in the second quarter ended April 3, a touch below what analysts estimated, according Refinitiv.

Net income from continuing operations rose to $912 million in the second quarter from $468 million a year earlier.

The theme parks division posted an operating loss of $406 million. The Disneylands in California and Paris were closed for the full quarter. Disneyland in California reopened April 30.

Chief Financial Officer Christine McCarthy said reservations at Disney’s U.S. parks were strong, “demonstrating the strength of our brands as well as growing travel optimism.”

Chapek said Disney will continue to experiment with movie distribution while theaters try to lure audiences back. The company will offer late summer releases “Free Guy” and “Shang-Chi and the Legend of the 10 Rings” exclusively in theaters for 45 days, a shortened period that has been embraced by other studios to allow for home viewing sooner.