Disney Invests $1.5B In Fortnite Owner Epic Games In 'Biggest Ever' Gaming Entry, Posts Q1 Earnings Beat, Revenue Miss

On Wednesday, Disney also announced a $1.5 billion investment in leading video game company Epic Games. The investment in the owner of the popular Fortnite game is a substantial one for Disney in the gaming sector.

The House of Mouse will work with the Fortnite studio on new games and an entertainment universe that includes content, characters and stories from Disney, Pixar, Marvel, Star Wars, Avatar and other franchises, the company said.

"This marks Disney's biggest entry ever into the world of games and offers significant opportunities for growth and expansion. We can't wait for fans to experience the Disney stories and worlds they love in groundbreaking new ways,” CEO Bob Iger said in a statement.

The company reported first-quarter earnings alongside the news of the Epic Games collaboration, and the highlights for investors are as follows:

Disney Q1 Earnings: Disney reported first-quarter revenue of $23.5 billion, which was flat compared to the prior year. The revenue total missed a Street consensus estimate of $23.6 billion, according to data from Benzinga Pro.

Adjusted earnings per share in the first quarter were $1.22, which beat a Street consensus estimate of 99 cents.

Revenue was reported as the following by segment, with year-over-year changes.

Entertainment: $9.98 billion, -7% year-over-year

Sports: $4.84 billion, +4%

Experiences: $9.13 billion, +7%

In the entertainment segment, revenue was as follows:

Linear: $2.8 billion, -12% year-over-year

DTC: $5.55 billion, +15%

Content Sales/Licensing: $1.63 billion, -38%

The company highlighted ongoing cost savings across business segments.

"We are on track to meet or exceed our $7.5 billion annualized savings target by the end of fiscal 2024, while we continue to look for further efficiency opportunities," according to Disney’s statement.

The company is guiding for full-year earnings per share of $4.60, which would amount to a 20% year-over-year improvement.

A $3-billion buyback plan was approved by the Disney board for fiscal 2024. The company also declared a dividend of 45 cents per share, payable on July 25, to shareholders of record on July 8. The dividend represents a 50% increase from the previous payout.  

"Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company, focused on fortifying ESPN for the future, building streaming into a profitable growth business, reinvigorating our film studios, and turbocharging growth in our parks and experiences," Iger said.

Related Link: Disney Q1 Earnings Preview: Media Company Battles DeSantis, Musk, Peltz

Disney Streaming, DTC Update: The direct-to-consumer segment in the entertainment segment posted an operating loss of $138 million. This marked an improvement of 86% from a year-ago loss of $984 million.

Overall DTC revenue for the company was $6.08 billion, up 14% year-over-year. The operating loss for all DTC segments, including ESPN, totaled $216 million, which was a 79% year-over-year improvement.

Here's a look at key subscriber figures and quarter-over-quarter changes.

Disney+ US and Canada: 46.1 million, -1%

Disney+ International excluding Hotstar: 65.2 million, -1%

Disney+ Core: 111.3 million, -1%

Disney+ Hotstar: 38.3 million, +2%

Hulu SVOD Only: 45.1 million, +3%

Hulu LiveTV & SVOD: 4.6 million, flat

Total Hulu: 49.7 million, +2%

ESPN+: 25.2 million, -3%

The company reported higher average revenue per subscriber figures in the first quarter, with Disney+ coming in at $8.15 for US and Canada and $6.84 for Core, which were up 9% and 2%, respectively, quarter-over-quarter.

Disney is guiding to add 5.5 million to 6 million Disney+ Core subscribers in the second quarter.

The company continues to guide for the overall DTC segment to reach profitability in the fourth quarter of fiscal 2024.

DIS Price Action: Disney shares are up 7.7% to $106.79 in after-hours trading versus a 52-week trading range of $78.73 to $118.18.Read Next: Disney Vs. DeSantis: House Of Mouse Loses First Amendment Battle With Florida Governor

Photo courtesy of Disney.