7 May 2025 — Reflections on the Q2 Earnings Call
Note: I strongly advise against relying on summaries to form an opinion — there are insights to be gained in the nuance of syntax and the cadence of both questions and answers.
The Abu Dhabi deal appears to be a strategic move with low capital outlay — a straightforward IP licensing agreement that expands Disney’s brand reach with minimal risk.
Streaming remains a work in progress. The launch of ESPN as a standalone streaming service is promising, and its integration with linear customers could open the door to direct-to-consumer relationships in the future. It’s clear that Disney is managing the present while attempting to evolve the business model for what’s next. Embedding Hulu into Disney+ has helped reduce churn, but Disney+ remains under pressure from intensifying competition — all platforms fighting over the same ad dollars. Over the medium term, there is a pathway toward a hybrid DTC business with advertising.
Despite these efforts, Disney remains a distant second to Netflix, which has built a dominant position as a content powerhouse. The strength of Disney’s flywheel lies in its combination of family-friendly content, theme parks, and now cruises. Its IP portfolio — from Mickey Mouse to Star Wars to Marvel — is possibly the strongest in the industry. But turning that IP strength into durable streaming and ad revenue is still very much in development.
The ESPN streaming initiative, with potential interactive features including betting, presents an interesting new frontier. That said, Disney remains a complex media conglomerate with many moving parts. The key question is whether those parts work together to drive operational leverage. Compared to Netflix — which built streaming from the ground up — Disney’s leverage looks weaker. Even so, I continue to believe there will be multiple winners in streaming, and that the eventual losers will be cable companies and linear networks.
Financially, Disney delivered strong Q2 results and reaffirmed its aggressive guidance for 2025 and 2026. But valuation remains a sticking point:
Disney’s current valuation has already priced in both the strength of its IP and the assumption that it will successfully monetize it in the post-cable world.
At the current price of $100, I would not be adding to my position. Its 7% portfolio weight reflects my interest in the company’s long-term potential, but also a measured view of its near-term upside. By contrast, ZM, C, and WISE each represent over 20% of our invested portfolio, indicating significantly higher conviction.
