Good morning. It's my pleasure to welcome everyone to The Walt Disney Company's second quarter 2025 earnings call. Our press release, Form 10-Q and management's posted prepared 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 Investor Relations website. Certain statements on this call, including those regarding our expectations, beliefs, plans, financial estimates and prospects, trends, outlook and guidance, and other statements that are not historical may be forward-looking statements under the securities laws. We make these statements on the basis of our assumptions regarding the future at the time we make them and do not undertake any obligation to provide updates. Forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from the results expressed or implied in light of a variety of factors. These factors include, among others, economic or 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 about key risk factors. 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. 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. So with that, I will now turn the call over to Bob.

In the 102 year history of The Walt Disney Company, there have been many defining moments and countless achievements. One such moment was the opening of Disneyland in 1955. Now, 70 years later, having entertained 4 billion guests across six Disney theme park destinations around the world, we are celebrating another great moment in our storied history. I’m joining you from the United Arab Emirates, where we just announced an agreement to bring a Disney theme park to Abu Dhabi. Disneyland Abu Dhabi will be authentically Disney and distinctly Emirati. It will serve as an oasis of extraordinary Disney entertainment for millions and millions of people in this crossroads of the world, connecting travelers from the Middle East and Africa, India, Asia, Europe and beyond. This seventh Disney theme park resort will rise from the shores of this land in spectacular fashion, blending wonderful Disney stories and characters with the cultures and tastes of this country and this region. It will combine contemporary architecture and cutting-edge technology with the timeless magic of Disney to offer guests deeply immersive experiences in unique and modern ways. As part of our new strategic partnership with the Miral Group of Abu Dhabi, Disney will oversee design, license our IP and provide operational expertise, while Miral will provide the capital, construction resources and operational oversight. Our Imagineering team is already hard at work designing this large and very special destination that will become a source of joy and inspiration for generations to come. This is my third visit to Abu Dhabi in the last nine months. And each time, I gain more appreciation and respect for the UAE government, the government of Abu Dhabi, for our partners at Miral and for the people and the culture of Abu Dhabi. As we prepare to embark on this exciting new addition to our experiences portfolio, we already have more expansion projects underway domestically and around the world than at any time in our history. That includes investing more than $30 billion in our theme parks in Florida and California to enhance our offerings, create jobs and support the U.S. economy. Our focus must always be on building for tomorrow, as much as it is on managing for today. That eye to the future and driving growth is central to the important work we've done advancing our four strategic priorities. And looking at our second quarter results, we're making excellent progress. We had a very strong Q2 with adjusted EPS, up 20% from the prior year, rounding out a solid first half of fiscal 2025. Our Experiences segment delivered strong results this quarter, driven by the outstanding performance from our domestic businesses. Investments in this segment have delivered impressive returns on invested capital with returns from our experiences businesses at all-time highs. Experiences is obviously a critical business for Disney and also an important growth platform. Despite questions around any macroeconomic uncertainty or the impact of competition, I'm encouraged by the strength and resilience of our business, as evidenced in these earnings and in the second half bookings at Walt Disney World. Our Entertainment business, including movies, television series, news and sports continues to generate strong growth. Our feature films continue to enjoy success at the global box office. Thunderbolts from Marvel Studios opened this past week and is currently the number one movie in the world and the best reviewed Marvel film in the last few years. We are also excited about our upcoming theatrical slate for the remainder of the calendar year, including the live action Lilo & Stitch, Pixar's Elio, Marvel's The Fantastic Four: First Steps, Freakier Friday, Zootopia 2 from Walt Disney Animation Studios and the spectacular Avatar: Fire and Ash. We're also quite pleased with the performance of our general entertainment and news programming. Finally, sports viewership trends continue to be healthy. ESPN's Q2 primetime audience among the key 18 to 49 demographic was up 32%, making it ESPN's most watched Q2 in primetime ever, driven by ESPN's fantastic programming, including NFL and college football, the NCAA Women's Basketball Tournament and other exciting events, all of which is giving us optimism, as we head into the upfront next week. Meanwhile, we are only a few months away from the launch of ESPN's exciting new direct-to-consumer product offering, and we look forward to sharing pricing and timing details very soon. Overall, our expansive portfolio of high quality content and programming is enabling us to continue to grow revenue and profitability in our streaming business. Streaming remains a key priority and a core growth platform for Disney. And as we move forward, our improvements in the product will continue to enhance the user experience, increase engagement and reduce churn, thereby enabling us to grow the strategic business at an accelerated rate over time. This has been an excellent first half of the fiscal year with strong results powered by our disciplined and focused growth strategy. We remain confident about the direction of the company and optimistic about our outlook for the rest of the fiscal year. And with that, Hugh and I would be happy to take your questions.

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 through as many analysts as possible today. And with that, operator, we are ready for the first question.

Thank you, sir. Today's first question comes from Ben Swinburne with Morgan Stanley. Please go ahead.

Good morning or good evening, depending on your location. Bob, I want to follow up on your comments about streaming. Over the past year, you have been adding more Hulu and sports content to Disney+, enhancing the bundling strategy. I am curious if you are seeing positive effects from this broader content approach within the Disney+ app. Specifically, regarding engagement, sign-ups, and other metrics, is expanding Disney+ into various content areas benefiting the business in terms of sign-ups and customer retention? Is there more to come that could significantly impact the business? Additionally, I wanted to clarify something that wasn't mentioned in the prepared remarks. Is the three-year guidance for double-digit earnings growth in '26 and '27 still valid based on the new '25 higher EPS base? Thank you.

Thanks, Ben. To specifically address your question, the integration of Hulu within Disney is positively influencing user experience, particularly with the addition of sports content. Engagement is increasing, and churn is significantly decreasing. Looking forward, we are optimistic about transforming the streaming business into a true growth area. We see three main strategies to achieve this. First, we plan to enhance the user experience by continuing to integrate Disney+ and Hulu, and you will see more of this in the coming months. Second, when we launch ESPN direct-to-consumer, we intend to bundle it wisely, creating a fully integrated experience for those who choose to bundle. This will leverage the Disney brands on Disney+, the general entertainment from Hulu, and the live sports offered. There is nothing comparable in the streaming market regarding quality, volume, and variety, and we are very excited about it. The second pillar of growth will be technology; we are focused on enhancing the tech side of our business. We've already begun implementing paid sharing with Hulu, which is showing positive results. Additionally, we are working on personalization, customization, and advancements in advertising technology, with significant improvements planned for the near term. Lastly, the third growth pillar will involve investing in content, especially outside the U.S., where we recognize the need for more local content. We have started this process, which is time-consuming, and costs will be booked once the shows air, but we are actively developing content in targeted international markets.

Right. And hey, Ben, this is Hugh. Obviously, the guide that we announced for this year, which was $5.30, we've now taken to $5.75. The long-term guide remains intact. What we announced before, no change to that.

Thanks, Ben. Operator, next question, please.

Yes, sir. And our next question comes from Stephen Khong with Wells Fargo. Please go ahead.

Yeah. First, just congratulations on Abu Dhabi. I was wondering, if you could speak a little more on how you settled specifically on this location and this partner. I mean, Yas Island is really exciting already with the track and Ferrari World and the Emirate has a lot in infrastructure, but there are a lot of choices in the region. So, maybe you could just think about what audience you're going after and how this particular location is best suited for those purposes? And then just a second question on parks. I think domestic park margins were up 110 basis points in the quarter. I think you said that cruise is margin accretive. I was just wondering if you could help us think through the margin improvement you saw at domestic. Was that mostly due to cruise mix? Were underlying domestic park margins up as well? Just thinking about that as we forecast this longer-term? Thank you.

Yeah. Hi. This is Hugh. So in terms of the margins on the Parks business, that's a combination of all of the businesses. So we had certainly seen margin accretion in the Parks and Experiences side as well, not just the impact of cruise.

Regarding the question about Abu Dhabi, we carefully examined the region and recognized numerous opportunities. Constructing a theme park in such a location significantly endorses it, indicating its capacity to support a Disney theme park. To begin, it's important to observe the broader Middle Eastern market. We identified that there are hundreds of millions of income-qualified individuals for whom visiting one of our six locations would require a lengthy and costly trip. Therefore, we decided that the best approach is to bring our offerings directly to them. For example, we initiated a cruise ship project in Singapore, set to launch at the end of the year, which sold out its first quarter within days of being available for bookings. This underscores the demand for consumer interaction with Disney in regions far enough from our existing locations to avoid any competition with them. Focusing specifically on Abu Dhabi and the UAE, I previously mentioned key statistics. The region stands at a crossroads, with 500 million income-qualified individuals residing within a four-hour travel radius. This year, 120 million people are expected to pass through Dubai and Abu Dhabi. Additionally, Abu Dhabi anticipates hosting 39 million tourists by 2030. Through our in-depth analysis of Abu Dhabi and collaboration with our partners, we found that capital was not a concern for them. More importantly, their commitment to quality, innovation, arts, creativity, and new technology greatly impressed us. We also considered the existing cultural landmarks such as the Louvre and the Guggenheim, along with the extraordinary architecture in the area. Our assessment confirmed that Abu Dhabi is an ideal location for us. Working with our partners at Miral, we quickly established a strong rapport, sharing similar values and a mutual respect for our histories while also focusing on future innovation. Thus, it became clear that among all possible locations, Abu Dhabi stood out as the best choice. Our agreement came together swiftly because we were convinced, especially after collaborating with our partners, that this was the right decision.

Thanks, Steve. Operator, next question, please.

Thank you. And our next question today comes from Robert Fishman with MoffettNathanson. Please go ahead.

Thank you. Bob, the studio has clearly delivered many hits over the past year. I'm wondering, if you could just share a little bit more about your excitement for the upcoming theatrical slate and how that will generate the additional long-term value for Disney and the multiplier effect that you talked about in your prepared comments? And on a related note with the Thunderbolts opening, what is your confidence that Marvel can still be a significant driver to that Disney flywheel with its renewed focus on theatrical and putting out less scripted series on Disney+?

Thanks, Robert. I have a lot of confidence in our upcoming film lineup. Let me mention some of the movies we're releasing. We have Lilo & Stitch coming out on Memorial Day weekend, which is the live-action version. The tracking numbers are huge. I've seen the movie several times, and I can support it completely. My confidence is strong. Following that, Pixar's Elio is set for June, then we have Fantastic Four in July, and we'll close out the year with Tron, Zootopia, and Avatar. That's an impressive schedule. Looking ahead to next year, we'll have Avengers, Mandalorian, Toy Story, and Moana in live action. We have a lineup for the next year and a half that I believe is as strong as any I've seen since 2019, which I considered our best year. It’s truly robust. Additionally, I've spoken plenty about Marvel. We understand that in our enthusiasm to enhance our streaming platform with more content, we relied heavily on all our creative teams, including Marvel, leading to increased production. However, we've recognized that more content doesn’t always mean better quality. We've realized that we may have lost some focus by producing too much. By consolidating our efforts and allowing Marvel to concentrate more on their films, we expect an improvement in quality. The first and best example of this is Thunderbolts, so I feel very positive about it. Thank you.

Thanks, Robert. Operator, next question, please.

Absolutely. And our next question today comes from Jessica Reif Ehrlich with BofA Securities. Please go ahead.

Thank you. And maybe switching gears to advertising. Bob, you mentioned in your prepared remarks that you're optimistic regarding the Upfront. So, can you give us like some comments on what you're seeing in the market, the move to programmatic? Is it having an impact on your share of markets, sports? And then, I think the advertising was lower in Disney+. So maybe you could give us some color on what's going on? And then, just a follow-up on Abu Dhabi. Since you're not putting capital in, is there any ownership or is this simply a royalty?

I'll begin with the question about Abu Dhabi, and then Hugh will address your question on advertising. The arrangement is based on all their capital, and we will receive a royalty. We do not have ownership; instead, we maintain our intellectual property and license it to them. We are responsible for the design and development, and we will play a significant role in overseeing their operations to ensure that the Disney theme park experience aligns with the high standards we maintain at our other six locations. We are not worried about this aspect, as they have already shown their commitment to quality. This is primarily a licensing agreement with our substantial involvement. Although they will manage the park, we will have our employees working closely with them to ensure that the Disney theme park maintains the quality that everyone expects.

Hi, Jessica. This is Hugh. To follow up on the advertising question, the advertising market is currently very healthy for us. Live sports are performing exceptionally well, as reflected in ESPN's numbers, where advertising revenue for the quarter increased by over 20%. As we approach the Upfront season, we continue to see strong demand for our advertising. While there are concerns from a consumer standpoint regarding the implications for advertisers, we are seeing significant demand in sectors like restaurants and healthcare. The direct-to-consumer segment does face some challenges not due to demand but because of increased competition in the market. Nevertheless, there is still a strong demand for Disney advertising in that space as well. Overall, at the start of the year, we projected our advertising growth to be consistent with last year's rate of 3%. We now anticipate that it will exceed our initial expectations. In summary, advertisers are indeed interested in what we have to offer.

Thanks, Jessica. Operator, next question, please.

Absolutely. And our next question today comes from David Karnovsky with J.P. Morgan. Please go ahead.

Hi. Thank you. Bob, just on ESPN flagship, as you move towards the launch, interested to understand better the approach from a programming standpoint, how you view the necessary critical mass of both sports rights and shoulder programming in a more tech driven interface, how is that different from linear? And then just given the importance of some of the features you'll rollout like betting and fantasy, how do you think about wanting to keep subscribers in that ecosystem versus giving them the option of consuming their flagship subscription through Disney+? Thanks.

To address your last point, if you currently subscribe to linear ESPN, you will automatically receive what we've referred to as ESPN flagship, although that name will change. Next week, Jimmy Pitaro is expected to announce the new name and pricing strategy. Our goal is to maintain a neutral stance for subscribers, allowing us to support the multichannel ecosystem while also expanding our direct-to-consumer business. However, the ESPN linear service will not offer the same features and extras that the direct-to-consumer service will provide. We are giving consumers the choice to engage with both options. From a critical mass perspective, we have an exceptional array of licensed sports on ESPN as well as outstanding studio and shoulder programming, most of which will appear on the linear service and, of course, the flagship. Moving forward, we will continue to offer Disney+ and Hulu consumers a glimpse of live sports to encourage them to upgrade to our direct-to-consumer service, which is a top priority for us, and this service will feature many more capabilities than the linear option. When we launch, we aim to simplify the process by limiting the number of options and clearly outlining what is included with linear access versus what is available through our direct-to-consumer service. Importantly, subscribers of Disney+, Hulu, and ESPN direct-to-consumer will experience a seamless integration of the services, enhancing the consumer experience significantly.

Thanks, David. Operator, next question, please.

Thank you. And our next question today comes from Michael Morris of Guggenheim. Please go ahead.

Thank you. Good morning. I wanted to ask a couple more questions about the Experiences segment and specifically about the outlook there. So, you had a strong fiscal second quarter. You didn't change the full year growth guidance. So, can you provide an update on what you're seeing in the demand environment in the U.S. in particular, and whether that changed from the end of the last quarter? Also, the growth rate, the implied growth rate in the back half of the year is for double-digit operating income growth. As you look into fiscal '26, is there a reason that double-digit growth isn't something that can continue? I know you've spoken to high-single digits in the past in '26. So wondering if there's any upside there? And then just finally, on international, you noted some softness in demand in China and the question is, is that getting worse and how much of a headwind may that be going forward? Thank you.

Okay. Hey, Michael. Hugh here. I believe that was three questions, but I'll do my best to remember them all and provide answers. Regarding the outlook, it remains strong for the experiences business. Currently, bookings for Walt Disney World in the third quarter are up 4%, and that’s with about 80% in. For the fourth quarter, bookings have increased by 7%, which is probably around 50% to 60% at this stage. So we are feeling very optimistic, and this contributed to our updated guidance. As for your question about international, the situation is not worsening. To reiterate what Josh mentioned on CNBC, attendance is still quite good; however, per capita spending isn’t as high as we would like.

That's China.

In China, correct. Because the Chinese consumer, as we know, is a bit challenged. So from that perspective, I certainly feel good about the fact that we still have the engagement. Consumers are tightening their belts a little bit in that particular market, and that's what you're seeing flow through there. In terms of expectations for '26 and for first '25, the only thing I would say, is we guided to 6% to 8%. Given the numbers that we're seeing, we're probably going to be at the higher end of that for the experiences business for this year. And then for '26 and beyond, I'm not going to comment on that at this point. We'll do guidance on '26 when we get to '26, so I'm not going to provide any further color on that until we get to that point other than what I had mentioned earlier, which is the guidance in terms of growth rates remains intact.

Thanks, Mike. Operator, next question, please.

Absolutely. Our next question today comes from Michael Ng with Goldman Sachs. Please go ahead.

Hi. Good morning. Thank you very much for the question. Just two on Experiences. First, just with Disney Treasure hitting the second full quarter or excuse me, second quarter of operations, I was wondering, if you could talk about key learnings from the Cruise launch so far and anything there that helps to inform expectations or strategy around the upcoming launch of Disney Adventure and Disney Destiny? And just as a Parks follow-up. I was just wondering, if you could talk a little bit about the international visitation to domestic parks and if you're seeing any changes there? Thank you very much.

I'll take the cruise ship, you take the rest. On the cruise ship side, as we've expanded, we've embedded in our ships even more Disney intellectual property and at a higher quality level. And the ratings for the treasure are just sky high. People just love that ship and for good reason. And obviously, the ships that are coming will take full advantage of everything that the treasure has taken advantage of and then some. And so, we feel great about that business. It has been a great way for us to bring the Disney Experience to more consumers around the world. As noted earlier on the call, the experience we've had in putting the ship that will sail out of Singapore up on sale as a for instance. And so, we see that business becoming a growth driver for the segment over the next three to four years as more ships are deployed.

Michael, regarding the international attendance at our domestic parks, we have previously noted that it hasn't returned to pre-COVID levels, but it is still in the double digits. We have observed a slight impact, roughly between 1% to 1.5%, and I anticipate that we will continue to see similar numbers moving forward. The positive aspect is that we are significantly compensating for that with strong domestic attendance. Overall, attendance at the parks has been excellent.

Thanks, Michael. Operator, next question, please.

Thank you. And our next question today comes from Kannan Venkateshwar with Barclays. Please go ahead.

Thank you. Maybe to Bob, on the Park side, with the Abu Dhabi Parks announcement and you also have a long-term plan in place for the segment as a whole. Are there other opportunities in other locations around the world? I mean, now you have a presence in Singapore, you will now have a presence in Abu Dhabi. So is there more opportunity for you to expand that footprint further as you look out longer-term? So some thoughts on that would be great. And then Hugh, on the streaming side, when we think about operating leverage going forward, is that largely a function of revenue growth or is there also cost opportunity as you align these platforms? And as Bob mentioned, there might be fewer SKUs going forward. And so does that also provide some kind of a cost opportunity maybe see margins inflect? Thanks.

Kannan, thanks for your question. We just announced Abu Dhabi and now you're asking for more already, so thank you. With this as our seventh location, we feel that once it opens, it gives us the ability to be far more effective at reaching basically the world's population than we've been before. And while I'm not going to rule out the possibility of another location, there's nothing that's really being planned near-term to actually build another park in what would be an eighth location. However, I want to remind you that when we talked about a year ago about turbocharging that business with investment in capital because the return on invested capital has been so stellar. We are continuing on that trajectory. And to remind everyone and it's tied to the kind of deal that we made in Abu Dhabi, we're planning to invest approximately $30 billion to expand Florida and California, which obviously is a vote of confidence in those locations. But in addition, those will be highly accretive from a job perspective as well. And we're also investing to expand in every other location that we operate. So obviously, a bullish belief in the business itself with Abu Dhabi, as I said, and with the addition of the cruise ships, we're making ourselves very accessible to hundreds of millions of more people than we were in the past. And so, we're going to focus on this right now and the other investments that we're making. And as I said, I'm not ruling out the possibility of another location, but it's not exactly something that's a priority right now for us.

Yeah. And hey, Kannan, I'll handle the streaming question. While your point is exactly right, with a business that is going to have the growth that we have expectations for in the streaming business, there will clearly be leverage that just comes out of the revenue growth itself. But in addition to that, we absolutely have opportunities to reduce costs. So the answer is both, we can certainly do it on the G&A side and especially as we start to add more to the product, both in terms of the technology side of the product where we will be investing and in terms of the content that's delivered, whether it's bringing ESPN on and the additional content that we've been bringing in through bundling, we certainly expect to get operating leverage out of marketing over time. I wouldn't say that initially, especially as we launch ESPN. But over time, we would expect to get leverage out of the marketing line as well. So put those two together, yeah, I do expect some flow from top to bottom. We will use some of that to invest back in the business, perhaps in some international content, but I would also expect some of those cost reductions to go straight to the bottom line as well to give us accelerated margin growth.

Thanks, Kannan. Operator, we have time for one last question.

Thank you. And our final question today will come from Peter Zaffino with Wolfe Research. Please go ahead.

Hi. Good morning. Thank you. I have a question regarding Experiences. You mentioned $30 billion of expansion capital for Florida and California. Is this capital intended to increase attendance, allowing more people to visit the park? Additionally, how do you assess the incremental return on capital for expansions in your experiences segment? Thanks.

The guest experience is extremely important to us. We prioritize it highly, which is why we limit the number of visitors to ensure it doesn't suffer. As we plan for expansion, we aim not only to utilize our existing properties and intellectual resources but also to increase our capacity to accommodate more guests without compromising their experience. This commitment applies across all our operations. We're fortunate to have ample land and significant intellectual resources available to us. We have made specific announcements regarding upcoming developments, such as a villain’s land and a Cars land in Florida, and attractions like Pandora and Coco in California. Moreover, we have achieved record levels of return on invested capital within the business. When I returned to Disney in 2022, I discussed this with Josh Damaro, who oversees that segment, and was very impressed by the capital returns we achieved prior to COVID. As we consider how to allocate our capital, we strive to focus on areas where we can achieve outstanding returns, which influences our decision-making process. I believe that encapsulates everything effectively.

Thanks, Peter, and thanks everyone for your questions today. We want to thank you for joining us and wish everyone a good rest of the day.

Thank you. This concludes today's conference call. We appreciate your attendance today. You may now disconnect your lines. Thank you.