08 February 2024
If you are covering Disney or Arm’s latest results, please see the following comment from Ben Barringer, technology analyst at Quilter Cheviot:
Disney
"Disney's financial results indicate that overall revenues remained stable, with significant improvements seen in the profitability of Disney+ through effective cost management. The Parks division maintained a stable growth rate of 7%, while the entertainment segment experienced a downturn. In response to challenges faced by traditional media, Disney+ is adopting strategies from the Netflix playbook, including measures to curb password sharing and introducing advertising options.
"The company has also unified its sports broadcasting by integrating Fox Sports and Discovery Sports onto a single platform. One of the big pieces of news was the notable investment with Epic Games, which is part of an innovative strategy to integrate Disney-themed worlds within Fortnite. This initiative allows users to build their own games and engage in immersive experiences, aligning with broader trends in the metaverse. This could prove fruitful over the long term as virtual and augmented reality goes from strength to strength but it is likely to be a slow burn. This move does also distinguish Disney's approach from Netflix's gaming strategy, which primarily focuses on offering games through its app.
"Looking ahead to the rest of the year, Disney anticipates modest revenue growth while maintaining a focus on cost discipline to ensure returns for shareholders. This strategy will garner support from its activist shareholders, despite ongoing challenges in the Parks business and a continued decline in linear television. Disney+ is currently smaller in scale compared to Netflix, and some cost-cutting measures are viewed as short-term solutions. Nevertheless, there is a general sense of relief that Disney's financial situation is not deteriorating further. However, when compared to Netflix and Meta, Disney is perceived as underperforming.
Arm
"Arm has reported a significant outperformance, attributed largely to the increasing demand for AI in data centres. This has led to a heightened need for high-performance chips in cloud computing, as well as advancements in smartphones equipped with AI functionality. As a result of these developments, royalty rates have increased. The transition from version 8 to version 9 has further contributed to these higher royalty rates. The company experienced a 20% increase in its stock value during after-hours trading, indicating strong momentum in AI technology."
