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Item 2. Management’s Discussion and Analysis

2025-02-05 compared with 2024-08-07 · 306 added, 804 removed, 622 unchanged (64% of the section changed)

5 unchanged sentences

• Current Quarter Results Compared to Prior-Year Quarter

• Current Nine-Month Period Results Compared to Prior-Year Nine-Month Period

• Seasonality

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Quarter Ended % Change

(Worse) Nine Months Ended % Change

(in millions, except per share data) June 29,

2023 June 29,

(in millions, except per share data) December 28,

2024 December 30,

Services $ 22,048 $ 20,975 5 %

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Total costs and expenses (20,612) (20,613) — %

Restructuring and impairment charges — ( 2,650 ) 100 % ( 2,052 ) ( 2,871 ) 29 %

Other income (expense), net ( 65 ) ( 11 ) >(100) % ( 65 ) 96 nm

Restructuring and impairment charges ( 143 ) — nm

Interest expense, net ( 367 ) ( 246 ) (49) %

Equity in the income of investees 92 181 (49) %

Income (loss) before income taxes 3,093 (134) nm 6,621 3,762 76 %

Income before income taxes 3,660 2,871 27 %

Income taxes ( 1,016 ) ( 720 ) (41) %

Net income (loss) 2,842 (153) nm 5,209 2,696 93 %

Net income 2,644 2,151 23 %

Net income attributable to noncontrolling interests ( 90 ) ( 240 ) 63 %

Net income (loss) attributable to Disney

$ 2,621 $ (460) nm $ 4,512 $ 2,090 >100 %

Diluted earnings (loss) per share attributable to Disney

$ 1.43 $ (0.25) nm $ 2.46 $ 1.14 >100 %

Net income attributable to Disney

$ 2,554 $ 1,911 34 %

Diluted earnings per share attributable to Disney

$ 1.40 $ 1.04 35 %

CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER

Revenues for the quarter increased 5%, or $1.1 billion, to $24.7 billion;

net income attributable to Disney increased to income of $2.6 billion in the current quarter compared to a loss of $0.5 billion in the prior-year quarter;

and diluted earnings per share (EPS) attributable to Disney increased to income of $1.43 compared to a loss of $0.25 in the prior-year quarter.

net income attributable to Disney increased to $2.6 billion compared to $1.9 billion;

and diluted earnings per share (EPS) attributable to Disney increased to $1.40 compared to $1.04 in the prior-year quarter.

The EPS increase was due to higher operating income at Entertainment.

On November 14, 2024, the Company and RIL completed the Star India Transaction (see Note 4 to the Condensed Consolidated Financial Statements).

After November 14, 2024, the Company began recognizing its 37% share of the India joint venture’s results in “Equity in the income of investees.” Star India results in the current quarter through November 14, 2024 and results in the prior-year quarter are consolidated in the Company’s financial results for those periods and reported in the Entertainment and Sports segments.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

increase was due to the comparison to the Content Impairment in the prior-year quarter and higher operating income at Entertainment in the current quarter.

Service revenues for the quarter increased 4%, or $0.8 billion, to $20.8 billion resulting from higher DTC subscription revenue and, to a lesser extent, higher advertising revenue.

Service revenues for the quarter increased 5%, or $1.1 billion, to $22.0 billion, due to higher subscription and theatrical distribution revenue and, to a lesser extent, growth in theme park admissions and resorts and vacations revenues.

Service revenues reflected an approximate 3 percentage point decrease due to Star India and an approximate 1 percentage point decrease due to an unfavorable movement of the U.S.

dollar against major currencies including the impact of our hedging program (Foreign Exchange Impact).

Costs and expenses

Cost of services for the quarter increased 2%, or $0.3 billion, to $13.2 billion due to higher sports programming and production costs as well as increased volumes and the impact of inflation at our parks and experiences businesses, partially offset by lower non-sports programming and production costs.

Depreciation and amortization decreased 9%, or $0.1 billion, to $1.2 billion due to lower depreciation at our domestic theme parks and resorts and lower TFCF and Hulu Acquisition Amortization.

Cost of services for the quarter decreased 1% to $13.8 billion due to lower sports programming and production costs, partially offset by the impact of inflation and increased volumes at our parks and experiences businesses as well as higher non-sports programming and production costs.

Cost of services reflected an approximate 6 percentage point decrease due to Star India and an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.

Selling, general, administrative and other costs increased 4% to $3.9 billion driven by a legal settlement and higher marketing costs.

Selling, general and administrative and other costs reflected an approximate 1 percentage point decrease due to Star India and an approximate 3 percentage point decrease due to a favorable Foreign Exchange Impact.

Depreciation and amortization increased 3% to $1.3 billion due to higher depreciation at Experiences, partially offset by lower TFCF and Hulu Acquisition Amortization.

Restructuring and impairment charges

In the prior-year quarter, the Company recorded charges of $2,650 million due to the Content Impairment and severance.

Other income (expense), net

Other expense in the current quarter reflected a charge of $65 million related to a legal ruling.

Other expense, net in the prior-year quarter included a charge of $101 million related to a legal ruling, largely offset by the DraftKings Gain of $90 million.

In the current quarter, the Company recorded a $143 million loss in connection with the Star India Transaction.

Interest expense, net

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Quarter Ended

(in millions) June 29,

(in millions) December 28,

2024 December 30,

2023 % Change

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Interest expense, net $ (367) $ (246) (49) %

The increase in interest expense was due to higher average rates, partially offset by lower average debt balances.

The decrease in interest income, investment income and other reflected the impact of lower cash and cash equivalent balances, partially offset by a favorable comparison of pension and postretirement benefit costs, other than service cost.

The decrease in interest expense was primarily due to lower average rates and debt balances, partially offset by a decrease in capitalized interest.

The decrease in interest income, investment income and other reflected the impact of lower cash and cash equivalent balances, an unfavorable comparison related to pension and postretirement benefit costs, other than service cost, and investment losses in the current quarter compared to investment gains in the prior-year quarter.

Equity in the Income of Investees

Income from equity investees decreased $45 million, to $146 million from $191 million, due to lower income from A+E Television Networks.

Income from equity investees decreased $89 million, to $92 million from $181 million, due to lower income from A+E Television Networks (A+E) and losses from the India joint venture in the current quarter.

Quarter Ended

Income (loss) before income taxes

2024 December 30,

Income before income taxes

$ 3,660 $ 2,871

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27.8 % 25.1 %

The prior-year quarter loss before income taxes included the $2,440 million Content Impairment.

In the prior-year quarter, income taxes included a benefit of approximately $568 million related to this charge.

Due to the significance of this charge on pre-tax results, the effective tax rate for the prior-year quarter was negative 14.2%.

In the current quarter, the Company recognized a $418 million tax benefit related to prior years’ tax matters (Income Tax Reserve Adjustments).

The increase in the effective income tax rate in the current quarter compared to the prior-year quarter was due to a non-cash tax charge in connection with the Star India Transaction.

This increase was partially offset by the comparison to an unfavorable effect of employee share-based awards in the prior-year quarter, the impact of adjustments related to prior years and a lower foreign effective tax rate.

Adjustments related to prior years were favorable in the current quarter and unfavorable in the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended

(in millions) June 29,

(in millions) December 28,

2024 December 30,

2023 % Change

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$ (90) $ (240) 63 %

The decrease in net income attributable to noncontrolling interests was primarily due to the comparison to the accretion of NBC Universal’s interest in Hulu in the prior-year quarter as we had accreted to the full guaranteed redemption value by December 2023.

The decrease in net income attributable to noncontrolling interests was due to the comparison to accretion of NBC Universal’s interest in Hulu in the prior-year quarter.

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

Certain Items Impacting Results in the Quarter

Results for the quarter ended June 29, 2024 were impacted by the following:

• Income Tax Reserve Adjustments of $418 million

Results for the quarter ended December 28, 2024 were impacted by the following:

• An impairment charge of $143 million and a non-cash tax charge of $213 million, which were both recorded in connection with the Star India Transaction (see Note 4 to the Condensed Consolidated Financial Statements)

• TFCF and Hulu Acquisition Amortization of $397 million

• Other expense of $65 million related to a legal ruling

Results for the quarter ended July 1, 2023 were impacted by the following:

• Restructuring and impairment charges of $2,650 million

Results for the quarter ended December 30, 2023 were impacted by the following:

• TFCF and Hulu Acquisition Amortization of $451 million

• Other expense, net of $11 million reflecting a charge of $101 million related to a legal ruling, partially offset by a DraftKings Gain of $90 million

A summary of the impact of these items on EPS is as follows:

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After-Tax Income (Loss) EPS Favorable (Adverse) (2)

Quarter Ended June 29, 2024:

Income Tax Reserve Adjustments

$ — $ 418 $ 418 $ 0.23

TFCF and Hulu Acquisition Amortization

(397) 93 (304) (0.16)

Other expense

(65) 11 (54) (0.03)

Total $ (462) $ 522 $ 60 $ 0.04

Quarter Ended July 1, 2023:

Restructuring and impairment charges $ (2,650) $ 617 $ (2,033) $ (1.10)

TFCF and Hulu Acquisition Amortization

(432) 101 (331) (0.18)

Other expense, net

Total $ (3,093) $ 723 $ (2,370) $ (1.28)

(1) Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.

(2) EPS is net of noncontrolling interest share, where applicable.

Total may not equal the sum of the column due to rounding.

CURRENT NINE-MONTH PERIOD RESULTS COMPARED TO PRIOR-YEAR NINE-MONTH PERIOD

Revenues for the current period increased $1.1 billion, to $68.8 billion;

net income attributable to Disney increased $2.4 billion, to $4.5 billion;

and EPS increased to $2.46 from $1.14 in the prior-year period.

The EPS increase was due to higher operating income at Entertainment, a lower effective income tax rate, which included the benefit from the Income Tax Reserve Adjustments, and, to a lesser extent, growth at Experiences.

Service revenues for the current period increased 2%, or $1.0 billion to $61.6 billion, resulting from higher DTC subscription revenue and increased revenues at our parks and experiences businesses.

These increases were partially offset by lower theatrical distribution revenue and, to a lesser extent, lower TV/VOD distribution revenue.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Costs and expenses

Cost of services for the current period decreased 3%, or $1.1 billion, to $39.8 billion, primarily due to lower non-sports programming and production costs, and, to a lesser extent, lower technical support costs, partially offset by higher sports programming and production costs and the impact of inflation and increased volumes at our parks and experiences businesses.

Depreciation and amortization decreased 6%, or $0.3 billion, to $3.7 billion due to lower TFCF and Hulu Acquisition Amortization and lower depreciation at our domestic theme parks and resorts.

Restructuring and impairment charges

In the current period, the Company recorded $2,052 million of charges for goodwill impairments related to the Star India Transaction and entertainment linear networks.

In the prior-year period, the Company recorded $2,871 million of charges including the Content Impairment, severance and costs related to exiting our businesses in Russia.

Other income (expense), net

Other expense in the current period reflected a charge of $65 million related to a legal ruling.

Other income, net in the prior-year period included a DraftKings Gain of $169 million and a $28 million gain on the sale of a business, partially offset by a charge of $101 million related to a legal ruling.

Interest expense, net

Interest expense, net is as follows:

Nine Months Ended

(in millions) June 29,

2023 % Change

Better (Worse)

Interest expense $ (1,538) $ (1,472) (4) %

Interest income, investment income and other 639 545 17 %

Interest expense, net $ (899) $ (927) 3 %

The increase in interest expense was due to higher average rates, partially offset by lower average debt balances.

The increase in interest income, investment income and other was driven by a favorable comparison of pension and postretirement benefit costs, other than service cost, and larger investment gains in the current period compared to the prior-year period.

Equity in the Income of Investees

Income from equity investees decreased $87 million, to $468 million from $555 million, due to lower income from A+E Television Networks.

Nine Months Ended

Income before income taxes

$ 6,621 $ 3,762

Income tax expense

Effective income tax rate

The effective income tax rate in the current period was comparable to the U.S.

statutory rate as an unfavorable impact from the current period goodwill impairments, which are not tax deductible, was largely offset by a benefit from the Income Tax Reserve Adjustments.

The effective income tax rate in the prior-year period was higher than the U.S.

statutory rate primarily due to a higher effective tax rate on foreign earnings.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Noncontrolling Interests

Nine Months Ended

(in millions) June 29,

2023 % Change

Better (Worse)

Net income attributable to noncontrolling interests

Quarter Ended December 28, 2024:

Star India Transaction

$ (143) $ (213) $ (356) $ (0.20)

The increase in net income attributable to noncontrolling interests was due to improved results at our Asia Theme Parks and ESPN, partially offset by the comparison to the accretion for Major League Baseball’s interest in BAMTech LLC and NBCU’s interest in Hulu.

We had accreted to the redemption value for BAMTech LLC by November 2022 and to the guaranteed redemption value for Hulu by December 2023.

Certain Items Impacting Results in the Nine Month Period

Results for the nine months ended June 29, 2024 were impacted by the following:

• Restructuring and impairment charges of $2,052 million

• Income Tax Reserve Adjustments of $418 million

• TFCF and Hulu Acquisition Amortization of $1,282 million

• Other expense of $65 million related to a legal ruling

Results for the nine months ended July 1, 2023 were impacted by the following:

• Restructuring and impairment charges of $2,871 million

• TFCF and Hulu Acquisition Amortization of $1,569 million

• Other income, net of $96 million reflecting a DraftKings Gain of $169 million and a gain on the sale of a business of $28 million, partially offset by a charge of $101 million related to a legal ruling

A summary of the impact of these items on EPS is as follows:

(in millions, except per share data) Pre-Tax Income (Loss) Tax Benefit

(Expense) (1)

After-Tax Income (Loss) EPS Favorable

(Adverse) (2)

Nine Months Ended June 29, 2024:

Restructuring and impairment charges $ (2,052) $ 121 $ (1,931) $ (1.05)

TFCF and Hulu Acquisition Amortization

(397) 93 (304) (0.16)

Other expense

(65) 11 (54) (0.03)

Income Tax Reserve Adjustments

— 418 418 0.23

Total $ (540) $ (120) $ (660) $ (0.36)

Nine Months Ended July 1, 2023:

Restructuring and impairment charges $ (2,871) $ 660 $ (2,211) $ (1.20)

Quarter Ended December 30, 2023:

TFCF and Hulu Acquisition Amortization

$ (451) $ 106 $ (345) $ (0.18)

Other income, net

96 (13) 83 0.05

Total $ (4,344) $ 1,012 $ (3,332) $ (1.80)

(1) Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.

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The Company’s businesses are subject to the effects of seasonality.

Consequently, the operating results for the nine months ended June 29, 2024 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

Consequently, the operating results for the quarter ended December 28, 2024 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

Entertainment revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, timing and performance of film releases in the theatrical and home entertainment markets, and the timing of and demand for film and television programs.

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Theatrical release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Sports revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, and the availability of and demand for sports programming.

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Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods.

In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character anniversaries and lower in the periods following such celebrations.

In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

anniversaries and lower in the periods following such celebrations.

Consumer products revenue fluctuates with consumer purchasing behavior, which generally results in higher revenues during the Company’s first fiscal quarter due to the winter holiday season.

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Quarter Ended % Change

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

(in millions) December 28,

2024 December 30,

Entertainment $ 10,872 $ 9,981 9 %

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(1) Reflects fees paid by Direct-to-Consumer to Sports and other Entertainment businesses for the right to air their linear networks on Hulu Live and fees paid by Entertainment to Sports to program sports on the ABC Network and Disney+.

The following table presents income from our operating segments and other components of income (loss) before income taxes:

The following table presents income from our operating segments and other components of income before income taxes:

Quarter Ended % Change

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

(in millions) December 28,

2024 December 30,

Entertainment operating income $ 1,703 $ 874 95 %

Sports operating income

802 854 (6) % 1,477 1,484 — %

Sports operating income (loss)

Experiences operating income 3,110 3,105 — %

Corporate and unallocated shared expenses (460) (308) (49) %

Restructuring and impairment charges — (2,650) 100 % (2,052) (2,871) 29 %

Other income (expense), net

(65) (11) >(100) % (65) 96 nm

Equity in the loss of India joint venture

Restructuring and impairment charges (143) — nm

Interest expense, net (367) (246) (49) %

1 unchanged sentence

(397) (451) 12 %

Income (loss) before income taxes

$ 3,093 $ (134) nm $ 6,621 $ 3,762 76 %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Income before income taxes

$ 3,660 $ 2,871 27 %

Depreciation expense is as follows:

Quarter Ended % Change

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

(in millions) December 28,

2024 December 30,

Entertainment $ 165 $ 163 (1) %

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Total depreciation expense $ 909 $ 823 (10) %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Amortization of intangible assets is as follows:

Quarter Ended % Change

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

(in millions) December 28,

2024 December 30,

Entertainment $ 13 $ 13 — %

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Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Linear Networks $ 2,617 $ 2,803 (7) %

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Linear Networks $ 1,098 $ 1,236 (11) %

Direct-to-Consumer (19) (505) 96 %

Direct-to-Consumer 293 (138) nm

Content Sales/Licensing and Other 312 (224) nm

$ 1,703 $ 874 95 %

The increase in Entertainment revenues was due to subscription revenue growth.

The increase in Entertainment revenues was due to subscription revenue growth and higher theatrical distribution revenues.

Operating income

The increase in Entertainment operating income in the current quarter compared to the prior-year quarter was due to improved results at Direct-to-Consumer and Content Sales/Licensing and Other.

The increase in Entertainment operating income in the current quarter compared to the prior-year quarter was due to improved results at Content Sales/Licensing and Other and Direct-to-Consumer, partially offset by a decrease at Linear Networks.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Affiliate fees $ 1,655 $ 1,766 (6) %

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Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Domestic $ 1,454 $ 1,480 (2) %

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$ 1,655 $ 1,766 (6) %

The decrease in domestic affiliate revenue was due to a decline of 13% from fewer subscribers, including the impact of the non-renewal of carriage of certain networks by an affiliate, partially offset by an increase of 7% from higher effective rates.

Lower international affiliate revenue was attributable to decreases of 8% from fewer subscribers and 4% from an unfavorable foreign exchange impact.

The decrease in domestic affiliate revenue was due to a decline of 8% from fewer subscribers, partially offset by an increase of 7% from higher effective rates.

Lower international affiliate revenue was due to declines of 14% from Star India, 8% from lower effective rates, 5% from fewer subscribers and 2% from an unfavorable Foreign Exchange Impact.

Revenues - Advertising

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Domestic $ 723 $ 706 2 %

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$ 915 $ 994 (8) %

The decline in domestic advertising revenue was due to a decrease of 15% from lower impressions attributable to a decline in average viewership, partially offset by an increase of 1% from higher rates.

Lower international advertising revenue was primarily due to a decrease of 7% from an unfavorable foreign exchange impact, partially offset by an increase of 5% from higher rates.

The increase in domestic advertising revenue included an increase of 12% from higher rates, due to more political advertising at the owned television stations, partially offset by an 11% decrease from fewer impressions attributable to lower average viewership at our networks.

Lower international advertising revenue was due to decreases of 29% from Star India and 3% from an unfavorable Foreign Exchange Impact.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Programming and production costs

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$ (1,108) $ (1,171) 5 %

The decrease in domestic programming and production costs was attributable to a lower average cost mix of programming and a decrease in program write-downs.

The increase in domestic programming and production costs was primarily due to a higher average cost mix of programming at the ABC Network reflecting the impact of the 2023 guild strikes on the prior-year quarter.

International programming and production costs decreased primarily due to Star India.

The decrease in other operating expenses was primarily attributable to lower technology costs.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $73 million, to $604 million from $677 million due to lower marketing costs and a favorable foreign exchange impact.

Selling, general, administrative and other costs decreased $37 million, to $520 million from $557 million, driven by Star India.

Equity in the Income of Investees

Income from equity investees decreased $49 million, to $127 million from $176 million, due to lower income from A+E Television Networks attributable to a decrease in advertising revenue, higher marketing costs and lower affiliate revenue.

Income from equity investees decreased $50 million, to $123 million from $173 million, due to lower income from A+E attributable to decreases in advertising and affiliate revenue and the comparison to a gain on the sale of an investment in the prior-year quarter.

Operating Income from Linear Networks

Operating income from Linear Networks decreased $59 million, to $966 million from $1,025 million, due to lower income from equity investees.

Operating income from Linear Networks decreased $138 million, to $1,098 million from $1,236 million, due to a decrease at our international business as a result of Star India, and lower income from equity investees.

Supplemental revenue and operating income

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Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Supplemental revenue detail

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Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Subscription fees $ 5,065 $ 4,507 12 %

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Depreciation and amortization (75) (70) (7) %

Operating Loss

$ (19) $ (505) 96 %

Operating Income (Loss)

$ 293 $ (138) nm

Revenues - Subscription fees

Growth in subscription fees reflected increases of 10% from higher rates attributable to increases in retail pricing at Disney+ Core and Hulu, and 7% from more subscribers due to growth at Disney+ Core and, to a lesser extent, Hulu, partially offset by a decrease of 3% from an unfavorable foreign exchange impact.

Growth in subscription fees reflected increases of 9% from higher rates attributable to increases in pricing and 6% from more subscribers, partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.

Revenues - Advertising

Higher advertising revenue reflected an increase of 29% from higher impressions at Disney+ and Hulu, partially offset by a decrease of 10% from lower rates.

Higher impressions at Disney+ reflected an increase at Disney+ Core and the benefit of airing the International Cricket Council (ICC) T20 World Cup on Disney+ Hotstar in the current quarter.

The previous ICC T20 World Cup occurred in the first quarter of fiscal 2023.

Lower advertising revenue was attributable to decreases of 16% from Star India, which included International Cricket Council (ICC) Cricket World Cup programming on Disney+ Hotstar in the prior-year quarter, and 11% from lower rates at Hulu and Disney+ Core.

There were no significant cricket events in the current quarter prior to the Star India Transaction.

These decreases were partially offset by an increase of 24% from higher impressions at Disney+ Core and Hulu.

In addition to revenue, costs and operating income, management uses the following key metrics (1) to analyze trends and evaluate the overall performance of Disney+ and Hulu, and we believe these metrics are useful to investors in analyzing the business:

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% Change Better (Worse)

(in millions) June 29,

2024 March 30,

2023 June 29, 2024 vs.

June 29, 2024 vs.

(in millions) December 28,

2024 September 28,

2024 December 30,

Domestic (U.S.

and Canada) 56.8 56.0 46.1 1 % 23 %

International (excluding Disney+ Hotstar)

International (2)

67.8 69.3 68.8 (2) % (1) %

Disney+ Core (2)

Disney+ (2)(3)

124.6 125.3 114.8 (1) % 9 %

Disney+ Hotstar 35.5 36.0 40.4 (1) % (12) %

SVOD Only 49.0 47.4 45.1 3 % 9 %

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Quarter Ended % Change Better (Worse)

2024 March 30,

2023 June 29, 2024 vs.

30, 2024 June 29, 2024 vs.

2024 September 28,

2024 December 30,

28, 2024 Dec.

Domestic (U.S.

and Canada) $ 7.99 $ 7.70 $ 8.15 4 % (2) %

International (excluding Disney+ Hotstar)

International (2)

7.19 6.78 5.68 6 % 27 %

Disney+ Core 7.22 7.28 6.58 (1) % 10 %

Disney+ Hotstar 1.05 0.70 0.59 50 % 78 %

7.55 7.20 6.67 5 % 13 %

SVOD Only 12.52 12.54 12.29 — % 2 %

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(1) See discussion on pages 50 — DTC Product Descriptions, Key Definitions and Supplemental Information.

(2) The sequential prior quarter and prior-year quarter Paid Subscribers and Average Monthly Revenue per Paid Subscriber have been adjusted to include Disney+ subscribers in Southeast Asia.

These subscribers were previously reported with Disney+ Hotstar, which is no longer presented as this business was included in the Star India Transaction.

(3) Total may not equal the sum of the column due to rounding.

Average Monthly Revenue Per Paid Subscriber - Third Quarter of Fiscal 2024 Comparison to Second Quarter of Fiscal 2024

Domestic Disney+ average monthly revenue per paid subscriber decreased from $8.00 to $7.74 due to the impact of subscriber mix shifts.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $6.66 to $6.78 due to increases in retail pricing, partially offset by an unfavorable foreign exchange impact.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.70 to $1.05 due to higher advertising revenue.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $11.84 to $12.73 due to higher advertising revenue.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $95.01 to $96.11 due to higher advertising revenue.

Average Monthly Revenue Per Paid Subscriber - Third Quarter of Fiscal 2024 Comparison to Third Quarter of Fiscal 2023

Domestic Disney+ average monthly revenue per paid subscriber increased from $7.31 to $7.74 due to increases in retail pricing and, to a lesser extent, higher advertising revenue, partially offset by a higher mix of subscribers to multi-product, wholesale and ad-supported offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $6.01 to $6.78 due to increases in retail pricing.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.59 to $1.05 due to increases in retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers from lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $12.39 to $12.73 due to increases in retail pricing, partially offset by a higher mix of subscribers to multi-product offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $91.80 to $96.11 due to increases in retail pricing, partially offset by a decrease in advertising revenue.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2025 Comparison to Fourth Quarter of Fiscal 2024

Domestic Disney+ average monthly revenue per paid subscriber increased from $7.70 to $7.99 due to increases in pricing, partially offset by a higher mix of subscribers to promotional offerings.

International Disney+ average monthly revenue per paid subscriber increased from $6.78 to $7.19 due to increases in pricing and higher advertising revenue, partially offset by a higher mix of subscribers to promotional offerings.

Hulu SVOD Only average monthly revenue per paid subscriber was comparable to the prior sequential quarter as lower advertising revenue was offset by increases in pricing and a higher mix of subscribers to higher priced multi-product offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $95.82 to $99.22 primarily due to increases in pricing.

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2025 Comparison to First Quarter of Fiscal 2024

Domestic Disney+ average monthly revenue per paid subscriber decreased from $8.15 to $7.99 driven by a higher mix of subscribers to wholesale offerings, largely offset by increases in pricing.

International Disney+ average monthly revenue per paid subscriber increased from $5.68 to $7.19 due to increases in pricing, partially offset by a higher mix of subscribers to ad-supported offerings.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $12.29 to $12.52 due to increases in pricing, partially offset by lower per-subscriber advertising revenue and a higher mix of subscribers to multi-product offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $93.61 to $99.22 due to increases in pricing.

Operating expenses

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Programming and production costs

$ (2,263) $ (2,126) (6) %

Disney+ and other

(1,345) (1,459) 8 %

2 unchanged sentences

$ (4,609) $ (4,493) (3) %

Higher programming and production costs at Hulu in the current quarter compared to the prior-year quarter were due to higher subscriber-based fees for programming the Hulu Live TV service primarily attributable to rate increases.

The increase in programming and production costs at Disney+ and other in the current quarter compared to the prior-year quarter was driven by the timing of the ICC T20 World Cup, partially offset by lower costs for non-sports content available on Disney+ Core.

The decrease in other operating expense was primarily due to lower distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $206 million, to $1,197 million from $991 million, driven by higher marketing costs.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer decreased $486 million, to $19 million from $505 million, due to improved results at Disney+.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Higher programming and production costs at Hulu were driven by higher subscriber-based fees for programming the Hulu Live TV service due to rate increases.

The decrease in programming and production costs at Disney+ was due to Star India reflecting ICC Cricket World Cup programming in the prior-year quarter.

The increase in other operating expense was due to higher technology and distribution costs.

Operating Income (Loss) from Direct-to-Consumer

Operating results from Direct-to-Consumer improved $431 million, to income of $293 million from a loss of $138 million, due to improved results at Disney+ and, to a lesser extent, Hulu.

Content Sales/Licensing and Other

1 unchanged sentence

Quarter Ended % Change

(in millions) June 29,

TV/VOD distribution $ 664 $ 560 19 %

(in millions) December 28,

2024 December 30,

TV/VOD and home entertainment distribution

$ 932 $ 731 27 %

Theatrical distribution 642 251 >100 %

Home entertainment distribution 142 252 (44) %

Other 582 560 4 %

609 650 (6) %

Total revenues 2,183 1,632 34 %

6 unchanged sentences

$ 312 $ (224) nm

Revenues - TV/VOD distribution

The increase in TV/VOD distribution revenue was due to higher sales of episodic content.

Revenues - TV/VOD and home entertainment distribution

The increase in TV/VOD and home entertainment distribution revenue was due to higher TV/VOD sales of episodic content and an increase in home entertainment distribution revenue.

The increase in home entertainment distribution revenue was due to higher electronic distribution revenue, partially offset by a decrease at our physical distribution business due to the business shifting to a third party licensing model.

Revenues - Theatrical distribution

The decrease in theatrical distribution revenue reflected fewer significant releases in the current quarter compared to the prior-year quarter.

The current quarter included Inside Out 2 and Kingdom of The Planet of the Apes .

The prior-year quarter included Guardians of the Galaxy Vol.

3 , The Little Mermaid , Elemental and Indiana Jones And The Dial Of Destiny , which was released in most territories in the last few days of June 2023.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenues - Home entertainment distribution

The decrease in home entertainment distribution revenue was due to lower unit sales and a decrease in average net effective pricing resulting from a lower mix of new releases, which have a higher relative sales price compared to catalog titles.

The increase in theatrical distribution revenue was due to the performance of Moana 2 and Mufasa:

The Lion King in the current quarter compared to The Marvels and Wish in the prior-year quarter.

Operating expenses

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Programming and production costs $ (942) $ (990) 5 %

Distribution costs and cost of goods sold (187) (217) 14 %

Other operating expenses (156) (185) 16 %

$ (1,098) $ (1,175) 7 %

The decrease in programming and production costs was due to lower production cost amortization attributable to the decreases in theatrical and home entertainment distribution revenues.

The decrease in distribution costs and cost of goods sold was primarily due to lower home entertainment unit sales.

The decrease in programming and production costs was due to lower film cost impairments, partially offset by higher production cost amortization attributable to the increase in TV/VOD distribution revenue.

The decrease in other operating expenses reflected lower cost of goods sold and distribution costs due to the shift of our physical home entertainment distribution business to a licensing model.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $190 million, to $562 million from $752 million, primarily attributable to lower theatrical marketing costs reflecting fewer significant releases in the current quarter.

Selling, general, administrative and other costs increased $94 million, to $679 million from $585 million, primarily due to higher theatrical marketing costs.

Operating Income (Loss) from Content Sales/Licensing and Other

Operating results from Content Sales/Licensing and Other increased $366 million, to income of $254 million from a loss of $112 million due to higher theatrical and TV/VOD distribution results.

Operating results from Content Sales/Licensing and Other increased $536 million, to income of $312 million from a loss of $224 million due to higher theatrical distribution results.

Items Excluded from Segment Operating Income Related to Entertainment

1 unchanged sentence

Quarter Ended % Change

(in millions) June 29,

Restructuring and impairment charges (1)

$ — $ (2,569) 100 %

(in millions) December 28,

2024 December 30,

TFCF and Hulu Acquisition Amortization (1)

$ (321) $ (353) 9 %

(1) Charges for the prior-year quarter were due to the Content Impairment and, to a lesser extent, severance.

(1) In the current quarter, amortization of intangible assets was $251 million and amortization of step-up on film and television costs was $67 million.

In the prior-year quarter, amortization of intangible assets was $282 million and amortization of step-up on film and television costs was $68 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating results for Sports are as follows:

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Affiliate fees $ 2,630 $ 2,669 (1) %

7 unchanged sentences

Equity in the income of investees 10 13 (23) %

Operating Income

$ 802 $ 854 (6) %

Operating Income (Loss)

$ 247 $ (103) nm

Revenues - Affiliate fees

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Domestic $ 2,345 $ 2,339 — %

2 unchanged sentences

$ 2,630 $ 2,669 (1) %

Lower domestic ESPN affiliate revenue was due to a decrease of 8% from fewer subscribers, partially offset by an increase of 6% from higher effective rates.

The increase in international ESPN affiliate revenue was attributable to higher effective rates.

The decrease in Star India affiliate revenue was due to lower effective rates.

Domestic ESPN affiliate revenue was comparable to the prior-year quarter, as an increase of 7% from higher effective rates was offset by a decrease of 7% from fewer subscribers.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The decrease in international ESPN affiliate revenue was attributable to an unfavorable Foreign Exchange Impact and, to a lesser extent, fewer subscribers, largely offset by higher effective rates.

The decrease in Star India affiliate revenue was due to the Star India Transaction.

Revenues - Advertising

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Domestic $ 1,291 $ 1,118 15 %

2 unchanged sentences

$ 1,342 $ 1,351 (1) %

The increase in domestic ESPN advertising revenue was due to increases of 9% from higher rates and 5% from sponsorship revenue growth.

Higher Star India advertising revenue was attributable to the timing of the ICC T20 World Cup.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The increase in domestic ESPN advertising revenue was primarily due to an increase of 12% from higher rates.

The decrease in Star India advertising revenue was due to the comparison to ICC Cricket World Cup programming in the prior-year quarter.

There were no significant cricket events in the current quarter prior to the Star India Transaction.

Revenues - Subscription fees

1 unchanged sentence

Revenues - Other

Other revenue increased $65 million, to $234 million from $169 million, primarily due to higher Ultimate Fighting Championship (UFC) pay-per-view fees reflecting one more UFC event in the current quarter compared to the prior-year quarter.

Other revenue increased $51 million, to $451 million from $400 million, reflecting higher fees received from the Entertainment segment to program sports content on Disney+, partially offset by lower sub-licensing fees.

The decrease in sub-licensing fees was attributable to the comparison to Star India sub-licensing of the ICC Cricket World Cup in the prior-year quarter, partially offset by fees from sub-licensing the College Football Playoff (CFP) programming rights for two games in the current quarter.

In addition to revenue, costs and operating income, management uses the following key metrics (1) to analyze trends and evaluate the overall performance of ESPN+, and we believe these metrics are useful to investors in analyzing the business:

Quarter Ended % Change Better (Worse)

2024 March 30,

2023 June 29, 2024 vs.

30, 2024 June 29, 2024 vs.

% Change Better (Worse)

December 28, 2024 September 28, 2024 December 30, 2023 Dec.

28, 2024 Dec.

Paid subscribers (1) at (in millions)

24.9 25.6 25.2 (3) % (1) %

Average Monthly Revenue per Paid Subscriber for the quarter end

Average Monthly Revenue per Paid Subscriber (1) for the quarter ended

$ 6.36 $ 5.94 $ 6.09 7 % 4 %

(1) See discussion on pages 72-73 —DTC Product Descriptions, Key Definitions and Supplemental Information.

Average Monthly Revenue Per Paid Subscriber - Third Quarter of Fiscal 2024 Comparison to Third Quarter of Fiscal 2023

ESPN+ average monthly revenue per paid subscriber increased from $5.45 to $6.23 due to increases in retail pricing and higher advertising revenue.

(1) See discussion on page 50 —DTC Product Descriptions, Key Definitions and Supplemental Information

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2025 Comparison to Fourth Quarter of Fiscal 2024

ESPN+ average monthly revenue per paid subscriber increased from $5.94 to $6.36 due to increases in pricing and higher advertising revenue.

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2025 Comparison to First Quarter of Fiscal 2024

ESPN+ average monthly revenue per paid subscriber increased from $6.09 to $6.36 due to increases in pricing, partially offset by a higher mix of subscribers to wholesale offerings.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating expenses

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Programming and production costs

2 unchanged sentences

(4,026) (3,695) (9) %

(555) (456) (22) %

Star India (17) (684) 98 %

(4,043) (4,379) 8 %

1 unchanged sentence

$ (4,293) $ (4,599) 7 %

Domestic ESPN programming and production costs increased in the current quarter compared to the prior-year quarter primarily due to higher NBA rights costs reflecting contractual rate increases, an increase in UFC pay-per-view fees and current quarter costs to air the Stanley Cup Finals, for which we have the rights every two years.

The increase in UFC pay-per-view fees was attributable to airing one more event in the current quarter.

Higher programming and production costs at international ESPN were due to new soccer rights.

The increase in Star India programming and production costs was attributable to the timing of the ICC T20 World Cup.

The increase in other operating expense was primarily attributable to higher technology and distribution costs.

Operating Income from Sports

Operating income decreased $52 million, to $802 million from $854 million, due to a decrease at Star India, partially offset by improved results at international ESPN.

Domestic ESPN programming and production costs increased in the current quarter compared to the prior-year quarter primarily due to expanded college football programming rights including one additional CFP game.

The CFP format was revised starting with the 2024-2025 season, which added four first round games in the current quarter, two of which aired on our networks and two of which were sub-licensed.

In the prior-year quarter, we aired three host games, which under the new format are now quarterfinal and semifinal games that aired in the second quarter of the current fiscal year.

Higher programming and production costs at international ESPN were attributable to higher soccer rights costs reflecting contractual rate increases, partially offset by a favorable Foreign Exchange Impact.

Star India programming and production costs decreased due to the comparison to ICC Cricket World Cup programming in the prior-year quarter.

The increase in other operating expense was attributable to higher technology costs.

Operating Income (Loss) from Sports

Operating results increased $350 million, to operating income of $247 million from an operating loss of $103 million, due to the comparison to the ICC Cricket World Cup programming in the prior-year quarter at Star India and, to a lesser extent, improved results at international ESPN, partially offset by a decrease at domestic ESPN.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

3 unchanged sentences

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Supplemental revenue detail

2 unchanged sentences

4,811 4,436 8 %

Star India 39 399 (90) %

$ 4,850 $ 4,835 — %

1 unchanged sentence

Domestic $ 231 $ 255 (9) %

International 5 (27) nm

1,090 1,050 4 %

(314) (216) (45) %

International (3) (56) 95 %

Equity in the income of investees 10 13 (23) %

$ 802 $ 854 (6) %

$ 247 $ (103) nm

Items Excluded from Segment Operating Income Related to Sports

1 unchanged sentence

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

TFCF Acquisition Amortization (1)

$ (74) $ (96) 23 %

Restructuring and impairment charges (2)

(1) Amortization of intangible assets

(2) Charges for the prior-year quarter were due to severance

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

(1) Represents amortization of intangible assets.

Operating results for the Experiences segment are as follows:

Quarter Ended % Change

(in millions) June 29,

(in millions) December 28,

2024 December 30,

Theme park admissions $ 3,087 $ 2,982 4 %

8 unchanged sentences

Operating Income $ 3,110 $ 3,105 — %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenues - Theme park admissions

Theme park admissions revenue growth was due to increases of 1% from higher average per capita ticket revenue and 1% from attendance growth.

Theme park admissions revenue growth was due to an increase of 4% from higher average per capita ticket revenue, partially offset by a decrease of 1% from lower attendance.

The decrease in attendance reflected a decline at our domestic parks, including the impact of hurricanes at Walt Disney World Resort, partially offset by attendance growth at our international parks.

Revenues - Resorts and vacations

Higher resorts and vacations revenue was primarily due to increases of 3% from higher average ticket prices for cruise line sailings, 1% from an increase in average daily hotel room rates and 1% from additional passenger cruise days.

Higher resorts and vacations revenue was due to increases of 2% from higher average daily hotel room rates, 1% from increased Disney Vacation Club sales and 1% from higher occupied room nights.

Revenues - Park & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth resulted from increases of 1% from guest spending growth and 1% from higher volumes.

Parks & Experiences merchandise, food and beverage revenue growth resulted from an increase of 4% from higher average guest spending.

Revenues - Merchandise licensing and retail

Lower merchandise licensing and retail revenue was due to decreases of 4% from merchandise licensing and 1% from retail.

The decrease in merchandise licensing revenue was due to lower minimum guarantee shortfall recognition, partially offset by higher royalties from merchandise sales.

Lower merchandise licensing and retail revenue was due to decreases of 1% from merchandise licensing and 1% from an unfavorable Foreign Exchange Impact, partially offset by a 1% increase from retail.

Revenues - Parks Licensing and Other

The increase in parks licensing and other revenue was due to a favorable foreign exchange impact and higher real estate sales.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The increase in parks licensing and other revenue was due to higher real estate sales.

In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business:

Domestic International (1)

Quarter Ended Quarter Ended Quarter Ended

Quarter Ended Quarter Ended

Increase (decrease)

18 unchanged sentences

(6) Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights.

Operating expenses

Quarter Ended % Change

(in millions) June 29,

Operating labor $ (2,154) $ (1,938) (11) %

Infrastructure costs (823) (754) (9) %

Cost of goods sold and distribution costs (780) (811) 4 %

Other operating expense (816) (776) (5) %

$ (4,573) $ (4,279) (7) %

Higher operating labor was primarily due to inflation and, to a lesser extent, increased volumes, partially offset by cost saving initiatives.

The increase in infrastructure costs was primarily attributable to higher technology spending.

Cost of goods sold and distribution costs decreased primarily due to lower third-party royalty expense.

The increase in other operating expense was due to higher costs for new guest offerings, increased operations support costs and inflation.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $42 million, to $942 million from $900 million due to higher marketing costs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Depreciation and amortization

Depreciation and amortization decreased $73 million, to $649 million from $722 million, due to lower depreciation at our domestic parks and experiences attributable to the comparison to depreciation in the prior-year quarter related to the closure of Star Wars:

Galactic Starcruiser.

Operating Income from Experiences

Segment operating income decreased from $2,297 million to $2,222 million due to a decrease at our domestic parks and resorts, partially offset by growth at our experiences businesses.

Our international parks and experiences results were comparable to the prior-year quarter as a decrease at Shanghai Disney Resort and growth at Hong Kong Disneyland Resort largely offset.

Supplemental revenue and operating income

The following table presents supplemental revenue and operating income detail for the Experiences segment:

Quarter Ended % Change

(in millions) June 29,

Supplemental revenue detail

Parks & Experiences

Domestic $ 5,820 $ 5,649 3 %

International 1,602 1,532 5 %

Consumer Products 964 1,017 (5) %

$ 8,386 $ 8,198 2 %

Supplemental operating income detail

Parks & Experiences

Domestic $ 1,347 $ 1,436 (6) %

International 435 428 2 %

Consumer Products 440 433 2 %

$ 2,222 $ 2,297 (3) %

Items Excluded from Segment Operating Income Related to Experiences

The following table presents supplemental information for items related to the Experiences segment that are excluded from segment operating income:

Quarter Ended % Change

(in millions) June 29,

Charge related to a legal ruling

$ (65) $ (101) 36 %

Restructuring and impairment charges (1)

TFCF Acquisition Amortization

(1) Charges for the prior-year quarter were due to severance.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

BUSINESS SEGMENT RESULTS - Current Period Nine-Month Results Compared to the Prior-Year Nine-Month Period

Entertainment

Revenue and operating results for the Entertainment segment are as follows:

Nine Months Ended % Change

(in millions) June 29,

Linear Networks $ 8,231 $ 9,073 (9) %

Direct-to-Consumer 16,993 14,850 14 %

Content Sales/Licensing and Other 5,133 7,188 (29) %

$ 30,357 $ 31,111 (2) %

Segment operating income (loss):

Linear Networks $ 2,954 $ 3,314 (11) %

Direct-to-Consumer (110) (2,076) 95 %

Content Sales/Licensing and Other 12 (30) nm

$ 2,856 $ 1,208 >100 %

The decrease in Entertainment revenues was due to lower theatrical distribution revenue and, to a lesser extent, decreases in TV/VOD distribution revenue and affiliate fees.

These decreases were partially offset by subscription revenue growth.

Operating income

The increase in Entertainment operating income was due to improved results at Direct-to-Consumer, partially offset by a decline at Linear Networks.

Linear Networks

Operating results for Linear Networks are as follows:

Nine Months Ended % Change

(in millions) June 29,

Affiliate fees $ 5,251 $ 5,631 (7) %

Advertising 2,875 3,303 (13) %

Other 105 139 (24) %

Total revenues 8,231 9,073 (9) %

Operating expenses

Selling, general, administrative and other (1,845) (1,940) 5 %

Depreciation and amortization (34) (39) 13 %

Equity in the income of investees 440 528 (17) %

Operating Income $ 2,954 $ 3,314 (11) %

Revenues - Affiliate fees

Nine Months Ended % Change

(in millions) June 29,

$ 4,437 $ 4,689 (5) %

International

814 942 (14) %

$ 5,251 $ 5,631 (7) %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The decrease in domestic affiliate revenue was due to a decline of 11% from fewer subscribers, including the impact of the non-renewal of carriage of certain networks by an affiliate, partially offset by an increase of 6% from higher effective rates.

Lower international affiliate revenue was attributable to decreases of 9% from fewer subscribers driven by channel closures, 2% from an unfavorable foreign exchange impact and 2% from lower effective rates.

Revenues - Advertising

Nine Months Ended % Change

(in millions) June 29,

$ 2,121 $ 2,555 (17) %

International

$ 2,875 $ 3,303 (13) %

The decline in domestic advertising revenue was due to decreases of 14% from fewer impressions and 3% from lower rates.

The decrease in impressions was due to lower average viewership and, to a lesser extent, fewer units delivered.

Lower rates were primarily attributable to a decrease in political advertising at the owned television stations.

International advertising revenue was comparable to the prior-year period as an increase of 6% from higher rates was offset by decreases of 4% from an unfavorable foreign exchange impact and 2% from fewer impressions.

The decrease in impressions reflected the impact of channel closures.

Revenues - Other

Other revenue decreased $34 million, to $105 million from $139 million driven by an unfavorable foreign exchange impact.

Operating expenses

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs

$ (2,619) $ (3,021) 13 %

International

(534) (520) (3) %

Total programming and production costs

(3,153) (3,541) 11 %

Other operating expenses

(685) (767) 11 %

$ (3,838) $ (4,308) 11 %

The decrease in domestic programming and production costs was primarily due to a lower average cost mix of programming and, to a lesser extent, a decrease in program write-downs.

The decrease in other operating expenses was primarily attributable to lower technology and distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $95 million to $1,845 million from $1,940 million, due to lower marketing costs and a favorable foreign exchange impact.

Equity in the Income of Investees

Income from equity investees decreased $88 million, to $440 million from $528 million, due to lower income from A+E Television Networks attributable to decreases in advertising and affiliate revenues.

Operating Income from Linear Networks

Operating income from Linear Networks decreased $360 million, to $2,954 million from $3,314 million, due to decreases at our domestic and international businesses and lower income from equity investees.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Supplemental revenue and operating income

The following table provides supplemental revenue and operating income detail for Linear Networks:

Nine Months Ended % Change

(in millions) June 29,

Supplemental revenue detail

$ 6,624 $ 7,307 (9) %

International

1,607 1,766 (9) %

$ 8,231 $ 9,073 (9) %

Supplemental operating income detail

$ 2,040 $ 2,206 (8) %

International

474 580 (18) %

Equity in the income of investees 440 528 (17) %

$ 2,954 $ 3,314 (11) %

Direct-to-Consumer

Operating results for Direct-to-Consumer are as follows:

Nine Months Ended % Change

(in millions) June 29,

Subscription fees $ 14,041 $ 12,243 15 %

Advertising 2,740 2,411 14 %

Total revenues 16,993 14,850 14 %

Operating expenses (13,449) (13,643) 1 %

Selling, general, administrative and other (3,424) (3,033) (13) %

Depreciation and amortization (230) (250) 8 %

Operating Loss $ (110) $ (2,076) 95 %

Revenues - Subscription fees

Growth in subscription fees reflected an increase of 10% from higher rates attributable to increases in retail pricing at Disney+ Core and, to a lesser extent, Hulu, and 6% from more subscribers due to growth at Disney+ Core and, to a lesser extent, Hulu.

These increases were partially offset by a decrease of 1% from an unfavorable foreign exchange impact.

Revenues - Advertising

Higher advertising revenue reflected an increase of 26% from higher impressions at Disney+ and Hulu, partially offset by a decrease of 12% from lower rates.

At Disney+, the increase in impressions was due to Disney+ Core growth and airing more cricket programming on Disney+ Hotstar compared to the prior-year period.

There were two significant cricket tournaments in the current period compared to one in the prior-year period.

The growth at Disney+ Core reflected the launches of the ad-supported Disney+ service domestically in December 2022 and internationally in November 2023.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Average Monthly Revenue Per Paid Subscriber:

Nine Months Ended % Change

Domestic (U.S.

and Canada) $ 7.96 $ 6.80 17 %

International (excluding Disney+ Hotstar) 6.46 5.82 11 %

Disney+ Core 7.13 6.26 14 %

Disney+ Hotstar 1.02 0.65 57 %

SVOD Only 12.29 12.19 1 %

Live TV + SVOD 94.89 90.66 5 %

Domestic Disney+ average monthly revenue per paid subscriber increased from $6.80 to $7.96 due to increases in retail pricing, partially offset by a higher mix of subscribers to multi-product and wholesale offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.82 to $6.46 due to increases in retail pricing.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.65 to $1.02 due to higher advertising revenue and increases in retail pricing.

The average monthly revenue per paid subscriber for Hulu SVOD Only was comparable to the prior-year period as increases in retail pricing were largely offset by the impact of subscriber mix shifts.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.66 to $94.89 due to increases in retail pricing, partially offset by lower advertising revenue and a higher mix of subscribers to multi-product offerings.

Operating expenses

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs

Hulu $ (6,437) $ (6,300) (2) %

Disney+ and other

(4,275) (4,333) 1 %

Total programming and production costs (10,712) (10,633) (1) %

Other operating expense (2,737) (3,010) 9 %

$ (13,449) $ (13,643) 1 %

Higher programming and production costs at Hulu were due to an increase in subscriber-based fees for programming the Hulu Live TV service driven by rate increases, partially offset by lower costs for SVOD content.

The decrease in programming and production costs at Disney+ and other was due to lower costs for non-sports content available on Disney+ Core, largely offset by higher costs for cricket programming.

The increase in cricket programming costs reflected two significant tournaments in the current period compared to one in the prior-year period.

Other operating expenses decreased due to lower distribution and technology costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $391 million, to $3,424 million from $3,033 million, primarily due to higher marketing costs.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer decreased $1,966 million, to $110 million from $2,076 million, due to improved results at Disney+.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Content Sales/Licensing and Other

Operating results for Content Sales/Licensing and Other are as follows:

Nine Months Ended % Change

(in millions) June 29,

TV/VOD distribution

$ 1,656 $ 2,063 (20) %

Theatrical distribution 1,098 2,745 (60) %

Home entertainment distribution

540 639 (15) %

Other 1,839 1,741 6 %

Total revenues 5,133 7,188 (29) %

Operating expenses (3,305) (4,931) 33 %

Selling, general, administrative and other (1,529) (2,024) 24 %

Depreciation and amortization (279) (262) (6) %

Equity in the loss of investees

(8) (1) >(100) %

Operating Income (Loss)

$ 12 $ (30) nm

Revenues - TV/VOD distribution

The decrease in TV/VOD distribution revenue was primarily due to lower sales of episodic content.

Revenues - Theatrical distribution

The decrease in theatrical distribution revenue reflected fewer significant releases in the current period compared to the prior-year period.

Significant titles in the current period included Inside Out 2 , Kingdom of the Planet of the Apes , Wish and The Marvels.

Significant titles in the prior-year period included Avatar:

The Way of Water , Black Panther:

Wakanda Forever , Guardians of the Galaxy Vol.

3 , The Little Mermaid and Ant-Man and the Wasp:

Quantumania .

Revenues - Home entertainment distribution

The decrease in home entertainment distribution revenue was due to lower unit sales.

Revenues - Other

Other revenue increased $98 million to $1,839 million from $1,741 million primarily attributable to an increase in revenue at Lucasfilm’s special effects business due to more projects and higher rates.

Operating expenses

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs $ (2,769) $ (4,249) 35 %

Distribution costs and cost of goods sold

(536) (682) 21 %

$ (3,305) $ (4,931) 33 %

The decrease in programming and production costs was due to lower production cost amortization attributable to the decreases in theatrical and, to a lesser extent, TV/VOD distribution revenues.

Lower distribution costs and cost of goods sold were driven by decreases in theatrical distribution costs and, to a lesser extent, home entertainment unit sales, partially offset by an increase at Lucasfilm’s special effects business due to more projects.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $495 million, to $1,529 million from $2,024 million, primarily due to lower theatrical marketing costs reflecting fewer significant releases in the current period.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating Income (Loss) from Content Sales/Licensing and Other

Operating results from Content Sales/Licensing and Other increased $42 million, to income of $12 million from a loss of $30 million.

Items Excluded from Segment Operating Income Related to Entertainment

The following table presents supplemental information for items related to the Entertainment segment that are excluded from segment operating income:

Nine Months Ended % Change

(in millions) June 29,

Restructuring and impairment charges (1)

$ (717) $ (2,750) 74 %

TFCF and Hulu Acquisition Amortization (2)

(1,018) (1,272) 20 %

Gain on sale of a business — 28 (100) %

(1) Charges for the current period were due to a goodwill impairment related to linear networks.

Charges for the prior-year period were due to the Content Impairment and, to a lesser extent, severance and costs to exit our businesses in Russia.

(2) In the current period, amortization of intangible assets was $804 million and amortization of step-up on film and television costs was $205 million.

In the prior-year period, amortization of intangible assets was $889 million and amortization of step-up on film and television costs was $374 million.

Operating results for Sports are as follows:

Nine Months Ended % Change

(in millions) June 29,

Affiliate fees $ 7,918 $ 8,052 (2) %

Advertising 3,640 3,196 14 %

Subscription fees 1,246 1,139 9 %

Other 901 814 11 %

Total revenues 13,705 13,201 4 %

Operating expenses (11,295) (10,737) (5) %

Selling, general, administrative and other (949) (965) 2 %

Depreciation and amortization (29) (54) 46 %

Equity in the income of investees 45 39 15 %

Operating Income $ 1,477 $ 1,484 — %

Revenues - Affiliate fees

Nine Months Ended % Change

(in millions) June 29,

Domestic $ 6,947 $ 7,057 (2) %

International 783 776 1 %

7,730 7,833 (1) %

188 219 (14) %

$ 7,918 $ 8,052 (2) %

The decrease in domestic ESPN affiliate revenue was primarily attributable to a decline of 8% from fewer subscribers, partially offset by an increase of 6% from higher effective rates.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

International ESPN affiliate revenue was comparable to the prior-year period as higher effective rates were largely offset by fewer subscribers.

Lower Star India affiliate revenue was attributable to a decrease in effective rates and fewer subscribers.

Revenues - Advertising

Nine Months Ended % Change

(in millions) June 29,

Domestic $ 3,059 $ 2,757 11 %

International 143 151 (5) %

3,202 2,908 10 %

$ 3,640 $ 3,196 14 %

The increase in domestic ESPN advertising revenue was attributable to increases of 6% from higher rates and 3% from sponsorship revenue growth.

Higher Star India advertising revenue was due to the airing of two significant cricket tournaments in the current period compared to one in the prior-year period.

Revenues - Subscription fees

Subscription fees increased $107 million, to $1,246 million from $1,139 million, due to an increase of 9% from higher rates.

Revenues - Other

Other revenue increased $87 million, to $901 million from $814 million, driven by higher fees received from the Entertainment segment to program sports on Disney+ in Latin America and on the ABC Network, partially offset by an unfavorable foreign exchange impact.

Nine Months Ended % Change

Average Monthly Revenue per Paid Subscriber for the period

$ 6.21 $ 5.54 12 %

ESPN+ average monthly revenue per paid subscriber increased from $5.54 to $6.21 due to increases in retail pricing and higher advertising revenue.

Operating expenses

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs

Domestic $ (8,386) $ (8,250) (2) %

International (874) (825) (6) %

(9,260) (9,075) (2) %

(1,341) (977) (37) %

(10,601) (10,052) (5) %

Other operating expenses (694) (685) (1) %

$ (11,295) $ (10,737) (5) %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Programming and production costs at domestic ESPN increased in the current period compared to the prior-year period driven by contractual rate increases and programming additions.

These increases were partially offset by lower college football rights costs in the current period.

The increase in international ESPN programming and production costs was due to new soccer rights.

Higher Star India programming and production costs were attributable to an increase in cricket programming costs due to airing two significant tournaments in the current period compared to one in the prior-year period.

Operating Income from Sports

Operating income from Sports was comparable to the prior-year period as an increase at domestic ESPN and lower results at Star India largely offset.

Supplemental revenue and operating income

The following table provides supplemental revenue and operating income (loss) detail for the Sports segment:

Nine Months Ended % Change

(in millions) June 29,

Supplemental revenue detail

Domestic $ 11,847 $ 11,490 3 %

International 1,075 1,074 — %

12,922 12,564 3 %

$ 13,705 $ 13,201 4 %

Supplemental operating income (loss) detail

Domestic $ 2,120 $ 1,894 12 %

International (32) (5) >(100) %

2,088 1,889 11 %

(656) (444) (48) %

Equity in the income of investees 45 39 15 %

$ 1,477 $ 1,484 — %

Items Excluded from Segment Operating Income Related to Sports

The following table presents supplemental information for items related to the Sports segment that are excluded from segment operating income:

Nine Months Ended % Change

(in millions) June 29,

TFCF Acquisition Amortization (1)

$ (259) $ (291) 11 %

Restructuring and impairment charges (2)

(1) Amortization of intangible assets

(2) Charges for the prior-year period were due to severance

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating results for the Experiences segment are as follows:

Nine Months Ended % Change

(in millions) June 29,

Theme park admissions $ 8,568 $ 7,800 10 %

Resorts and vacations 6,334 5,919 7 %

Parks & Experiences merchandise, food and beverage 6,126 5,846 5 %

Merchandise licensing and retail 3,184 3,246 (2) %

Parks licensing and other 1,699 1,578 8 %

Total revenues 25,911 24,389 6 %

Operating expenses (13,562) (12,524) (8) %

Selling, general, administrative and other (2,830) (2,652) (7) %

Depreciation and amortization (1,906) (2,016) 5 %

Equity in the loss of investees — (2) 100 %

Operating Income $ 7,613 $ 7,195 6 %

Revenues - Theme park admissions

The increase in theme park admissions revenue was due to increases of 7% from higher average per capita ticket revenue and 3% from attendance growth.

Higher attendance was due to increases at Shanghai Disney Resort and Disneyland Resort.

Revenues - Resorts and vacations

Higher resorts and vacations revenue was attributable to increases of 4% from higher average ticket prices for cruise line sailings, 1% from higher average daily hotel room rates and 1% from increased occupied hotel room nights.

Revenues - Park & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 3% from higher volumes and 2% from an increase in average guest spending.

Revenues - Merchandise licensing and retail

Lower merchandise licensing and retail revenue was due to decreases of 2% from retail and 2% from an unfavorable foreign exchange impact, partially offset by an increase of 2% from merchandise licensing.

Lower retail revenue was primarily due to a decrease in online sales.

The increase in merchandise licensing revenue was due to higher royalties from merchandise sales, partially offset by lower minimum guarantee shortfall recognition.

Revenues - Parks licensing and other

The increase in parks licensing and other revenue was due to an increase in sponsorship revenue, a favorable foreign exchange impact and higher royalties from Tokyo Disney Resort.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Domestic International Total

Nine Months Ended Nine Months Ended Nine Months Ended

Increase (decrease)

Attendance 1 % 6 % 15 % 64 % 5 % 19 %

Per Capita Guest Spending 3 % 4 % 7 % 20 % 3 % 2 %

Occupancy 86 % 87 % 83 % 71 % 85 % 83 %

Available Hotel Room Nights (in thousands) 7,640 7,565 2,381 2,380 10,021 9,945

Change in Per Room Guest Spending (1)

3 % 1 % 8 % 14 % 3 % 1 %

(1) In the third quarter of the prior fiscal year, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue.

The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms.

If we had applied the new method in the first six months of the prior-year period, the impact would have been a decrease of approximately $30 million in the prior-year period.

Operating expenses

Nine Months Ended % Change

(in millions) June 29,

Quarter Ended % Change

(in millions) December 28,

2024 December 30,

Operating labor $ (2,164) $ (2,000) (8) %

3 unchanged sentences

$ (4,678) $ (4,480) (4) %

The increase in operating labor was attributable to inflation, higher volumes and increased operations support costs, partially offset by cost saving initiatives.

The increase in infrastructure costs was due to higher technology spending and increased operations support costs.

Cost of goods sold and distribution costs were comparable to the prior-year period as cost saving initiatives and lower third-party royalty expense were offset by increased costs due to higher volumes.

Other operating expense increased due to inflation, higher volumes and increased operations support costs.

Higher operating labor was due to inflation and, to a lesser extent, new guest offerings.

Cost of goods sold and distribution costs increased due to higher volumes.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $178 million, to $2,830 million from $2,652 million, driven by higher marketing costs, partially offset by the comparison to a loss in the prior-year period on the disposal of our ownership interest in Villages Nature.

Selling, general, administrative and other costs increased $23 million, to $948 million from $925 million, primarily due to higher marketing costs, partially offset by cost saving initiatives.

Depreciation and amortization

Depreciation and amortization decreased $110 million, to $1,906 million from $2,016 million, due to the comparison to depreciation in the prior-year period related to the closure of Star Wars:

Galactic Starcruiser.

Depreciation and amortization increased $57 million, to $679 million from $622 million, due to higher depreciation at our domestic and international parks and experiences.

Operating Income from Experiences

Segment operating income increased from $7.2 billion to $7.6 billion due to growth at our international parks and experiences.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Segment operating income was comparable to the prior-year quarter as an increase at international parks and experiences was offset by a decrease at domestic parks and experiences.

Supplemental revenue and operating income

The following table presents supplemental revenue and operating income detail for the Experiences segment:

Nine Months Ended % Change

(in millions) June 29,

Quarter Ended % Change

(in millions) December 28,

2024 December 30,

Supplemental revenue detail

10 unchanged sentences

$ 3,110 $ 3,105 — %

Items Excluded from Segment Operating Income Related to Experiences

The following table presents supplemental information for items related to the Experiences segment that are excluded from segment operating income:

Nine Months Ended % Change

(in millions) June 29,

Charge related to a legal ruling $ (65) $ (101) 36 %

Restructuring and impairment charges (1)

TFCF Acquisition Amortization

(1) Charges for the prior-year period were due to severance.

CORPORATE AND UNALLOCATED SHARED EXPENSES

Quarter Ended % Change

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

(in millions) December 28,

2024 December 30,

Corporate and unallocated shared expenses $ (460) $ (308) (49) %

Corporate and unallocated shared expenses increased $33 million for the quarter, from $295 million to $328 million, driven by increased compensation costs and other cost inflation.

Corporate and unallocated shared expenses for the current nine-month period increased $173 million, from $854 million to $1,027 million, primarily due to increased compensation costs, higher costs related to our proxy solicitation and other cost inflation.

Corporate and unallocated shared expenses increased $152 million for the quarter, from $308 million to $460 million, primarily due to a legal settlement.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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The change in cash and cash equivalents is as follows:

Nine Months Ended % Change

(in millions) June 29,

Quarter Ended % Change

(in millions) December 28,

2024 December 30,

Cash provided by operations $ 3,205 $ 2,185 47 %

5 unchanged sentences

Cash provided by operations increased $1.0 billion from $2.2 billion in the prior-year period to $3.2 billion for the current period.

The increase was primarily due to lower film and television production spending and the timing of payments for sports rights.

The increase also reflected collateral receipts related to our hedging program in the current period compared to collateral payments in the prior-year period and the comparison to a payment in the prior-year period related to the termination of content licenses in fiscal 2022.

These increases were partially offset by payment in the current period of fiscal 2023 federal and California income taxes, which were deferred pursuant to relief provided by the Internal Revenue Service and California State Board of Equalization as a result of 2023 winter storms in California.

The increase was primarily due to lower tax payments in the current quarter compared to the prior-year quarter, partially offset by lower operating cash flows at Entertainment.

Tax payments in the prior-year quarter reflected payment of fiscal 2023 U.S.

federal and California state income taxes that had been deferred pursuant to relief provided by the Internal Revenue Service and California Board of Equalization as a result of the 2023 winter storms in California.

The decrease in operating cash flows at Entertainment was primarily due to higher film and television production spending and an increase in operating cash disbursements resulting from higher operating expenses, partially offset by an increase in cash receipts attributable to higher revenue.

Produced and licensed programming costs

6 unchanged sentences

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The Company’s film and television production and programming activity for the nine months ended June 29, 2024 and July 1, 2023 are as follows:

Nine Months Ended

(in millions) June 29,

The Company’s film and television production and programming activity for the quarter ended December 28, 2024 and December 30, 2023 are as follows:

Quarter Ended

(in millions) December 28,

2024 December 30,

Beginning balances:

4 unchanged sentences

Produced film and television content 2,534 1,800

17,957 21,959

Amortization:

3 unchanged sentences

Change in produced and licensed content costs (1,141) (2,642)

Content Impairment

Produced and licensed content costs reclassified to assets held for sale

Other non-cash activity 266 (7)

3 unchanged sentences

$ 29,842 $ 30,152

The Company currently expects its fiscal 2024 spend on produced and licensed content, including sports rights, to be approximately $24 billion compared to fiscal 2023 spend of $27 billion.

The Company currently expects its fiscal 2025 spend on produced and licensed content, including sports rights, to be comparable to fiscal 2024 spend of $23 billion.

Investing Activities

Investing activities consist principally of investments in parks, resorts and other property and acquisition and divestiture activity.

The Company’s investing activities for the nine months ended June 29, 2024 and July 1, 2023 are as follows:

Nine Months Ended

(in millions) June 29,

The Company’s investing activities for the quarter ended December 28, 2024 and December 30, 2023 are as follows:

Quarter Ended

(provided by (used in) in millions)

2024 December 30,

Investments in parks, resorts and other property:

Entertainment

$ (268) $ (309)

Domestic (1,786) (571)

1 unchanged sentence

Total Experiences

(2,079) (815)

Corporate (118) (175)

Total investments in parks, resorts and other property

Cash used in (provided by) other investing activities, net

(2,466) (1,299)

Other investing activities, net

Cash used in investing activities $ (2,575) $ (1,246)

Capital expenditures at the Entertainment segment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.

The decrease in the current quarter compared to the prior-year quarter was due to lower spend on equipment and production facilities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Capital expenditures at the Experiences segment are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and technology.

The increase in the current period compared to the prior-year period was due to higher spend on cruise ship fleet expansion and new attractions.

The increase in the current quarter compared to the prior-year quarter was due to higher spend on cruise ship fleet expansion.

Capital expenditures at Corporate primarily reflect investments in corporate facilities, technology and equipment.

The decrease in the current period compared to the prior-year period was due to lower spend on facilities.

The decrease in the current quarter compared to the prior-year quarter was due to lower spend on facilities.

The Company currently expects its fiscal 2025 capital expenditures to be approximately $8 billion compared to fiscal 2024 capital expenditures of $5 billion.

Other Investing Activities

Cash used in other investing activities was $980 million for the current period reflecting an investment in Epic Games, Inc.

Cash provided by other investing activities was $336 million for the prior-year period reflecting proceeds from the sale of investments.

The projected increase in capital expenditures is primarily due to higher spending at Experiences, attributable to continued investment in cruise ship fleet expansion and new guest offerings at our theme parks.

Financing Activities

Financing activities for the nine months ended June 29, 2024 and July 1, 2023 are as follows:

Nine Months Ended

(in millions) June 29,

Financing activities for the quarter ended December 28, 2024 and December 30, 2023 are as follows:

Quarter Ended

(provided by (used in) in millions)

2024 December 30,

Change in borrowings

$ 780 $ (1,209)

Repurchases of common stock

Activities related to noncontrolling and redeemable noncontrolling interests (1)

(8,610) (181)

Cash used in other financing activities, net (2)

Acquisition of redeemable noncontrolling interest (see Note 1)

Other financing activities, net (1)

Cash used in financing activities

$ (997) $ (8,006)

(1) Activities related to noncontrolling and redeemable noncontrolling interests in the current and prior-year period were due to payments for redeemable noncontrolling interests in Hulu and BAMTech, respectively.

The prior-year period was partially offset by a contribution related to BAMTech (see Note 1 to the Condensed Consolidated Financial Statements).

(2) Primarily consists of dividends to noncontrolling interest holders and equity award activity.

See Note 5 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the nine months ended June 29, 2024 and information regarding the Company’s bank facilities.

(1) Primarily equity award activity.

See Note 5 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the quarter ended December 28, 2024 and information regarding the Company’s bank facilities.

The Company may use cash balances, operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities and incremental term debt issuances to retire or refinance other borrowings before or as they come due.

See Note 11 to the Condensed Consolidated Financial Statements for a summary of dividends and share repurchases in fiscal 2024.

There were no dividends paid or share repurchases in fiscal 2023.

The Company is targeting approximately $3 billion in share repurchases in fiscal 2024.

See Note 11 to the Condensed Consolidated Financial Statements for a summary of dividends and share repurchases.

The Company is targeting a total of $3 billion in share repurchases in fiscal 2025.

The Company may be required to pay an incremental amount for Hulu depending on a final determination of Hulu’s fair value (see Note 1 to the Condensed Consolidated Financial Statements).

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control.

4 unchanged sentences

reducing film and episodic content investments;

or implementing furloughs or reductions in force.

or implementing further cost-saving initiatives.

The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios.

As of June 29, 2024, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively.

As of December 28, 2024, Moody’s Ratings’ long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, S&P Global Ratings’ long- and short-term debt ratings for the Company were A and A-1 (Stable), respectively, and Fitch Rating’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively.

The Company’s bank facilities contain only one financial covenant, relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs.

On June 29, 2024, the Company met this covenant

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

by a significant margin.

On December 28, 2024, the Company met this covenant by a significant margin.

The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.

The Company is exposed to the impact of interest rate changes, foreign currency fluctuations, commodity fluctuations and changes in the market values of its investments.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Policies and Procedures

24 unchanged sentences

As disclosed in Note 13 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters.

See Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.

See Note 5 to the Condensed Consolidated Financial Statements and Note 14 to the Consolidated Financial Statements in the 2024 Annual Report on Form 10-K.

As disclosed in Note 9 to the Consolidated Financial Statements in the 2024 Annual Report on Form 10-K, the Company has exposure for certain tax matters.

Contractual Commitments

See Note 13 to the Condensed Consolidated Financial Statements and Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

See Note 14 to the Consolidated Financial Statements in the 2024 Annual Report on Form 10-K.

OTHER MATTERS

2 unchanged sentences

For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements in the 2024 Annual Report on Form 10-K.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Produced and Acquired/Licensed Content Costs

27 unchanged sentences

If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenue Recognition

5 unchanged sentences

See Note 10 to the Consolidated Financial Statements in the 2024 Annual Report on Form 10-K for estimated impacts of changes in these assumptions.

Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.

Other assumptions

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.

The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date.

13 unchanged sentences

The quantitative assessment compares the fair value of each reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.

The impairment test for goodwill requires judgment related to the identification of reporting units, determining whether reporting units should be aggregated, the assignment of assets and liabilities including goodwill to reporting units, and the determination of fair value of the reporting units.

To determine whether our reporting units should be aggregated, we evaluate the interdependency of our reporting units which includes consideration of the degree to which resources are shared including operating costs such as content, marketing, and technology, the similarity of products and services delivered, customers served or distribution channels used, and long term financial performance (e.g., operating margins).

The impairment test for goodwill requires judgment related to the identification of reporting units, the determination of whether reporting units should be aggregated, the assignment of assets and liabilities including goodwill to reporting units, and the determination of fair value of the reporting units.

To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate.

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Discount rates are determined based on the inherent risks of the underlying operations.

Significant judgments and assumptions in the discounted cash flow model used to determine fair value relate to future revenues and certain operating expenses, terminal growth rates and discount rates.

Significant judgments and assumptions in the discounted cash flow model used to determine fair value include future revenues and certain operating expenses, operating margins, terminal growth rates and discount rates.

We believe our estimates are consistent with how a marketplace participant would value our businesses.

Changes to these assumptions and shifts in market trends or macroeconomic events could impact test results in the future, and we could be required to record additional impairment charges.

As discussed in Note 16 to the Condensed Consolidated Financial Statements, the Company recorded a non-cash goodwill impairment charge of $0.7 billion related to our entertainment linear networks reporting unit in the second quarter of fiscal 2024.

The carrying amount of the entertainment linear networks reporting unit goodwill after this impairment is approximately $6 billion.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

As a result of the impairment, the fair value of this reporting unit approximates its carrying amount.

A 25 basis point increase in the discount rate or a 1% reduction in projected annual cash flows used to determine fair value of the entertainment linear networks reporting unit would each result in an incremental impairment charge of approximately $0.3 billion.

In addition, as discussed in our Critical Accounting Policies and Estimates section of our fiscal 2023 Annual Report on Form 10-K, the fair value of our entertainment DTC services reporting unit exceeded its carrying amount by less than 10%.

The carrying amount of the entertainment DTC services reporting unit goodwill is approximately $45 billion.

For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine its fair value would eliminate the excess fair value over carrying amount, and a 1% reduction in projected annual cash flows would result in a decrease in the excess fair value over carrying amount by approximately $0.9 billion.

As of the fourth quarter of fiscal 2024, the fair value of the entertainment reporting unit exceeded its carrying amount by less than 10%.

The carrying amount of the entertainment reporting unit goodwill is approximately $51 billion.

Based on our annual assessment performed in the fourth quarter of fiscal 2024, an approximate 40 basis point increase in the discount rate or an approximate 6% reduction in projected annual cash flows used to determine the fair value of the entertainment reporting unit would effectively eliminate the excess fair value over carrying amount.

To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value.

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The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable.

Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale.

Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

hold the asset for sale.

The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group.

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Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.

As discussed in Note 4 to the Condensed Consolidated Financial Statements, the Company recorded a non-cash goodwill impairment charge related to the Star India Transaction of $1.3 billion in the second quarter of fiscal 2024 to reflect Star India at its estimated fair value less costs to sell.

The fair value and carrying amount of Star India are subject to change depending on developments and results of operations for the duration that Star India is classified as held for sale, and we may be required to record additional impairment charges.

The Company has investments in equity securities.

The Company has investments in equity securities, including equity method investments.

For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments.

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These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate.

From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

and estimable loss.

From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss.

It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our assumptions regarding other contingent matters.

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Product Offerings

In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings.

In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or as part of various multi-product offerings.

Hulu Live TV + SVOD includes Disney+ and ESPN+.

Disney+ is available in more than 150 countries and territories outside the U.S.

In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar.

In certain Latin American countries prior to July 2024, we offered Disney+ as well as Star+, a general entertainment SVOD service, which was available on a standalone basis or together with Disney+ (Combo+).

At the end of June 2024, we merged these services into a single Disney+ product offering.

Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.

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Paid subscribers reflect subscribers for which we recognized subscription revenue.

Certain product offerings provide the option for an extra member to be added to an account (extra member add-on).

These extra members are not counted as paid

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method.

Subscribers to multi-product offerings in the U.S.

are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services.

In Latin America prior to July 2024, if a subscriber had either the standalone Disney+ or Star+ service or subscribed to Combo+, the subscriber was counted as one Disney+ paid subscriber.

are counted as a paid subscriber for each of the Company's services included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services.

Subscribers include those who receive an entitlement to a service through wholesale arrangements, including those for which the service is available to each subscriber of an existing content distribution tier.

When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.

International Disney+ (excluding Disney+ Hotstar)

International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S.

and Canada and the Star+ service in Latin America.

International Disney+

International Disney+ includes the Disney+ service outside the U.S.

Average Monthly Revenue Per Paid Subscriber

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Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period.

Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Pay-Per-View revenue.

Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses), premium and feature add-on revenue and extra member add-on revenue but excludes Pay-Per-View revenue.

Advertising revenue generated by content on one DTC streaming service that is accessed through another DTC streaming service by subscribers to both streaming services is allocated between both streaming services.

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In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Supplemental information about Paid subscribers:

(in millions) June 29,

2024 March 30,

(in millions) December 28,

2024 September 28,

2024 December 30,

Domestic (U.S.

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86.6 86.7 77.5

International (excluding Disney+ Hotstar) (3)(4)

International (2)

67.8 69.3 68.8

154.4 156.0 146.3

(1) At June 29, 2024, there were 19.5 million and 5.8 million subscribers to three-service and two-service multi-product offerings, respectively.

At March 30, 2024, there were 19.4 million and 4.8 million subscribers to three-service and two-service multi-product offerings, respectively.

At July 1, 2023, there were 20.1 million and 1.8 million subscribers to three-service and two-service multi-product offerings, respectively.

(1) At December 28, 2024, there were 10.5 million and 19.1 million subscribers to two-service and three-service multi-product offerings, respectively.

At September 28, 2024, there were 7.4 million and 19.7 million subscribers to two-service and three-service multi-product offerings, respectively.

At December 30, 2023, there were 3.9 million and 19.8 million subscribers to two-service and three-service multi-product offerings, respectively.

(2) The sequential prior quarter and prior-year quarter Paid Subscribers have been adjusted to include Disney+ subscribers in Southeast Asia, which were previously reported with Disney+ Hotstar.

Disney+ Hotstar was included in the Star India Transaction.

(3) Total may not equal the sum of the column due to rounding.

(3) Disney+ Hotstar is not included in any of the Company’s multi-product offerings.

(4) The services within the Combo+ multi-product offering were merged into a single Disney+ product offering.

The Combo+ subscribers at March 30, 2024 and July 1, 2023 were 11.7 million and 9.9 million, respectively.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

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On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney.

In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).

Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”).

The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at June 29, 2024 was as follows:

The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at December 28, 2024 was as follows:

TWDC Legacy Disney

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Operations are conducted almost entirely through the Company’s subsidiaries.

Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise.

Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise.

Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.

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This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with GAAP.

Results of operations (in millions) Nine Months Ended June 29, 2024

Results of operations (in millions) Quarter Ended December 28, 2024

Costs and expenses —

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Net income (loss) attributable to TWDC shareholders (581)

Balance Sheet (in millions) June 29,

Balance Sheet (in millions) December 28,

2024 September 28,

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis