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Let's move on here, because we're talking about how the Downdustrials is outperforming the NASAK one hundred for a third straight day, so that move to go beyond mag seven is certainly taking place here at least recently. Although I look within the Downdustrials, it is really am Jen and Cisco leading the way, and the biggest drags on that measure are Caterpillar and Disney. So let's talk a little bit about Disney right now with our very own Githa Ranganathan.
She is our US media analyst for Bloomberg Intelligence, and Githa, you took a look at Disney's fiscal fourth quarter results and your verdict is good, not great.
Yeah, that's exactly right, Scarlet. It came off as a little bit of a lackluster report. I mean everything if you look at the fundamental drivers of the company, which is really the parks business brings in about sixty percent of profits. Things seem to be going pretty strong there. We saw a thirteen percent jump in operating profit for the fiscal fourth quarter. Again, the guidance for you know,
twenty twenty six seems pretty good as well. But really, you know, Disney really has this very very tough balancing act. So on the one hand, they have the parks business, they have the streaming business, which is doing really well from a profitability standpoint, but to drag it down, you have the linear TV networks, and then you have the hit and miss nature of you know, the volleybo in
the Hollywood studio business. So you know, they have to contend with all of those different moving parts, and I think that the drag down from the TV networks and the studios is kind of weighing a lot on the narrative today, Keith I.
Talk to us about some of their bundling of all their streaming services, particularly that ESPN app, that really they put a lot of the real valuable sports programming on that ESPN app. How were the early results from in terms of subscriber growth?
So they didn't give us any hard number there, Paul, in terms of the number of subscribers that they got on the ESPN Ultimate product, which is priced at twenty nine to ninety nine a month. But they did talk about, you know, in general that the traction has been pretty good. They talked about the whole bundling strategy because that is
where Disney really wins. I mean, if we've seen some of the numbers, you know, from Disney, we know that forty percent of new subscribers actually take the Disney bundle, and this is really going to be the strategy for them going forward. Right, you get people in with the bundle, and that's how you kind of stem churn. You you're able to take price increases. So it's really going to be the main driver for earnings growth for them going forward.
And that's exactly what they indicated on the call as well.
Paul, I can't remember who said this, but it's so true that the history of media is about bundling and unbundling. We went through this period where everyone cut the cord and everyone unbundled, and now we're back to bundling again. Although it's you know, in these discrete groups or Disney might bundle Disney plus an ESPN plus together and then if you are a T Mobile subscriber, you might get some other options.
And here, but here's my point, that's fine. Is the consumer better off? And my answer is absolutely not.
It's too confusing. It's way too confusing, Gita when it comes to bundling. How much more can they do?
Though?
I mean, I see what you're saying about how it's paying off right now, but I mean, can they continue to innovate on their bundling or is have we reached the limits of it?
I don't think we've reached the limits at all, Scarlett. So I think what they're ultimately, what they're ultimately aiming for with their ESPN product, and you know, they just introduced the streaming product a couple of months ago. I think ultimately they wanted to kind of become the premier
sports destinations. So you know, ultimately, I wouldn't be surprised if you see a Fox or an NBC or you know, even maybe an Amazon kind of feeding in all of their apps so that you go to this one stop shop for you know, ESPN and you're able to see all different kinds of sports content. Because you're absolutely right, there's way too much of fragmentation becoming a great source of friction for you know, the average consumer, and so I think they're going to seek out a lot more
different bundling opportunities. We're already seeing them kind of do something with ESPN Ultimate and Fox One, which is Fox's streaming product that they also just introduced a few months ago. So they're going to look to partner with different media platforms across the ecosystem, and I think that is going to be a source of, you know, a great upside opportunity for them. Eventually.
Is everyone willing to play ball on something like that, Kita, or is there someone who's going to say, you know what, you can't get me in here and I own or I have the rights over X number of NFL games.
Actually, that's what we're seeing right now. There is the standoff going going on between Disney and YouTube TV, and it's really all again, it's just a you know, game of chicken here. So you know, when it comes to sports content, I have to say Disney has the upper
hand a little bit. So if you just kind of look at sports viewing in the United States, Disney has about forty percent of sports viewing just with you know, marquee rights tied to all major leagues, you know, college football, NFL, NBA, MLB, they have it all, so I think it becomes a little harder to say no to them. But again, never say.
Never, all Right, Keith, I'm reluctant to ask this question, but I feel like I have to. What's the latest on Bob Iger's succession plan.
Yeah, this is the big thing that we're all looking at in fiscal twenty twenty six. So James Gorman, who's kind of heading up this whole succession planning committee Paul has said that, you know, the board will be out with the decision by the end of March. So Bob Eiger's contract comes to an end by the end of twenty twenty six, so hopefully we do have some kind of clarity on that. Right now, it's really looking like
it's going to be internal candidates. I mean, there was some you know, rumors and buzz about whether they were looking externally, but I think they're going to kind of keep it internal.
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Let's talk about some of the big movers in the market today, and one is an old school name that we've been talking a lot about, and that's Cisco coming out with results that show that it's definitely a part of this AI conversation. Wujin Hoe is the Bloomberg Intelligence Senior Technology analyst. He covers Cisco and wojin. You are looking at this beat and raise quarter for Cisco and thinking that the outlook is maybe even a little conservative, and Cisco can do better than what it's promised.
Yeah, hey, Scarlett, thanks for having me on. I'll tell you they did raise their outlook off of the first quarter beat and the second quarter guide. But when I look at the second half of the year, you know there were one hundred million dollars below consensus expectations. So give them the strong momentum that they've already had in the first half of the year. I don't see why it can't go any better.
All right. The stock's hitting at fifty two weeks high today, and I put up my GP chart which grafts that I go all the way back to March of two thousand, I think they've just set a new all time high that was set back in March thirty one of two thousand. So after twenty five years, based on a long round trip, they've gotten that market cap back. So good for them
and their patient shareholders. So WOCH talk to us about the competitive landscape for somebody like Cisco here, how has that changed and how are they stacked up?
Yeah, so we got to look at it two or three different buckets. Right on the core networking side, there's still the eight hundred pound gorilla there and that's actually been doing a lot better than I had anticipated. And they have this tremendous upgrade cycle that they're going to have grow off of for the next couple of years. And you know, given that they have the largest networking base out there, there's a lot to upgrade. It's going
to be supplemental growth. Now. The AI is actually the cherry on top of this, right, they're relatively a newer player to AI. They've they've been more known to the enterprise base and that's been growing quite nicely. One billion dollars in revenue and fiscal twenty five. They said on the call yesterday they're going to be They're on pace for three billion dollars in revenue one point three billion dollars in order in this quarter alone, and they have the products to win. So who do they come up
against on the AI front? Arista on their networking side, Broadcom on the chip side, and Video on the on the switching side. So they are coming up against some heavy hitters. And Cisco has the balance sheet, importantly, the balance sheet to help support their growth.
In terms of M and A, is there Are you looking for them to do anything? I was just checking in. It seems like they did buy a softwaremakers Plunk in twenty twenty four to diversify in to security product. Is now a good time for them to kind of build out their empire a little bit more?
Yeah, and and this is one of the things that I'm waiting for right this splunk eear. The Splunk M and A was more of their Hey, let's let's switch over to a recurring revenue software uh uh, software based era. Right. I think the phase three of M and A is going to be more on the AI side. Now, I will tell you M and A the acquisitions that I made about a decade ago is actually started to come
into fruition here to help some of their infrastructure. But you know some some of the interesting things that they've invested in over the past I would say a year two or two, they've been investing in some AI infrastructure guys uh and and such as a cohere uh and, and I believe they have a little piece of core Weave as well. So I'm curious where they go with
that going forward. But it's going to be they're gonna start leaning into the AI side, is my guest, but it's going to be a small and unlikely large.
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All right, let's talk a little bit about the retail sector and f leisure, because that was a big thing a couple of years ago, but it seems like it's had its moment, and you just look at Lululemon shares and how they've done, and that kind of tells you what's happened to the leisure trend. Lulu Lemon shares down
by fifty five percent in twenty twenty five. Punam Goyel is senior US e Commerce and retail analysts here at Bloomberg Intelligence, and she is here with more and Putam you recently authored a report about how Adidas may lead ath leisure in twenty twenty six. But how big is that at leisure market?
Right now?
The at leisure market is still big and growing. So when you think about who dominates it, it's still Nike right at over forty billion dollars in sales annually. Adidas is the second, and when you think of a Little Lemon, it's far behind. It's still you know, expected to be at twelve billion dollars in the next two a specialist it is exactly. But in terms of the market, when you think about at leisure and you think about the broader apparel market, at leisure is still growing faster than
the broader apparel. What are the growth rates the growth rates on If you look at Nike, Nike is clearly under a turnaround, But if you look at the average growth rate, you're looking at the single digits. It's in the high single digits to mid single digits. And if you think about it, next year, we're looking at low single digit growth rates for the whole year. But that's
because there is turmoil between the names, right. There are some names that are losing share, especially the smaller names, like when you think of All Birds, right, all Birds has gone through a whole transformation or is trying to, and it's really not with its shoppers like you planted. When you think of Little Lemon, the issue isn't the brand.
The issue is the product. It's the product that isn't resonating as well as it did because there isn't just much of a difference between what we already see out there and then Nike, I think, is doing a phenomenal job right now to turn around its business, so we do expect it to gain traction in the second half of next year.
Is I think I haven't seen even forever Punham. He's actually see her every day now. It's been forever. Puns actually literally one of our first annamals we hired back in the beginning of.
BI pretty incredible. I love I love it coming together.
Putum is at leisure a global marketplace because when I went over to Italy a few months ago, my friend who lives in Rome says, do not bring any of the ath leisure stuff. We don't do that here in Italy. We trust like adults. Is it talked about the global trends.
It is a global trend and now, yes, Europe is probably more on the dressier end of it, absolutely, but I think it's a growing trend in Asia, which is a very important market for at leisure. China especially still very important while trends have been mixed there for the last few years. We do think that as people begin to explore the outdoors, begin to explore fitness and health and wellness in a more meaningful way, that market is growing in that region and it is very important to growth.
Where does a company like under Armour fit in here?
So under Armour is one of those companies that have kind of went back and forth with this might be. I've seen them trying to turn around their business several times in the last twenty years. So Kevin Plank is back in the seat. They're focusing on the right things.
When you look at their playbook, they're focusing on product they're focusing on reducing wholesale penetration and off price where you really dilute the brand, and they're focusing on bringing marketing and endorsers as athletes back in a more meaningful way.
Sounds great, but I said, we've heard it before. We've heard it before, So I think execution is really key here, and then just sticking to it right because it's very easy to fall off the product cycle and for retail, irrespective of everything that we talk about, product is still king. You have to have the right product, you have to have the right customer connection, and under Armar is trying to build that. I'd say that in the early signs of it, they're doing what they need to do. It's working,
but I'm not sold yet. I need to see it play out and stay. It needs to be sustained. I think that's the key here.
Che.
I think that business is just so competitive. I mean, there's so many good brands there, and I mean you almost forget about a Puma, you know, who's been around.
Forever and they're struggling.
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