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Disney's 'Inside Out 2' delivers box office windfall in much needed win for Pixar

Disney's (DIS) "Inside Out 2" secured an estimated $155 million in its domestic box office debut, far surpassing expectations as the company attempts to revamp its box office strategy after multiple theatrical misses.

The long-awaited sequel from Pixar follows the 2015 original title, which secured $859 million globally at the box office before going on to win best animated feature at the Oscars that next year.

It's a huge win for Disney after both Pixar and Walt Disney Animation have seen more losses than wins in recent years, with the studios plagued by various leadership changes and a pandemic that upended the entire industry.

"Inside Out 2" (Pixar/Disney)
"Inside Out 2" (Pixar/Disney)

In 2022, Pixar's "Toy Story" prequel "Lightyear" fell way short of analyst expectations, producing just $51 million in its domestic debut before going on to gross a mere $118 million in theaters ahead of an expedited Disney+ release.

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Shortly after, the animated film "Strange World," starring Jake Gyllenhaal and Dennis Quaid, cost the media giant a reported $200 million after it opened to dismal reviews. It was one of the worst flops of 2022.

And last year didn't make up for the poor performances, either, with Pixar's "Elemental" delivering the studio's worst opening weekend box office performance ever. Similarly, Disney's animated title "Wish" disappointed after it failed to hit $20 million during its three-day opener Thanksgiving weekend.

Industry watchers blamed the misses on poor marketing plans, along with audience confusion over which titles were theatrical exclusives and which were streaming-only releases on the company's Disney+ platform.

Competition has also intensified, particularly within the animation space, as NBCUniversal (CMCSA) and Sony (SONY) debuted strong titles last year — including the $1 billion "Super Mario Bros. Movie" and "Spider-Man: Across the Spider-Verse.

Disney executives have taken notice, with CEO Bob Iger stressing a strategy of quality over quantity at the box office.

"We are focusing heavily on the core brands and franchises that fuel all of our businesses and reducing output overall to enable us to concentrate on fewer projects and improve quality, while continuing our effort around the creation of fresh and compelling original IP," he said late last year.

For Pixar, that means about three movies every two years, with every other film being either a sequel or spinoff, Pixar's president Jim Morris told Bloomberg.

The studio will also return to its theatrical-first model while simultaneously developing separate series based on existing IP for Disney+.

"I hope that we will not release another feature film on Disney+," Morris said. "If we do more stuff for Disney+, it should be a series, and then that makes a clean demarcation between what we do for theaters and what we do for streaming."

As part of the revamp, Pixar laid off 14% of its 1,300 employees last month, eliminating about 175 positions. This was largely due to the pullback of streaming series, a person familiar with the matter told Yahoo Finance.

Still, more will have to be seen to know whether or not Disney truly has its mojo back.

"Generally, the performance of any given movie doesn’t affect our longer-term outlook," Morningstar analyst Matthew Dolgin told Yahoo Finance. Dolgin, who has a Hold rating on the stock and $115 price target, added more needs to be proven in order to signal a "meaningful" shift in expectations for Disney's future box office results and, therefore, its potential impact on the company's growth.

The next big test will come this fall with an animated "Moana" sequel set to hit theaters in November. A "Deadpool" sequel from Marvel is slated for July.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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