Disney stock slid sharply on Thursday after the company reported quarterly results that beat analyst expectations on earnings but fell short on revenue. The report highlighted a widening divide between Disney’s fast-growing streaming and experiences divisions and the continued struggles of its traditional TV networks and theatrical film business.
Shares of Disney stock were down roughly 8 percent in early trading, wiping out several weeks of gains and raising questions about what the mixed results mean for long-term investors.
Earnings Beat Expectations, But Revenue Disappoints
For the fiscal fourth quarter ending September 27, Disney reported earnings per share of 1.11 dollars on an adjusted basis, topping Wall Street forecasts of 1.05 dollars. Revenue came in at 22.46 billion dollars, slightly below the 22.75 billion dollars analysts expected.
Net income for the quarter surged to 1.44 billion dollars, or 73 cents per share, doubling the 564 million dollars, or 25 cents per share, recorded in the same period last year. Adjusting for one time items, earnings per share landed at 1.11 dollars.
Total revenue of nearly 22.5 billion dollars was slightly lower than last year’s comparable quarter, even as the company managed to expand profits through cost controls and price increases in its streaming unit.
Disney also announced plans to increase its dividend and double its share buyback program for fiscal 2026, a move aimed at reassuring investors concerned about volatility in Disney stock.
“We are leaving the year with a lot of momentum,” CFO Hugh Johnston told CNBC’s Squawk Box when discussing the performance of Disney’s streaming and experiences businesses.
Entertainment Revenue Falls as Linear Networks Struggle
Disney’s entertainment segment brought in 10.21 billion dollars in revenue, a decline of 6 percent from a year ago. The weakness came from two areas: the ongoing decline in linear television and another soft theatrical release slate.
The TV networks have faced additional challenges due to a high profile carriage dispute with YouTube TV. ESPN, ABC, FX and other Disney channels have been unavailable to YouTube TV subscribers since October 31 as negotiations between the two sides continue.
Johnston said Disney expected a difficult negotiation and is prepared to “go as long as they want to.”
CEO Bob Iger told investors, “We are trying really hard, as I said working tirelessly, to close this deal, and we are hopeful that we will be able to do so on a timely enough basis to at least give consumers the opportunity to access our content over their platform.”
The networks also saw a 40 million dollar decline in political advertising revenue and impacts related to Disney’s 2024 joint venture in India with Hotstar.
Operating income for the linear networks plunged 21 percent to 391 million dollars.
Streaming Continues to Drive Growth and Profitability
Streaming was once again the brightest spot for Disney stock investors. Operating income for the streaming unit rose 39 percent to 352 million dollars as subscription price increases took effect across Disney+, Hulu, and bundled offerings.
Iger highlighted the progress: “This is a significant achievement when you consider that just three years ago our [streaming] business was running a 4 billion dollar operating loss.”
Disney+ added 3.8 million paid subscribers, bringing the total to 131.6 million. Hulu ended the quarter with 64.1 million subscribers. A large share of the subscriber growth came from the expanded carriage deal with Charter Communications, which gives Charter customers access to ad supported Hulu.
Johnston noted that about half of the subscriber gains were driven by the Charter partnership, with the remaining growth coming from retail customers, many in international markets.
One major development this quarter was the launch of Disney’s new ESPN direct to consumer app, which mirrors the full content slate of ESPN’s television networks and ESPN+. According to Iger, early engagement with the app has been “very, very encouraging.”
Johnston said on CNBC that 80 percent of new retail ESPN subscribers are joining through bundles, which typically boost retention and revenue over time.
Disney will no longer report subscriber or ARPU metrics for Disney+ or Hulu going forward, mirroring Netflix’s reporting strategy.
Sports Revenue Holds Steady Despite Transition to Streaming
Revenue for Disney’s sports division, driven largely by ESPN, grew 3 percent to about 4 billion dollars. Operating income was flat at 898 million dollars, weighed down by costs related to launching the ESPN app and higher programming expenses.
Even with cord cutting accelerating, live sports remains the strongest asset within the traditional TV bundle, and investors continue to view ESPN as Disney’s most valuable media property.
Experiences and Parks Deliver Strong Growth
The experiences segment, which includes theme parks, resorts, cruises, and consumer products, continued to deliver robust growth. Revenue rose 6 percent to 8.77 billion dollars, while operating income jumped 13 percent to 1.88 billion dollars.
Johnston said higher prices and strong bookings continue to drive performance. Bookings are up 3 percent heading into Disney’s fiscal first quarter, and spending per guest at the parks is up 5 percent.
Disney’s cruise division was a standout performer. Johnston noted that ships are selling out at the same rates as before despite an expanding fleet.
Two new ships are on the way: Disney Destiny launches this month, and Disney Adventure, the company’s first Asia based ship, begins sailing in March.
The international parks also posted strong numbers. Revenue rose 10 percent to 1.74 billion dollars, with Disneyland Paris delivering particularly strong growth.
Johnston said overall demand at domestic parks is in line with expectations and that Comcast’s new Epic Universe theme park in Florida has had a limited impact on Disney’s traffic so far.
What the Results Mean for Disney Stock Investors
Disney stock took a hit because the revenue miss signaled continued weakness in traditional TV and theatrical releases. Investors have largely accepted that linear networks will remain a drag for the foreseeable future, but the size of this quarter’s decline weighed on sentiment.
However, there are several bright spots for long term investors:
- Streaming profitability is accelerating faster than expected
- Disney+ and Hulu subscriber growth is stabilizing
- ESPN’s direct to consumer transition is gaining traction
- Parks and cruises continue to deliver strong revenue and income
- A larger dividend and doubled buyback plan for fiscal 2026 adds shareholder value
- Profit margins in experiences remain among the strongest in the industry
For long term holders of Disney stock, the biggest question is whether the company can fully stabilize its entertainment unit while continuing the profitable expansion of Disney+, Hulu, and ESPN.
Disney enters next year with improving profitability, strong cash flow from experiences, and a more disciplined financial structure. If entertainment and theatrical releases rebound, investors may see the sharp drop in Disney stock as an opportunity rather than a warning sign.
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