Disney continued to make progress in streaming in its fiscal fourth quarter, with Disney+ and Hulu growing their combined profit 39% to $352 million and revenue 8% to $6.25 billion.
The growth in streaming was fueled by price increases, the addition of 12.4 million subscribers across the two services and the absence of Star India, offset by higher programming, production, marketing, technology and distribution costs.
But shares of Disney fell over 7% on Thursday after the company’s overall operating profit fell 5% to $3.48 billion, weighed down by a 21% decline at its linear entertainment networks, a loss in its content, sales and licensing unit, and higher marketing, programming and production costs at ESPN.
Revenue also came in flat at $22.5 billion as growth in sports and experiences was weighed down by a 16% decline at its linear entertainment networks and lower theatrical distribution results, reflecting the releases of “The Fantastic Four: First Steps,” “The Roses” and “Freakier Friday” and the carry-over performance of the live-action “Lilo & Stitch.” The prior-year quarter included the box office-smashing release of “Deadpool & Wolverine” and the carry-over performance of “Inside Out 2.”
Here are the quarter’s results:
Net income: $1.3 billion, compared to $460 million a year ago.
Earnings Per Share: 73 cents per share. Excluding certain items, EPS came in at $1.11, compared to $1.02 per share expected by analysts surveyed by Yahoo Finance.
Revenue: $22.5 billion, flat year over year, compared to $22.78 billion expected by analysts surveyed by Yahoo Finance.
Streaming subscribers: Added 12.4 million subscribers across Disney+ and Hulu for a total of 195.7 million. Disney+ added 3.8 million subscribers for a total of 131.6 million. Hulu added 8.6 million for a total of 64.1 million, largely driven by the company’s expanded distribution deal with Charter Communications.
The company no longer breaks out subscriber or average revenue per user figures for ESPN+ and did not break out figures for its new ESPN streamer. It will stop reporting the metrics for Disney+ and Hulu starting in the first quarter of 2026.
A unified standalone app combining Disney+ and Hulu is also set to launch in 2026. As part of this change, Hulu has replaced the Star brand in international markets and Disney+ has rolled out new homepage updates, including better personalization and improved recommendations.
Looking ahead, Disney expects double digit earnings per share growth in fiscal year 2026 and 2027. It also plans to invest $24 billion in entertainment and sports content and expects $19 billion in cash provided by operations and $9 billion in capital expenditures in fiscal 2026.
Additionally, it is doubling its share repurchase target to $7 billion. The board has declared a dividend of $1.50 per share, payable in two installments on Jan. 15 and July 22, 2026.
Disney executives address YouTube TV dispute and M&A
When asked how the YouTube TV carriage dispute would impact Disney’s earnings guidance, chief financial officer Hugh Johnston said the company “built a hedge into that with the expectation that these discussions could go for a little while.”
“In terms of the dollar impacts, keep in mind, there’s two pieces to it. There’s the piece that we’re not getting paid for and then the piece that we’re picking up by virtue of subscribers moving elsewhere,” Johnston added. “But beyond that, I don’t want to comment because it is a live negotiation right now.”
The executive told CNBC earlier on Thursday that its prepared for a “challenging battle” with the Google-owned platform, adding that its “ready to go as long as they want to.”
Disney CEO Bob Iger reiterated that the deal it has already proposed is “equal to or better than what other large distributors have already agreed to.”
“While we’ve been working tirelessly to close this deal and restore our channels to the platform, it’s also imperative that we make sure that we agree to a deal that reflects the value that we deliver, which both YouTube, by the way, and Alphabet, have told us, is greater than the value of any other provider,” Iger continued. “So we’re not trying to break new ground.”
As for M&A, you can count Disney out. As Warner Bros. Discovery puts itself up for sale, Johnston argued that Disney doesn’t need to get involved, touting the portfolio of IP it’s already built from acquisitions of Fox’s entertainment assets, Lucasfilm, Marvel and Pixar.
“We’ll see how the various moves play out,” Johnston said. “But we like the hand that we have right now, so I wouldn’t expect us to participate in making any significant moves.”
Disney Entertainment
Disney’s entertainment segment, which includes Disney+, Hulu and the company’s linear networks, saw revenue fall 6% to $10.2 billion, while operating profit tumbled 35% to $691 million due to a loss in its content, sales & licensing unit and a 21% decline at its linear networks.
Disney+ reported a total of 59.3 million domestic subscribers and 72.4 million international subscribers, marking increases of 3% and 4% from the previous quarter, respectively. Average revenue per user came in flat at $8.09 domestically as higher advertising revenue was offset by the impact of subscriber mix shifts, while international ARPU grew 4% to $8, due to a favorable impact from foreign exchange rates and subscriber mix shifts.
Hulu SVOD only subscribers grew 17% to 59.7 million, while Hulu + Live TV subscribers grew 2% to 4.4 million. Hulu SVOD only ARPU fell to $12.20 due to the impact of subscriber mix shifts, while Hulu + Live TV ARPU fell to $100.02 due to lower advertising revenue.
The company recently completed the merger of its Hulu + Live TV business with Fubo. Reaching nearly 6 million subscribers in North America, Disney now holds approximately 70% interest in the newly combined company, while Fubo shareholders retain a 30% interest.
As Disney+ and Hulu combine into a single app experience, Iger told analysts that there’s an opportunity to use the former as a “portal to all things Disney” moving forward.
“There’s clearly an opportunity for commerce. There’s an opportunity to use it as an engagement engine for people who want to go to our theme parks, want to stay at our hotels, and want to enjoy our cruises, our cruise ships,” Iger said. “And obviously, there’s a huge opportunity for games and the investment that we made in the agreement that we reached with Epic Games. While that will largely be on their platform, it gives us an opportunity to integrate a number of game like features into Disney+.”
He also touted the “phenomenal” opportunities to deploy generative AI across the company, including through data collection and mining and giving Disney+ subscribers the ability to create and consumer user-generated content that will primarily be short-form.
In June, Disney and Universal sued AI platform Midjourney for copyright infringement over allowing its characters to be used for AI generation. Iger tipped to the ongoing litigation on the earnings call, but indicated Disney is also having “productive” conversations with some of the AI companies.
“We’ve been in some interesting conversations with some of the AI companies, and I would characterize some of them as quite productive conversations as well, seeking to not only protect the value of our IP and of our creative engines, but also to seek opportunities for us to use their technology to create more engagement with consumers, and we feel encouraged by some of the discussions that we’re having” Iger said.
The CEO noted it’s “imperative” to protect their IP with this technology, but he’s “hopeful that ultimately we’ll be able to reach some agreement in the industry or the company on its own with some of these entities that would, in fact, reflect our need to protect the IP.”
Disney’s linear entertainment networks saw revenue drop 16% to $2.06 billion, while operating profit plunged 21% to $391 million.
The segment saw revenue dip 7% to $1.86 billion and profit fall 5% to $329 million domestically, due to lower affiliate revenue from fewer subscribers, declines in average viewership and lower ad revenue from lower political advertising and the comparison to the Emmys in the prior-year period. The lower affiliate revenue was offset by higher rates and lower programming and production costs for non-scripted programming, offset by higher costs for scripted programming, including more original content.
Meanwhile, revenue fell 56% to $202 million and the segment swung to an operating loss of $33 million internationally due to the $8.5 billion Star India transaction with Reliance Industries.
The content sales, licensing and other unit also swung to a loss of $52 million, compared to a profit of $316 million a year ago, while revenue fell 26% to $1.9 billion. The results reflected the disappointing performance of “The Fantastic Four: First Steps” and “The Roses,” as well as difficult comparisons to last year’s smash hit “Deadpool & Wolverine” and carryover of “Inside Out 2.”
Iger said the company is “very bullish” about its upcoming film slate, which includes “Zootopia 2,” “Avatar: Fire and Ash,” “The Mandalorian and Grogu,” “Toy Story 5,” the live-action “Moana,” and “Avengers: Doomsday.”
In the first quarter of 2026, Disney is expecting a streaming profit of $375 million, adverse impacts of $400 million due to theatrical slate comparisons and higher costs, including marketing for “Avatar: Fire and Ash,” and $73 million from Star India, and lower political ad revenue of $140 million. For full year 2026, Disney expects double-digit entertainment profit growth weighed to the second half of the year and a streaming operating margin of 10%.
“In no way are we going to get there through cost cutting. The way we’re going to get there is through revenue growth and through driving operating leverage through the business,” Johnston said of the streaming business. “We didn’t give a specific revenue guide, but our objective and our aspiration is very much to be growing the top line of that business by double digits.”
“We’ll obviously continue to invest at a reasonable level in content, leaning a bit more towards the international side as we identify opportunities in specific markets to grow the international business where we have a big opportunity,” he continued. “In addition to that, we’ll be investing in product. So the technology area will get some some level of investment as well.”
Disney Sports
Disney’s sports segment, which includes the ESPN linear network, ESPN+ and its new standalone ESPN streaming service, saw revenue climb 2% to $3.98 billion, while profits fell 2% to $911 million.
ESPN saw domestic revenue grow 2% to $3.58 billion and profit fall 3% to $908 million. Impacting the results were higher marketing costs due to the launch of ESPN’s standalone streamer, higher programming and production costs from rate increases and new sports rights, ad revenue growth due to higher impressions and rates, and higher subscription and affiliate revenue from higher rates and the comparison to the temporary suspension of carriage with an affiliate in the prior year period, offset by fewer subscribers.
International ESPN grew revenue 10% to $401 million and narrowed its losses 75% to $10 million. The results were attributable to higher affiliate revenue due to a rate increase offset by fewer subscribers.
Executives declined to disclose how many subscribers ESPN Unlimited has gained since launching in August, but Iger noted that the number of sign-ups has been “substantial”and said 80% have signed up for the service via Disney’s trio bundle. ESPN+, which is still marketed and sold separately in part due to contractual rights commitments with several leagues both domestically and internationally, no longer reports quarterly subscriber and average revenue per user metrics. The network’s content is also available through a tile in Disney+.
ESPN has agreed to acquire the NFL Network, the linear RedZone channel and NFL Fantasy, subject to regulatory approval, in exchange for the league taking a 10% stake. Disney currently owns 80% of ESPN, while Hearst owns the remaining 20%. It also struck a new sports betting partnership with DraftKings and is dropping its previous partner PENN Entertainment.
For full year 2026, Disney expects low-single digit sports profit growth weighted to the fourth quarter due to the timing of rights expenses, which will hurt the second and third quarters.
Disney Experiences
Disney’s experiences segment, which includes its theme parks, hotels, Disney Cruise Line and consumer products, saw revenue rise 6% to $8.8 billion and profits jump 13% to $1.9 billion.
Domestic revenue increased 6% to $5.86 billion and profits climb 9% to $920 million due to growth at Disney Cruise Line offset by higher fleet expansion costs from the launch of the Disney Treasure. International revenue jumped 10% to $1.74 billion and profits surged 25% to $375 million, due to volume, attendance and guest spending growth at Disneyland Paris, offset by higher costs from new guest offerings.
Consumer products revenue grew revenue 3% to $1.17 billion and profits 14% to $583 million due to higher licensing revenue.
When asked about the impact of competition from Universal’s Epic Universe theme park on its results, Johnston said it was “very much in line” with expectations.
“If anything, it seems to be, in fact, impacting the rest of the competition down in Florida more than it’s impacting us. From a consumer perspective, we certainly feel, feel good about it,” he said.
In the first quarter of fiscal 2026, Disney expects to incur $90 million in pre-opening expenses at Disney Cruise Line, driven by the Disney Destiny and Adventure ships launching on Nov. 20 and in March, respectively, and $60 million in dry dock expenses.
For the full year, it expects high-single digit growth in profit weighed to the second half of the year, $160 million in pre-opening expenses driven by the Disney Adventure and Destiny ships and $120 million in dry dock expenses. Five additional cruise ships are scheduled for launch beyond fiscal 2026.
Disney will open World of Frozen at Disneyland Paris this spring and has expansion projects underway at all of its theme parks across the globe. It also has a new theme park planned for Abu Dhabi, which will expand its global reach.
