- Disney reported a net profit of $2.6 billion, or adjusted earnings of $2.06 per share, on revenue of $25.25 billion, compared to earnings of $1.85 per share and revenue of $25.4 billion expected by Wall Street analysts.
- The entertainment giant will shift its consumer products business from its Experiences division to its Entertainment division to better reflect the returns from the content it produces
- Disney+ will add more games from ESPN starting this fall to help drive engagement and upsell subscribers to its trio bundle
Disney posted fiscal third-quarter results that topped Wall Street earnings expectations, with a profit of $2.6 billion, or adjusted earnings of $2.06 per share, but slightly missed on revenue, which was up 7% to $25.25 billion and fueled by gains in its streaming and experiences divisions.
Disney+ and Hulu’s combined profit more than doubled to $712 million, while total entertainment streaming revenue grew 11% to $5.5 billion, driven by a 15% increase in subscription revenues and 3% bump in ad revenue. The company attributed the growth in part to an increase in subscribers, which are no longer disclosed on a quarterly basis, price hikes and reduced subscriber turnover driven by product and technology improvements.
As the entertainment giant looks to boost its reach, engagement and subscriber retention, CEO Josh D’Amaro said it would begin introducing elements of its vision to transform Disney+ into a “comprehensive membership ecosystem” and “digital centerpiece” in Spring 2027 (we explored its prospects here).
Meanwhile, the Disney Experiences business grew revenue 10% to $1.68 billion and profits 20% to $3.02 billion, fueled by “Toy Story 5” and “Star Wars: The Mandalorian and Grogu” merchandise sales and strength in the domestic parks, cruise line, consumer products and Disneyland Paris.
Weighing on Disney’s growth for the quarter was softness in its Asia theme parks, which is expected to continue in the fourth quarter. Content sales also fell 6% to $1.6 billion, driven by an 8% decrease from TV/VOD and home entertainment distribution revenue.
Additionally, Disney’s sports division saw profits tumble 17% to $858 million due to four-game sweeps in early rounds of the NBA Playoffs and the impact of a network carriage dispute, despite segment revenue climbing 4% to $4.5 billion.
Despite the mixed results, Disney shares climbed over 3% in pre-market trading on Wednesday.
Disney+ and Hulu continue to be a bright spot
Disney’s Entertainment division grew revenue 6% to $11.35 billion and profits rose 64% to $1.68 billion. Total entertainment subscription and affiliate fees grew 12%, driven by the Fubo deal, higher rates and subscriber growth, while ad revenue fell 1% due to lower rates, offset by the Fubo deal and more impressions.
Disney is currently generating more from its streaming business than it is from linear TV and expects that shift to continue to grow over time. Streaming operating margin came in at 13% for the quarter, benefitting in part from the timing of marketing and programming spend. Disney continues to expect a double-digit entertainment streaming operating margin for the full year.
Over the next three years, Disney+ will triple the number of local original series available on the platform to drive new sign-ups internationally and reduce churn. It also remains on track to complete its integration with Hulu into a unified standalone app by year end and is adding autoplay video to the homepage and social clips to its Verts feature.
Additionally, Disney sold its 50% stake in A&E Global Media to joint venture partner Hearst for $1.2 billion. The proceeds will be used to buyback Disney stock, with share repurchases in 2026 expected to now total at least $9 billion.
Disney is also launching a pilot with TikTok in the U.S. in the coming months that will bring Disney-centric fan-created content to Disney+. Short-form videos from participating creators who opt-in to the program will live on both TikTok and in Verts on Disney+ and feature characters and stories from across Disney’s brands including Pixar, Marvel, Star Wars, FX and more. TikTok will offer their creators access to assets related to hundreds of films and series from Disney’s vast library of enduring franchises and beloved IP.
Disney touts ‘Toy Story 5’ as ‘The Mandalorian and Grogu’, live-action ‘Moana’ underperform
Disney touted the release of “Toy Story 5” during the quarter, which has surpassed $1 billion at the global box office and brings the franchise’s lifetime global box office to more than $4 billion.
It added that the film’s value has extended beyond the theatrical window, with the franchise seeing over two billion hours streamed on Disney+ and over $1 billion in annual retail sales. In total, the “Toy Story” franchise has generated more than $16 billion in estimated income for the company and over $50 billion in global economic impact.
In addition to “Toy Story,” the company touted the performance of “Devil Wears Prada 2.”
Meanwhile, “The Mandalorian and Grogu” underperformed expectations, but contributed to value creation through the update for “Millennium Falcon: Smuggler’s Run” in Disneyland and Disney World and “healthy retail sales” for the Star Wars franchise during the quarter.
The live-action “Moana” also underperformed, but is expected to be a strong title on Disney+ and extend the franchise’s reach, which includes three films, a theme area in EPCOT and a robust global merchandise business.
Disney+ adding more games from ESPN
Sports segment subscription and affiliate fees increased 8% to $3.14 billion, with half of the growth coming from its NFL Network acquisition. Ad revenue grew 5% to $1.2 billion, due to higher impressions.
As Disney looks to transform ESPN into the “front door” for sports fans, the company has struck partnerships with the NFL, MLB, Fox One and The CW Network. The latter partnership will see more than 800 annual hours of CW Sports stream live on the ESPN app for viewers with an ESPN Unlimited subscription plan.
The company also said it would deliver a “more robust subset” of ESPN games for Disney+ subscribers starting this fall, anchored by additional college football simulcasts alongside “College GameDay,” as it looks to drive greater engagement on the service and help upsell subscribers to its trio bundle, which includes ESPN Unlimited.
ESPN also recored its best month ever in June for digital and social engagement, reaching nearly 230 million unique fans and over 80% of the U.S. internet population.
Disney domestic theme parks and Disneyland Paris, cruises and consumer products offset Asia softness
Attendance at Disney’s domestic theme parks grew 3% versus the prior-year quarter, primarily driven by Walt Disney World, domestic tourists and annual passholders, summer promotions and new experiences.
It continues to face headwinds from international attendance at its domestic theme parks, but those trends moderated from the prior quarter. It also saw strong attendance growth at Disneyland Paris following the opening of World of Frozen. Forward bookings at Walt Disney World remain robust and Disney expects another quarter of global guest growth in the fourth quarter, despite consumer softness in Asia.
The third quarter was also the first full quarter since the launch of the Disney Destiny and Adventure cruise ships, which increased stateroom capacity by approximately 50% compared to the prior-year quarter. The company remains encouraged by current occupancy and forward bookings and plans to bring additional cruise capacity online in the years ahead.
Disney also noted that AI is accelerating how the company designs, builds and operates its attractions, with a J.A.R.V.I.S. AI tool made available to its more than 2,000 Imagineers earlier this year. It is also using AI-powered digital twins and simulation tools to design and stress-test new attractions, including for its upcoming the Abu Dhabi park, and using the technology to simplify vacation booking and planning and give its cast members tools to better serve guests.
Additionally, Disney received a tariff refund of approximately $100 million during the quarter. Though it may receive additional refunds in upcoming quarters, the company said the dollar amounts are expected to be insignificant.
Disney shifting consumer products to entertainment division, teases more layoffs and cost cuts
Looking ahead, Disney is forecasting fourth quarter operating profit of $4.9 billion and adjusted earnings per share growth of approximately 16% in fiscal 2026.
The Experiences unit is expected to come in at the high end of its prior high-single-digit operating profit guidance for the fiscal year. It also anticipates sports operating profit in the mid-single digits for the year and double-digit entertainment operating profit. However, its fourth-quarter entertainment results will reflect the impact of the disappointing live-action “Moana,” as well as a softer-than-expected advertising environment, particularly in domestic streaming.
Additionally, the company anticipates double-digit adjusted earnings per share growth in fiscal 2027.
Starting in the first quarter of 2027, most of Disney’s consumer products business will also shift from the experiences segment to the entertainment segment to better reflect the returns from the content it produces.
The company also remains focused on reducing costs across the company, including through additional layoffs and selling, general and administrative expenses. Disney is currently “mid-stream” in this effort and will provide future updates on its progress.
