The Walt Disney Company’s stock fell sharply Thursday after the media giant reported mixed fiscal fourth-quarter results, highlighting solid streaming gains but continued weakness in its traditional entertainment business.
Shares of Disney (NYSE: DIS) dropped about 8–10% in early trading, even as earnings per share beat Wall Street expectations.
Earnings Beat, But Revenue Misses
For the quarter ending September 27, Disney reported:
- Earnings per share (adjusted): $1.11 vs. $1.05 expected
- Revenue: $22.46 billion vs. $22.75 billion expected
Net income more than doubled year over year to $1.44 billion, or 73 cents per share, up from $564 million (25 cents per share) a year ago. However, total revenue was flat compared to last year, and free cash flow tumbled 37% to $2.56 billion, sparking concern among investors.
Disney also announced plans to raise its dividend and double its share buyback program in fiscal 2026 — signaling confidence in long-term growth.
“Overall, we’re leaving the year with a lot of momentum,” CFO Hugh Johnston told CNBC, pointing to strong performance in streaming and theme parks.
Streaming Shines as TV Falters
Disney’s entertainment unit saw revenue fall 6% to $10.21 billion, dragged down by weak performance in its TV networks and movie division.
Linear television continued to struggle amid ongoing cord-cutting and a carriage dispute with Google’s YouTube TV, which has kept ESPN and other Disney channels off the platform since October 31.
Advertising revenue also declined, with Disney citing $40 million less in political ad spending and the impact of its Hotstar India joint venture.
Still, streaming was the clear bright spot:
- Operating income for streaming jumped 39% to $352 million.
- Linear network income fell 21% to $391 million.
The gains came from price hikes, new international subscribers, and expanded distribution deals. Disney’s partnership with Charter Communications helped add millions of ad-supported Hulu subscribers.
Disney+ added 3.8 million new subscribers, bringing its total to 131.6 million, while Hulu reached 64.1 million. Combined, Disney’s streaming platforms now boast nearly 200 million subscribers.
However, the company said this would be the last time it reports subscriber numbers or ARPU (average revenue per user), following Netflix’s lead in focusing on profitability rather than growth figures.
Sports Stay Solid with ESPN’s App Push
Disney’s sports division, anchored by ESPN, posted a 3% revenue increase to roughly $4 billion. Operating income stayed flat at $898 million, held back by costs from the launch of its new ESPN streaming app and higher programming expenses.
Johnston said ESPN’s direct-to-consumer push — offering all the TV network’s content plus ESPN+ — is helping retain viewers and boost engagement.
He noted that 80% of new ESPN streaming subscribers signed up through bundles that include Disney+ or Hulu, a move that improves retention and lifetime value.
Theme Parks and Cruises Lift Experiences Division
Disney’s “experiences” segment — which includes theme parks, resorts, cruises, and consumer products — continued to perform well.
- Revenue: Up 6% to $8.77 billion
- Operating income: Up 13% to $1.88 billion
Johnston said bookings rose 3%, and spending per visitor at parks increased by 5%. Disney’s cruise business, in particular, showed strong demand, with ships selling out even as the fleet expanded.
“So that added capacity is filling up quickly,” Johnston said.
Looking Ahead: Growth and Challenges
Disney expects double-digit operating income growth in its entertainment business by fiscal 2026, with high single-digit gains for experiences and low single-digit growth for sports.
By 2027, the company projects double-digit EPS growth, fueled by cost discipline, new content releases, and stronger cash flow.
CEO Bob Iger said the company’s turnaround strategy is gaining traction:
“This was another year of great progress as we strengthened Disney by leveraging the power of our creative brands. Our strategy and strong balance sheet allow us to invest in high-quality offerings while delivering greater returns to shareholders.”
Bottom Line
Disney’s latest earnings underscore a company in transition — streaming is thriving, parks are booming, but legacy TV continues to drag.
With free cash flow plunging and the end of detailed subscriber reporting, investors are cautiously optimistic but looking for proof that Disney can sustain profitability in the streaming era.
