Disney Earnings Beat, Stock Sinks on Weak Outlook

Walt Disney Co. reported fiscal first‑quarter results ahead of Wall Street expectations, with revenue rising 5% year over year to about $26 billion and adjusted earnings per share of $1.63 versus forecasts around $1.56–$1.58. Despite the beat, adjusted EPS declined about 7% from the prior year, and overall operating income fell 9%, contributing to volatile trading in the stock.

Net profit came in at $2.48 billion, down 6% from a year earlier. Investors initially pushed the shares as high as $117.50 after the release, but the stock then slid sharply, trading down roughly 3% to 5% by late morning and leading decliners in the Dow Jones Industrial Average.

Disney’s Experiences division, which includes theme parks, resorts, cruises and consumer products, again drove results. Segment revenue climbed 6% to a record $10 billion, while operating income also rose 6% to about $3.3 billion. The unit generated 39% of company revenue but about 72% of overall operating profit, remaining Disney’s primary earnings engine.

U.S. parks, including Walt Disney World, posted 8% operating income growth, with attendance up about 1% and per‑capita spending up roughly 4%. CFO Hugh Johnston said Walt Disney World had a “very good quarter,” aided by comparisons to a prior‑year hurricane period, and reported that full‑year bookings are up about 5%, weighted to the back half of the year.

Cruise operations benefited from higher passenger counts and the addition of the Disney Destiny, the seventh ship in the fleet. However, management guided to only “modest” Experiences growth in the current quarter, citing weaker international visitation to U.S. parks and pre‑opening costs tied to the Disney Adventure cruise ship and World of Frozen at Disneyland Paris.

Entertainment revenue, which includes media networks, studios and streaming, increased about 7%, but segment operating income fell roughly 35% to $1.1 billion. Higher programming and marketing costs, including spending for an expanded slate of holiday releases such as “Avatar: Fire and Ash,” weighed on results and offset gains from blockbuster titles.

CEO Bob Iger highlighted more than $6.5 billion in global box office in calendar 2025 and said “Zootopia 2” became Hollywood’s highest‑grossing animated film ever at about $1.7 billion, as well as the highest‑grossing foreign film of all time in China. He emphasized the “interconnected” impact of franchises like Zootopia across theatrical, streaming, consumer products and parks, including Shanghai Disneyland’s Zootopia land.

Looking ahead, Iger pointed to an upcoming slate including “The Devil Wears Prada 2,” “The Mandalorian and Grogu,” “Toy Story 5,” a live‑action “Moana,” and “Avengers: Doomsday,” with Johnston noting expected benefits for the back half of the year through downstream consumer products and park demand.

Disney’s streaming operations posted significant improvement. Subscription revenue grew 12% to 13%, driven by price increases, North American and international growth, and uptake of bundles such as Duo, Trio and Max. Segment revenue rose about 11% and streaming operating profit jumped 72% year over year to roughly $450 million.

Executives said streaming had previously been losing about $1 billion per quarter but achieved a 5% margin last year and is guided to reach a 10% margin this year. For the current quarter, Disney expects streaming profit to approach or reach about $500 million, while projecting flat year‑over‑year operating income for the broader entertainment segment.

Iger reported that early results from an integrated Disney+ and Hulu experience have reduced churn, and bundled subscribers that include ESPN also churn less. Disney is working toward a one‑app experience that combines Disney+ and Hulu while preserving standalone options, with a fully integrated version targeted for around the end of the calendar year.

Sports remains Disney’s smallest segment by revenue and profit. Revenue rose about 1%, but operating income declined 23% to 25% to around $191 million, pressured by rising sports rights costs and distribution issues. A temporary YouTube TV carriage suspension reduced segment results by roughly $110 million in the quarter, and Disney anticipates about a further $100 million decline this quarter.

Iger cited the launch of ESPN Unlimited and strong ratings, including ESPN’s most‑watched college football regular season since 2011, ABC’s best college football season since 2006, and Monday Night Football’s second‑highest viewership in 20 years. He also confirmed closing a transaction with the NFL to acquire NFL Network and related media assets, including linear rights to RedZone.

Alongside the earnings, investor attention focused on CEO succession. Multiple reports said Disney’s board, led by chairman and former Morgan Stanley CEO James Gorman, is meeting as soon as this week to vote on Bob Iger’s successor, with internal candidates including Disney Experiences chairman Josh D’Amaro and Entertainment co‑chair Dana Walden. Bloomberg and other outlets reported the board is aligning around D’Amaro, though no decision has been announced.

Disney reiterated its goal of double‑digit EPS growth for fiscal 2026, a push to lift streaming margins toward 10%, and plans to repurchase about $7 billion of stock this year. Iger told investors he believes the company is “in much better shape today than it was three years ago” and that his eventual successor will inherit what he described as a strong platform for continued growth.