Disney Q4 2025: EPS Beat, Revenue Miss, Streaming Growth
Key Points
- Disney reported Q4 fiscal 2025 adjusted EPS of $1.11, beating analyst estimates by $0.08 to $0.09, but revenue of $22.46 billion missed expectations by approximately $320 million and was flat year-over-year.
- Streaming subscriptions for Disney+ and Hulu combined rose by 12.4 million to 196 million, with Disney+ alone adding 3.8 million subscribers to reach 132 million, marking continued growth despite industry challenges.
- Operating income declined 5% to $3.48 billion, driven by a 35% drop in Entertainment segment income due to weaker theatrical performance and a 16% revenue decline in linear TV networks, while Parks and Experiences and Sports segments showed gains.
- Disney announced plans to double share repurchases to $7 billion for fiscal 2026 and increase its dividend by 50% to $1.50 per share, alongside guidance for double-digit EPS growth in fiscal 2026 and 2027 and improved streaming profitability.
Mixed Fourth Quarter Financial Results
The Walt Disney Company reported its fiscal fourth-quarter 2025 earnings with adjusted earnings per share (EPS) of $1.11, surpassing analyst expectations that averaged around $1.03 to $1.06. This represented an earnings surprise of approximately 7.7% to 8.4%. However, the company’s revenue came in at $22.46 billion, falling short of Wall Street estimates by roughly $320 million to $520 million depending on the source, and was essentially flat compared to the prior year’s $22.57 billion. The revenue miss and flat top line underscored ongoing challenges in Disney’s traditional media businesses, particularly its linear television networks and theatrical releases. Total segment operating income declined 5% year-over-year to $3.48 billion, reflecting a 35% drop in the Entertainment segment’s operating income to $691 million. This decline was attributed to weaker box office results and a 16% revenue decrease in linear networks, driven by lower advertising revenue and subscriber losses. Despite these headwinds, Disney’s Parks and Experiences segment posted a 13% increase in operating income to $1.88 billion, supported by strong domestic and international performance, including growth at Disneyland Paris and the cruise line business. The Sports segment also showed modest gains, with operating income of $911 million, down slightly by 2% but with revenue up 2% year-over-year.
Streaming Growth and Profitability Momentum
Disney’s direct-to-consumer (DTC) streaming business continued to be a bright spot amid the mixed quarter. The combined Disney+ and Hulu subscriber base grew by 12.4 million sequentially to 196 million, with Disney+ alone adding 3.8 million subscribers to reach 132 million. This subscriber growth was partly driven by a new distribution deal with Charter Communications, which expanded access to Disney’s streaming services. Domestic Disney+ average revenue per user (ARPU) remained stable, as increased advertising revenue offset changes in subscriber mix, while international Disney+ ARPU rose from $7.67 to $8.00, benefiting from favorable foreign exchange rates and a more profitable subscriber base. Hulu’s ARPU declined slightly due to weaker advertising revenue and subscriber mix shifts. The direct-to-consumer segment’s revenue increased 8% year-over-year to $6.25 billion, and operating income surged 39% to $352 million, nearly matching the $391 million profit from the linear networks segment. Disney’s CFO Hugh Johnston emphasized that the company is focusing on growing streaming revenue at double-digit rates and expects operating leverage to drive margin expansion rather than relying on cost-cutting. Management projected streaming profitability to improve to a 10% operating margin in fiscal 2026, up from about 5% in fiscal 2025, signaling confidence in the long-term viability of the streaming business.
Challenges in Entertainment and Linear TV
The Entertainment segment, which includes movies, TV networks, and streaming, faced significant challenges during the quarter. Revenue declined 6% year-over-year to $10.21 billion, and operating income fell 35% to $691 million. The theatrical slate underperformed compared to the prior year’s blockbuster hits such as "Deadpool & Wolverine" and "Inside Out 2," with recent releases like "The Fantastic Four: First Steps," "The Roses," and "Freakier Friday" delivering lukewarm box office results. Additionally, the linear networks business experienced a 16% revenue decline and a 21% drop in operating income, driven by accelerated cord-cutting, lower advertising rates, and a $40 million reduction in political advertising revenue. The sale of Star India assets also contributed to lower revenue and operating income comparisons. These factors combined to weigh on the segment’s profitability and contributed to the overall revenue miss for the quarter. Disney’s ongoing dispute with YouTube TV, which resulted in a blackout of Disney networks including ESPN and ABC on the platform for nearly two weeks, added further uncertainty to the linear TV business. Despite these pressures, Disney’s management remains optimistic about the Entertainment segment’s outlook, expecting double-digit operating income growth in fiscal 2026, primarily in the second half of the year.
Capital Allocation and Strategic Outlook
In response to the mixed financial results and to bolster shareholder confidence, Disney announced plans to double its share repurchase program to $7 billion for fiscal 2026, up from $3.5 billion in the prior year. The company also increased its annual dividend by 50% to $1.50 per share, payable in two installments in January and July 2026. These moves reflect management’s view that the stock is attractively valued and a commitment to returning capital to shareholders. CEO Bob Iger outlined a broader vision for Disney+ as a platform that will integrate artificial intelligence to enhance consumer engagement through shopping, gaming, and deeper connections with Disney’s parks and cruise experiences. The company is investing heavily in content, with a planned $24 billion spend across Entertainment and Sports in fiscal 2026, alongside $9 billion in capital expenditures focused on expanding theme parks and cruise ships. Disney’s Experiences segment, which includes theme parks, cruises, and consumer products, is a key growth driver, with record full-year operating income of $10 billion and a 6% revenue increase in Q4. The company expects high-single-digit operating income growth in Experiences for fiscal 2026, supported by new attractions and international expansion, including a planned theme park resort in Abu Dhabi. Overall, Disney projects double-digit adjusted EPS growth for fiscal 2026 and 2027, signaling confidence in its multi-year turnaround strategy despite near-term challenges in traditional media.
Key Takeaways
- Disney’s Q4 2025 earnings beat expectations on EPS but missed revenue estimates, reflecting ongoing challenges in traditional media offset by streaming and parks growth.
- Streaming subscriptions and profitability showed strong momentum, with Disney+ and Hulu reaching 196 million combined subscribers and streaming operating income up 39%.
- The Entertainment segment faced headwinds from weaker theatrical releases and a decline in linear TV revenue and operating income due to cord-cutting and advertising pressures.
- Management’s capital return initiatives and strategic investments in content, streaming, and experiences underscore a focus on long-term growth and margin expansion.
References
- 1. https://finance.yahoo.com/m/f0874bb2-2f24-3d8d-8e18-b9677279e424/disney-stock-drops-as-revenue.html
- 2. https://finance.yahoo.com/news/disney-stock-crashes-10-wall-182504986.html
- 3. https://www.benzinga.com/news/entertainment/25/11/48839795/disney-isnt-thinking-in-basis-points-anymore-it-wants-margins-in-chunks
- 4. https://finance.yahoo.com/m/443243dd-310a-38c5-81cf-4315394eba2b/disney-%28dis%29-climbs-in.html
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