Disney Stocks Down 8%: Last Quarter Results Mixed!

Disney's Latest Quarterly Report Worries Investors

Disney (DIS) alarmed investors after its mixed quarterly results released on Thursday led to a more than 8% drop in its shares. The company generated $22.46 billion in revenue, falling short of analyst expectations of $22.83 billion, and was roughly equal to the same period last year.

The entertainment segment, which includes streaming, TV, and film operations, experienced a 6% decline in revenue, which was one of the primary factors behind the top-line loss. Traditional broadcasting revenues fell 16% year-over-year, and operating income dropped 21% with the shift of ad revenues towards streaming.

The results were announced just before CEO Bob Iger's planned departure during the final phase of the transformation process. The company noted that some of the decline in operating income was due to the sale of Star India assets; this asset provided a contribution of $84 million last year. The local tariff network is facing lower advertising revenues due to a decrease in viewership, resulting in a $40 million drop compared to the same quarter of the previous year.

The company also faced weak box office revenues during the period, negatively impacting overall entertainment results. Adjusted earnings per share (EPS) for the quarter was $1.11, above the expectations of $1.07 set by analysts surveyed by Bloomberg. However, earnings decreased 3% compared to the previous year, when it was recorded at $1.14.

Nonetheless, reporting an adjusted EPS of $5.93 for the fiscal year 2025 represents a 19% annual increase and exceeded both the company’s own targets and Wall Street’s estimate of $5.87. The company announced that it expects double-digit adjusted EPS growth for the fiscal year 2026 and plans to double its share buyback target to $7 billion next year.

On the other hand, as part of cash dividends, the company increased the dividend by $0.50, raising it to $1.50. In streaming, Disney+ gained 3.8 million subscribers during the quarter, exceeding analysts’ anticipated increase of 2.4 million subscribers. The direct-to-consumer segment achieved a profit of $352 million along with Disney+ and Hulu, a significant increase compared to last year’s $253 million profit.

The company has set its priority to achieve consistent profitability during the transition from traditional services to streaming. Setting a profit target of approximately $375 million in streaming for Q1 2026, Disney plans to combine Disney+ and Hulu next year. The streaming operating income target of $1.3 billion was successfully achieved during the fiscal year 2025, with $1.33 billion recorded at the end of the year.

This update came alongside price increases for Disney+ and Hulu, which took effect from October 21.

On another note, Disney's experiences segment, including parks, increased its quarterly revenue by 6% year-over-year, but sales fell slightly short of Wall Street estimates. The company expects park profits to grow by more than 10% next year. Analysts emphasize a continued increase among local attendees in the face of the new competitor, Universal’s Epic Universe, noting that the introduction of new ships has remained a major growth driver for cruises.

The Disney Adventure cruise was initially set to launch next month but has been postponed to March 2026. This situation limits short-term profits while promising to sustain long-term growth.

In sports, the ESPN Unlimited app was launched in August at a price of $29.99 and is recorded as the biggest evolution of the company’s sports strategy. Disney is planning to expand its brand into the Asian market and aims to offer more live sports through Disney+.

Morgan Stanley predicts that this service will reach approximately 3 million subscribers by the end of the fiscal year 2026 and generate an additional $500 million in annual revenue. This situation seems to offset short-term losses arising from the ongoing YouTube TV carriage dispute.