Disney Shares Decline by 8%: Last Quarter Results Mixed!

Disney's Latest Quarterly Report Worries Investors

Disney (DIS) has worried its investors as its shares fell by more than 8% following the release of mixed fourth-quarter results on Thursday. The company generated $22.46 billion in revenue, falling short of analyst expectations of $22.83 billion and was approximately equal to the same period last year.

The entertainment segment, which includes streaming, TV, and film operations, experienced a 6% decline in revenue, contributing significantly to the loss at the top line. Traditional broadcast revenues decreased 16% year-over-year, and operating income dropped 21% due to the shift of advertising revenue to streaming.

The results were announced during the final stages of the transformation process before CEO Bob Iger's planned departure. The company noted that a portion of the decline in operating income was due to the sale of its Star India assets, which had contributed $84 million last year. The local tariff network faced lower advertising revenues due to a decline in viewership, resulting in a $40 million drop compared to the same quarter last year.

The company also faced weak box office revenues during the period, adversely impacting overall entertainment results. For the quarter, adjusted earnings per share (EPS) were reported at $1.11, which exceeds the analysts' expectation of $1.07 as surveyed by Bloomberg. However, earnings decreased 3% compared to the previous year, when they were recorded at $1.14.

Nevertheless, the reported adjusted EPS of $5.93 for the fiscal year 2025 reflects a 19% annual increase, surpassing the company's own targets and Wall Street’s forecast of $5.87. The company announced that it expects double-digit adjusted EPS growth for the fiscal year 2026, and it plans to double its stock buyback target to $7 billion next year.

On another note, in the cash dividend part, the company raised the dividend by $0.50 to $1.50. In terms of streaming, Disney+ gained 3.8 million subscribers during the quarter, exceeding analysts' estimates of 2.4 million subscriber growth. The direct-to-consumer segment achieved a profit of $352 million with Disney+ and Hulu, representing a significant increase compared to the $253 million profit a year ago.

The company has set continuous profitability during the transition from traditional services to streaming as its primary goal. Setting a profitability target of around $375 million in streaming for Q1 2026, Disney plans to merge Disney+ and Hulu next year. The target for streaming operating income for the fiscal year 2025 was successfully achieved at $1.3 billion; by the end of the year, it was noted as $1.33 billion.

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

In the experience segment, which includes parks, Disney's quarterly revenues increased 6% year-over-year but fell slightly short of Wall Street forecasts. The company expects park profits to grow by over 10% next year. Analysts highlight a continuing increase among local participants in light of the new competitor Universal’s Epic Universe, and the introduction of new ships continues to drive growth in cruises.

Disney Adventure cruise was initially scheduled to open next month but has been postponed to March 2026. This situation limits short-term profits while promising to maintain long-term growth.

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

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