Disney shares declined more than 4% in premarket trading Thursday after the entertainment giant reported fiscal fourth-quarter 2025 earnings that beat on the bottom line but fell short on revenue expectations, underscoring the mounting challenges facing its traditional television business.
The company beat analyst estimates on earnings but missed on revenue expectations, with adjusted earnings per share of $1.11 coming in ahead of the $1.07 expected by analysts. However, revenue likely disappointed as the company grapples with accelerating cord-cutting and weaker theatrical comparisons.
The mixed results highlight Disney’s ongoing transformation struggle as CEO Bob Iger attempts to pivot the iconic entertainment brand from its legacy television roots toward streaming profitability and experiences-driven growth.
Revenue Miss Tells a Different Story Than Profit Beat
While Disney managed to exceed earnings expectations through aggressive cost management and improved streaming margins, a 6% revenue drop within the company’s entertainment division, which includes its streaming, TV, and theatrical businesses, contributed to the top-line miss.
Linear network revenue fell 16% year over year, while operating income dropped 21% as cord-cutting accelerated and ad dollars continued to shift toward streaming.
The traditional TV business continues to hemorrhage revenue as millions of Americans abandon cable subscriptions each year, with domestic linear networks also coming under pressure from lower advertising tied to weaker viewership and a $40 million decline in political ad spending compared to the prior-year quarter.
Streaming Continues Bright Trajectory Despite Revenue Headwinds
The quarter’s silver lining came from Disney’s direct-to-consumer streaming business, which continues building on its recent profitability achievements. Disney+ added 3.8 million subscribers in the quarter, ahead of the 2.4 million that analysts polled by Bloomberg had expected.
The direct-to-consumer segment, which includes Disney+ and Hulu, posted a profit of $352 million, compared to $253 million a year ago, demonstrating that Disney’s strategic pivot to prioritize streaming profitability over subscriber growth at any cost is paying dividends.
Disney’s flagship streaming service Disney+ added 3.8 million paid subscribers, bringing its total to 131.6 million, while Hulu had 64.1 million customers.
Notably, company executives said more than half of new U.S. Disney+ subscribers are choosing the cheaper, ad-supported tier, validating the company’s advertising-focused strategy for long-term streaming profitability.
In fiscal 2025, the company achieved its target of securing $1.3 billion in streaming operating income, reporting $1.33 billion for the full year. Looking ahead, Disney is targeting approximately $375 million in streaming profits for Q1 2026, with plans to merge Disney+ and Hulu next year.
Theme Parks Show Resilience Despite Softness Warnings
Disney’s experiences division, which includes the parks, saw revenue grow 6% year over year in Q4, although sales fell slightly short of Wall Street estimates.
Operating income for the segment was up 13% to $1.88 billion, demonstrating continued strength in one of Disney’s most profitable divisions.
However, management has cautioned about near-term headwinds. Disney expects park profits to grow in the high single digits next year, following a 13% increase in full-year 2025 operating income.
The company faces new competition with Universal’s Epic Universe opening, though cruise operations remain a significant growth driver.
The Disney Adventure cruise, originally slated to debut next month, has been pushed to March 2026, trimming near-term profit but leaving long-term growth intact, according to analysts.
Sports Segment Faces Programming Cost Pressures
Disney’s sports division, anchored by ESPN, continues navigating challenging waters. Revenue for Disney’s sports division was up 3% to roughly $4 billion, while operating income was flat at $898 million when compared with the same period last year.
ESPN’s domestic operating income in particular decreased due to costs associated with the launch of the app in August, as well as higher programming costs.
The August launch of ESPN Unlimited at $29.99 per month marks a pivotal evolution in Disney’s sports strategy, though start-up costs weighed on quarterly results.
Doubling Down on Share Buybacks Despite Mixed Results
Despite the revenue miss, Disney demonstrated confidence in its long-term trajectory by announcing aggressive capital return plans. The company expects to double its share repurchase target to $7 billion next year, signaling management’s belief that the stock remains undervalued.
Additionally, the company announced a $0.50 increase in its cash dividend to $1.50, providing another avenue for shareholder returns as Disney transitions through its strategic transformation.
Market Response: Caution Wins Over Optimism
The negative premarket reaction suggests investors are weighing the revenue shortfall more heavily than the earnings beat, reflecting concerns about the sustainability of Disney’s growth trajectory as its legacy businesses continue declining.
Overall, Disney is up only about 5% in 2025 on a year-to-date basis, in a year in which the S&P 500 is up closer to 17% as of Nov. 12, highlighting the stock’s underperformance relative to broader market gains driven primarily by technology and AI-related investments.
The stock’s muted 2025 performance comes despite Disney trading at what many analysts consider an attractive valuation. Disney stock is trading at a reasonable 17X forward earnings multiple, offering a pleasant discount to the benchmark S&P 500’s 25X.
What’s Ahead: Transformation Continues
This marks the last time the company will report subscriber numbers and the average revenue per unit for its streaming services, which includes Disney+ and Hulu, as Disney follows Netflix’s playbook of focusing investor attention on profitability metrics rather than subscriber counts.
The company faces a critical holiday season with anticipated releases “Moana 2” and “Mufasa: The Lion King” that could provide additional momentum heading into fiscal 2026.
Success at the box office, continued streaming profitability expansion, and stabilization in the parks business will be essential for Disney to meet its aggressive growth targets.
For investors, the earnings report encapsulates Disney’s complex transformation: impressive progress in streaming and experiences offset by the ongoing erosion of its once-mighty television empire.
Whether the company can navigate this transition successfully while maintaining profitability and returning capital to shareholders remains the central question facing Bob Iger as he prepares the company for his eventual succession.
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