Walt Disney (DIS) delivered a stronger-than-expected second-quarter report on Wednesday, with streaming profitability and resilient theme park results providing a solid foundation for new Chief Executive Josh D'Amaro in his first earnings call since taking the helm in March.
For the quarter ended March 28, the Burbank-based entertainment giant posted revenue of $25.2 billion and adjusted earnings per share of $1.57, comfortably surpassing analyst estimates of $24.78 billion and $1.49, according to data from Reuters and LSEG. Revenue rose 7% year-over-year, while total segment operating income climbed 4% to $4.6 billion.
Streaming Surge
Disney's entertainment streaming segment was a standout performer. Revenue jumped 10% to $11.7 billion, and operating income rose 6% to $1.34 billion. Within that, the entertainment SVOD business — encompassing Disney+ and Hulu — delivered operating income of $582 million, an 88% surge from the prior-year period, on revenue of $5.49 billion. The sharp improvement highlights Disney's progress in turning its direct-to-consumer operations into a profit center after years of heavy investment.
Parks and Experiences Hold Up
The Experiences segment, which includes theme parks, cruise lines, and consumer products, reported revenue of $9.49 billion and operating income of $2.62 billion. While domestic parks saw a lift from higher guest spending and increased cruise passenger days, U.S. park attendance dipped 1%, and international travel to parks remained soft, according to the Associated Press. Disney described domestic demand as “healthy” but acknowledged “macroeconomic uncertainty” that could weigh on consumers.
Sports Costs Weigh on ESPN
ESPN posted a 5% decline in operating income to $652 million, as higher rights and production costs offset revenue gains. Looking ahead, Disney warned of an even steeper drop in sports operating income for the third quarter, projecting a decline of roughly 14% due to a double-digit jump in programming expenses from new rights deals.
New CEO Sets Growth Targets
D'Amaro, who succeeded Bob Iger on March 18, outlined a strategy centered on three pillars: boosting intellectual property, expanding audiences, and leveraging technology for stronger returns. In a shareholder letter, he and Chief Financial Officer Hugh Johnston said they see “significant opportunity to engage and entertain our fans more deeply.” For fiscal 2026, Disney targets adjusted EPS growth of approximately 12% (excluding an extra reporting week) or roughly 16% if that week is included.
Upcoming Slate and Gaming Push
Disney highlighted a robust pipeline of upcoming releases, including Zootopia 2, Avatar: Fire and Ash, The Mandalorian & Grogu, Toy Story 5, and a live-action Moana. The company also underscored its Epic Games partnership, noting that a Simpsons event within Fortnite logged 780 million hours across 80 million unique players, signaling a growing focus on gaming as a channel to reach younger consumers.
Market Context and Risks
Disney’s results set it apart from streaming-focused Netflix (NFLX) and more leveraged peers like Warner Bros. Discovery (WBD). While Disney has not yet reached full streaming scale, its ability to leverage franchises across film, streaming, gaming, and parks offers a diversified growth model. However, the company flagged risks including macroeconomic uncertainty, softer ad rates, escalating sports costs, tariffs, and regulatory headwinds that could affect its earnings trajectory.
Outlook
With streaming losses no longer dominating the narrative, parks generating steady cash, and ESPN remaining a valuable albeit costly asset, D'Amaro inherits a business with improving fundamentals. The key question is whether these segments can sustain momentum as consumers become more price-sensitive. Disney’s latest quarter provides a positive starting point for the new CEO, but the path ahead will require careful navigation of cost pressures and shifting consumer behavior.
