Why Has Disney (DIS) Declined by 0.9% Following Its Most Recent Earnings Announcement?

Disney's Recent Earnings and Stock Performance Overview

Since the last earnings announcement, Walt Disney (DIS) shares have slipped by approximately 0.9%, yet they have still managed to outperform the S&P 500 during this period.

With this modest decline, investors are left to wonder whether this downward momentum will persist as the next earnings report approaches, or if Disney is poised for a rebound. Before examining recent analyst and investor sentiment, let’s review the key highlights from the latest earnings release to better understand the company’s current position.

First Quarter Results: Earnings and Revenue

For the first quarter of fiscal 2026, Disney posted adjusted earnings of $1.63 per share, representing a 7% decrease year-over-year. Despite this decline, the result surpassed the Zacks consensus estimate by 3.8%.

Total revenue reached $25.98 billion, a 5% increase from the previous year, though it narrowly missed consensus expectations by 0.03%. Net income for the quarter stood at $2.48 billion ($1.34 per share), down from $2.64 billion ($1.40 per share) a year earlier, reflecting a 4% drop in reported EPS. The adjusted EPS figure excludes certain items, such as tax charges related to the Fubo acquisition.

Performance by Business Segment

• Entertainment: This segment contributed 44.7% of total revenue, climbing 7% year-over-year to $11.61 billion. Direct-to-Consumer streaming revenue rose 11% to $5.35 billion, while Content Sales/Licensing and Other revenues surged 22% to $1.94 billion, driven by successful film releases like Zootopia 2, Avatar: Fire and Ash, Predator: Badlands, and Tron: Ares.
• Sports: Accounting for 18.9% of total revenue, this segment saw a 1% increase to $4.91 billion.
• Experiences: Making up 38.5% of total revenue, Experiences revenue grew 6% to $10.01 billion. Domestic revenue reached $6.91 billion (up 7%), and international revenue also rose 7% to $1.75 billion. Consumer Products revenue remained steady at $1.34 billion.

Entertainment Segment Details

Overall segment operating income dropped 9% year-over-year to $4.6 billion. Specifically, the Entertainment segment’s operating income fell 35% to $1.1 billion, with an operating margin of 9.5%. Streaming operations contributed $450 million in operating income, while the remainder of the segment generated $650 million, a 55% decline from the prior year.

Several factors contributed to this decrease, including a temporary carriage dispute with YouTube TV that impacted the Sports segment by about $110 million, lower advertising revenue due to the Star India transaction, and increased programming and production costs related to the Fubo deal. Higher streaming service prices led to increased license fees, and costs for production, marketing, technology, and distribution also rose.

Advertising revenue dropped 6% to $1.8 billion, reflecting the absence of Star India and higher political advertising in the previous year. Subscription and affiliate fees increased 8% to $7.25 billion, driven by rate hikes, subscriber growth, and the Fubo acquisition.

Streaming: Growth and Strategic Shifts

Excluding Hulu + Live TV and Fubo, streaming revenue advanced 11% to $5.35 billion. Subscription fees increased 13% to $4.4 billion, while advertising and other revenue rose 4% to $922 million. The streaming segment achieved an operating margin of 8.4%.

Disney has stopped reporting detailed subscriber counts and average revenue per user for Disney+ and Hulu, shifting its focus to overall streaming profitability. Combined, Disney+ and Hulu generated $450 million in operating income, a 72% jump from the previous year. The two platforms are set to merge into a single app later this year, with Hulu replacing the Star brand internationally and Disney+ introducing enhanced personalization and recommendations.

Sports Segment Update

The Sports segment reported operating income of $191 million, a 23% decrease from the previous year. This decline was due to higher programming and sports rights costs, as well as a 2% drop in subscription and affiliate fees to $2.98 billion, attributed to fewer subscribers, the YouTube TV dispute, and the Star India deal. However, advertising revenue grew 10% to $1.48 billion, benefiting from higher rates and fewer regular season NBA games due to new media rights timing.

Experiences Segment Fuels Growth

Operating income for the Experiences segment rose 6% to $3.31 billion. Domestic Parks & Experiences operating income increased 8% to $2.15 billion, supported by more cruise days, higher attendance, and greater guest spending. The launches of the Disney Treasure and Disney Destiny cruise ships contributed to this growth, as did a favorable comparison to the prior year, which was affected by Hurricane Milton.

International Parks & Experiences operating income grew 2% to $428 million. Consumer Products operating profit improved 3% to $732 million. Theme parks and admissions revenue increased 7% to $3.3 billion, resorts and vacations revenue climbed 9% to $2.41 billion, and merchandise, food, and beverage revenue rose 8% to $2.35 billion. Licensing revenue remained unchanged at $610 million.

Financial Position and Cash Flow

As of December 27, 2025, Disney held approximately $5.7 billion in cash and equivalents. Operating cash flow for the quarter was $735 million, down 77% year-over-year. For fiscal 2026, Disney anticipates $19 billion in operating cash flow, factoring in $1.7 billion in tax deferrals from 2025 due to California wildfire relief measures.

Guidance for Fiscal 2026

Looking ahead to the second quarter, Disney expects Entertainment operating income to be on par with the prior year, with streaming profits projected at around $500 million—a $200 million increase year-over-year. The remainder of the Entertainment segment is forecasted to deliver $700 million in operating profit. Sports revenue should remain steady, but operating income is expected to fall by $100 million due to higher rights costs. Experiences operating income growth will likely be modest, impacted by lower international visitation at U.S. parks and pre-opening expenses for new attractions and cruise ships.

For the full fiscal year, Disney projects double-digit growth in adjusted earnings per share compared to 2025. The Entertainment segment is expected to see double-digit operating income growth, especially in the second half of the year, with a 10% SVOD operating margin. The Sports segment anticipates low single-digit operating income growth, while Experiences is forecasted to achieve high single-digit growth, also weighted to the latter half of the year.

Disney plans to repurchase $7 billion in stock during fiscal 2026 and expects $19 billion in operating cash flow. Capital expenditures are set at $9 billion, with $24 billion earmarked for content investment across Entertainment and Sports.

Strategic Moves and Leadership Changes

Disney completed its acquisition of a 70% stake in Fubo, an internet TV bundle provider, in October 2025, which is reflected in the latest results. The company continues to advance its strategic priorities in streaming, traditional entertainment, sports, and theme parks. Plans are underway to open a new theme park in Abu Dhabi, further expanding Disney’s global footprint.

A leadership transition is also on the horizon, with Disney expected to announce CEO Bob Iger’s successor in early 2026. The board will vote on the new CEO in February, and Experiences chairman Josh D’Amaro is currently seen as the leading candidate.

Recent Estimate Revisions

Over the past month, analyst estimates for Disney have generally moved lower, with the consensus estimate declining by 6.05%.

VGM Score Breakdown

• Growth Score: D (below average)
• Momentum Score: B (strong)
• Value Score: B (places Disney in the top 40% for this strategy)

Disney’s overall VGM Score is C, which may appeal to investors seeking a balanced approach rather than focusing on a single strategy.

Stock Outlook

With estimates trending downward and the scale of revisions indicating a negative shift, Disney currently holds a Zacks Rank #3 (Hold). The stock is expected to deliver performance in line with the broader market over the coming months.