Disney Beats Q3 Estimates as Toy Story 5 Crosses $1 Billion
Walt Disney Co. reported fiscal third-quarter earnings that topped expectations, fueled by the blockbuster performance of “Toy Story 5” and strong streaming growth. Revenue rose 7% year-over-year to $25.2 billion for the period ended June 27, while adjusted earnings per share came in at $2.06, up 28% from $1.61 a year earlier.
Operating income climbed 21% to $5.6 billion, exceeding the company’s own guidance. Disney executives credited decades of intellectual property investment for the robust results, noting that deep fan connections are translating into financial gains across theatrical, merchandise, and streaming.
Entertainment Division Rides Pixar Momentum, Offsets Star Wars Stumble
Entertainment revenue hit $11.3 billion, a 6% increase, with operating income surging 64% to $1.7 billion. “Toy Story 5,” which opened in the final days of the quarter, has since crossed $1 billion globally, providing a significant lift. This helped offset the softer performance of “Star Wars: The Mandalorian and Grogu,” which debuted over Memorial Day weekend.
20th Century Studios’ “The Devil Wears Prada 2” also contributed, amassing over $691 million worldwide, with nearly $471 million from international markets. The Pixar franchise’s appeal extended beyond theaters: merchandise sales under Disney’s experiences division saw their strongest quarterly year-over-year growth in 20 quarters, as toys and licensed products began selling before the film’s release. On Disney+, the “Toy Story” franchise has surpassed 2 billion hours of streaming.
Streaming Profits Double as Subscriber Growth and Pricing Kick In
Disney’s entertainment streaming business posted revenue of $5.5 billion, up 11%, with operating income more than doubling to $712 million from $329 million a year ago. The gains were driven by higher rates and increased subscriber numbers, reinforcing Disney+’s role as a key growth engine. Management reiterated plans to make Disney+ the company’s “digital centerpiece,” with continued integration of Hulu and a focus on sports and international programming.
Parks Attendance Rises 4%, But International Visitors Remain a Drag
Attendance across Disney’s theme parks, cruise line, and Aulani resort rose 4% in the quarter, with U.S. parks seeing a 3% increase. Walt Disney World in Florida had a standout quarter, fueled by domestic visitors, annual passholders, and summer promotions. However, international attendance at U.S. parks continued to face headwinds, though the impact moderated compared to the previous quarter.
The experiences division reported $9.97 billion in revenue, up 10%, with operating income of $3 billion, a 20% jump. That growth included a $100 million tariff refund, which reversed earlier tariff payments and added four percentage points to the segment’s growth.
ESPN Scores Ratings Wins, But Costs Weigh on Sports Operating Income
Disney’s sports division, led by ESPN, saw revenue rise 4% to $4.5 billion, but operating income fell 17% to $858 million. The decline was attributed to higher programming costs from new rights deals, including the NBA and NHL playoffs, which delivered the most-watched fiscal third quarter since 2016 for ABC, ESPN, and ESPN2. The NBA postseason drew its largest first-round audience in 33 years, though Disney now shares that inventory with NBC and Amazon under the league’s new rights agreement.
Additionally, ESPN acquired NFL Network and RedZone in February, but the channels have been dark on Comcast’s Xfinity systems since April 30 due to a carriage dispute. The ongoing blackout could affect ESPN’s distribution reach in the coming quarters.
Disney Sells A+E Stake for $1.2 Billion, Boosts Buyback Target
Disney confirmed it will sell its 50% stake in A+E Global Media to Hearst Corp. for about $1.2 billion in cash. The proceeds will be used for share repurchases, with Disney raising its fiscal 2026 buyback target to at least $9 billion. This move underscores Disney’s commitment to returning capital to shareholders while streamlining its portfolio.
Looking ahead, management said it will reveal more details next spring about evolving Disney+ into a “comprehensive membership ecosystem.” Investors should watch whether Disney+ subscriber growth and pricing power continue to offset content costs, and whether international park attendance recovers as travel trends stabilize. The next key date is the fiscal fourth-quarter earnings report, where Disney will provide updated guidance on streaming profitability and parks performance.
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