Walt Disney Co. topped analyst expectations for the holiday quarter ended December 27, as its parks and a strong theatrical lineup helped offset weaker results in parts of its sports and entertainment businesses. The company said overall revenue rose 5% to $26 billion for the fiscal first quarter, beating the LSEG consensus estimate of $25.7 billion.
The experiences division - which combines Disney's parks, cruises and consumer products - carried the quarter, producing $10 billion in revenue and accounting for 72% of the company's quarterly operating profit, which approached $5 billion. Walt Disney World saw particular benefit from easier year-ago comparisons, when Orlando attractions were closed due to Hurricane Milton.
Disney reported income before taxes of $3.7 billion for the period, outpacing Wall Street's projection of $3.5 billion. On an adjusted per-share basis, earnings were $1.63, a 7% decline from the prior year but above analysts' expectations of $1.57 per share.
The company said it remains on track with its full-year financial targets, reaffirming a forecast of double-digit per-share earnings growth compared with fiscal 2025. Management expects to generate $19 billion in cash from operations over the year and is proceeding with plans to repurchase $7 billion of stock.
Disney's entertainment segment, which includes its film studios, television networks and streaming services, posted $11.6 billion in revenue for the quarter, a 7% increase year-over-year. The rise was driven in part by the holiday theatrical slate, notably Zootopia 2, which has brought in nearly $1.8 billion in worldwide ticket sales, and Avatar: Fire and Ash, which has grossed $1.4 billion globally, according to Comscore.
Despite higher top-line revenue, the entertainment unit's operating profit fell 35% year-over-year. Management attributed the decline in part to elevated marketing expenses, including costs associated with Avatar - released in the last week of the quarter - and eight other films, compared with four films in the prior holiday season. The unit also recorded a $140 million decline in political advertising revenue compared with the year-ago quarter.
Disney's sports business was notably affected by a two-week carriage dispute with YouTube TV that prevented millions of subscribers from accessing Disney-owned networks such as ESPN. The disagreement resulted in a $110 million hit to the sports unit during the quarter. As a result, operating income for the sports division fell 23% to $191 million, even as revenue edged up 1% to $4.9 billion. The operating income decline reflected the licensing dispute, higher programming costs, and a reduction in regular-season NBA games.
Streaming operations - which encompass Disney+, Hulu and ESPN - reported a 72% increase in operating income to $450 million, with revenue rising 13% to $4.4 billion. The company no longer reports a subscriber total for its streaming services.
Separately, Disney is expected to name a new chief executive to succeed Bob Iger early in the year. Industry executives view Josh D'Amaro, chairman of the experiences division, as the frontrunner for the role.
What this means
- Disney's experiences division remains the primary profit engine for the company in the quarter, demonstrating resilience in parks and related consumer activity.
- Holiday theatrical releases supported entertainment revenue growth, but the concentration of higher marketing costs and reduced political ad revenue pressured operating profit in that segment.
- Carriage disputes and programming cost increases continue to affect the sports business, producing a noticeable hit to operating income despite steady revenue.