Walt Disney Co. (NYSE:DIS) shares dropped after the company released its fiscal third-quarter 2025 results. While adjusted earnings per share (EPS) surpassed analyst expectations, the company’s total revenue fell slightly short of projections.
For the quarter, Disney reported adjusted EPS of $1.61, beating the consensus estimate of $1.47. However, revenue grew by just 2% year-over-year to $23.65 billion, slightly missing the $23.72 billion analyst forecast. The company’s performance was driven by its Experiences business.
The direct-to-consumer (DTC) streaming businesses, including Disney+ and Hulu, reached a combined operating income of $346 million on revenue of $6.2 billion, an increase of 6% year-over-year. The quarter concluded with 183 million total Disney+ Core and Hulu subscriptions, a sequential increase of 2.6 million. Disney+ Core paid subscribers increased by 1.8 million to 128 million.
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Revenue for the Entertainment segment, which encompasses traditional TV networks, DTC streaming, and films, saw a modest 1% increase to $10.7 billion. In contrast, the Sports segment, primarily consisting of ESPN, saw revenue decline by 5% to $4.3 billion. Disney’s Experiences segment, which includes theme parks and consumer products, proved to be a strong performer, with revenue climbing 8% to $9.09 billion.
The company’s traditional Linear Networks business declined, with revenue falling 15% year-over-year to $2.3 billion. Consolidated operating income for the quarter grew 8% to $4.6 billion. This was led by the Experiences segment’s $2.5 billion, followed by the Sports segment’s $1.04 billion and the Entertainment segment’s $1.02 billion. Disney also demonstrated strong cash flow generation, with quarterly operating cash flow up 41% year-over-year to $3.7 billion and free cash flow rising over 52.7% to $1.9 billion.
Sports Content Deals
In a series of strategic moves to boost its sports offerings, Disney announced an equity-for-assets deal where its ESPN unit will take over the NFL Network, NFL RedZone, and NFL Fantasy. The agreement grants the NFL a 10% stake in ESPN, and ESPN will integrate these assets into its digital and DTC platforms, while also gaining rights to three additional NFL games annually. To maintain the NFL Network’s seven-game slate, four existing ESPN games will be moved to the channel.
Furthermore, ESPN and TKO Group’s World Wrestling Entertainment have entered a five-year, $1.6 billion agreement that gives ESPN exclusive U.S. streaming rights to many of WWE’s premium events, including WrestleMania and SummerSlam, beginning in 2026. The Wall Street Journal reported that ESPN will pay $325 million annually for the deal, which “significantly exceeds WWE’s current $900 million contract with Peacock.” These events will be featured on ESPN’s new $29.99 per month service, launching this fall, with select coverage also airing on ESPN’s cable channels. This deal follows WWE’s recent $5 billion, 10-year deal with Netflix (NASDAQ:NFLX) for its weekly show “Raw.”
CEO Robert A. Iger highlighted the company’s forward momentum, stating that Disney is advancing in streaming with the upcoming launch of ESPN’s direct-to-consumer service, new plans with the NFL, and the integration of Hulu into Disney+, creating a uniquely comprehensive streaming offering. He also noted that Disney is undertaking more global expansions in its parks and experiences division than at any other point in its history.
CFO Hugh Johnston attributed the quarter’s performance to the success of the streaming business on CNBC’s “Squawk Box,” noting the unit’s recent turnaround from losing $1 billion per quarter to building a solid financial foundation. He added that streaming growth is now helping to offset the long-declining traditional TV segment and that Walt Disney World delivered its biggest third quarter ever, with strong attendance in Orlando. Despite wider concerns about consumer health, Johnston said Disney continues to see solid spending from its customer base.
Outlook
Disney raised its fiscal 2025 adjusted EPS projection to $5.85, an 18% increase over fiscal 2024, up from a previous forecast of $5.75 and ahead of the $5.78 analyst consensus estimate.
The company reiterated its expectation for double-digit operating income growth in the Entertainment segment and revised its outlook for the Experiences segment to 8% operating income growth (from 6%-8%).
The Sports segment’s operating income is now projected to grow by 18%, an increase from the prior 13% forecast. For the fiscal fourth quarter, Disney expects a “modest increase in Disney+ subscribers” compared to the third quarter.
Price Actions: DIS stock is trading lower by 2.35% to $115.54 at last check Wednesday.
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