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Disney Shares Tumble 8% Amid Mixed Earnings and YouTube TV Dispute
Disney reported mixed fourth-quarter results as weakness in its cable networks and film divisions was partially offset by growth in streaming and theme parks. The entertainment giant’s shares plunged more than 8% Thursday as investors reacted to ongoing challenges, including a protracted licensing dispute with YouTube TV.
The standoff with the Google-owned streaming platform has left YouTube TV subscribers without access to major Disney-owned networks including ESPN for two weeks, a particularly painful outage during college football season. Disney executives warned shareholders that negotiations could continue for an extended period.
For the quarter ended September 25, Disney posted a net income of $1.31 billion (73 cents per share), significantly higher than the $460 million (25 cents per share) earned in the same period last year. Adjusted earnings reached $1.11 per share, exceeding analysts’ expectations of $1.03 per share. However, revenue fell short at $22.46 billion against Wall Street projections of $22.86 billion.
The company’s Disney Entertainment segment, which includes film studios and streaming services, saw revenue decline 6%, while the Experiences division, encompassing theme parks and related offerings, grew 6%.
Linear television networks continued to struggle with operating income dropping 21% and revenue falling 16%. Disney attributed part of this decline to the Star India transaction, as Star India contributed $84 million to results in the prior year. Domestic linear networks saw a 7% operating income decline due to lower advertising revenue from reduced viewership and less political advertising.
The film business underperformed compared to the same quarter last year, which benefited from the blockbuster “Deadpool & Wolverine” and continued success of “Inside Out 2.” Recent releases including “The Fantastic Four: First Steps,” “The Roses,” and “Freakier Friday” failed to generate similar box office momentum.
In contrast, Disney’s direct-to-consumer business showed strength, with operating income increasing to $352 million from $253 million a year ago, while revenue grew 8%. Disney+ subscribers increased 3% domestically and 4% internationally, bringing the total to 132 million subscribers, up from 128 million in the third quarter. Combined Disney+ and Hulu subscriptions reached 196 million, a quarterly increase of 12.4 million.
This subscriber growth came despite a spike in cancellations in September, according to data from subscription analytics company Antenna. The cancellations reportedly followed ABC’s brief suspension of “Jimmy Kimmel Live!” over comments made following the death of conservative activist Charlie Kirk.
Disney had previously indicated expectations for a fourth-quarter increase of more than 10 million Disney+ and Hulu subscriptions compared to the third quarter, with most growth coming from Hulu due to an expanded Charter agreement.
During the earnings call, Disney Chief Financial Officer Hugh Johnston addressed industry consolidation rumors, particularly after Warner Bros. Discovery signaled openness to selling assets. Johnston stated that Disney is content with its current portfolio, saying, “We like the hand that we have right now. So I wouldn’t expect us to participate in making any significant moves.”
The company’s theme park business continued to be a bright spot, with the Experiences division reporting a 13% increase in operating income to $1.88 billion. Domestic parks saw operating income rise 9%, while international parks and Experiences surged 25%.
Looking ahead, Disney maintained its forecast for double-digit adjusted earnings per share growth for fiscal 2026 and 2027. The company plans to double its share repurchase program to $7 billion in fiscal 2026 compared to fiscal 2025, and its board approved a 50% dividend increase to $1.50 per share.
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10 Comments
The strength in Disney’s streaming and parks businesses is encouraging, but the weaknesses in cable and box office are concerning. The company will need to carefully manage these different revenue streams to maintain overall profitability.
The YouTube TV dispute highlights the importance of Disney’s relationships with digital platforms. Resolving this issue quickly will be crucial to avoiding further subscriber losses and maintaining its position in the evolving media landscape.
Disney’s Q4 results show the company is navigating a challenging environment, with both successes and setbacks. The growth in streaming and parks is a positive sign, but the declines in cable and box office are worrying.
The YouTube TV dispute adds further uncertainty to Disney’s outlook. Maintaining access to key sports content will be critical to retaining subscribers and preventing further erosion of its cable business.
Disney’s Q4 results show the challenges the company is facing, with weakness in cable and box office offsetting growth in streaming and parks. The YouTube TV dispute is particularly concerning, cutting off access to key networks like ESPN during a critical sports season.
The mixed performance highlights the need for Disney to continue adapting its business model to changing consumer trends. Resolving the YouTube TV dispute will be crucial to avoid further erosion of its cable subscriber base.
It’s interesting to see Disney’s diversified revenue streams, with streaming and theme parks helping to offset declines in traditional media. The company will need to carefully balance its investments across these different business lines going forward.
The YouTube TV dispute is a concerning development, as losing access to key sports content could accelerate cord-cutting. Disney will need to find a resolution to this quickly to avoid further subscriber losses.
Disney’s Q4 results demonstrate the ongoing evolution of the entertainment industry, with the rise of streaming and the challenges facing traditional media. The company’s ability to adapt and capitalize on emerging trends will be crucial to its long-term success.
The YouTube TV dispute is a reminder of the complex negotiations and partnerships required in the modern media landscape. Disney will need to find a way to balance the interests of its various distribution channels to maintain its competitive edge.