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Disney Q2 Earnings Surpass Estimates, Revenues Increase Y/Y
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Key Takeaways
Disney reported Q2 adjusted EPS of $1.57, up 8% year over year and above estimates.
DIS saw SVOD operating income jump 88% as Disney and Hulu boosted subscription revenue.
DIS generated $4.94 billion in free cash flow versus a negative $2.28 billion last quarter.
The Walt Disney Company (DIS - Free Report) reported second-quarter fiscal 2026 adjusted earnings of $1.57 per share, up 8% year over year, beating the Zacks Consensus Estimate by 5.4%.
Revenues of $25.17 billion rose 7% year over year, topping the consensus mark by 0.55%.
Net income was $2.25 billion, or $1.27 per share, down from $3.28 billion, or $1.81 per share a year earlier, representing a 30% decline in reported EPS. The GAAP decline reflected higher income tax expense versus a one-time tax benefit in the prior-year period related to the resolution of a prior-year tax matter.
The Walt Disney Company Price, Consensus and EPS Surprise
Entertainment revenues (46.5% of total revenues) increased 10% year over year to $11.72 billion. Subscription Video on Demand (SVOD) revenues increased 13% year over year to $5.49 billion. Content Sales revenues increased 8% year over year to $1.73 billion, reflecting higher theatrical distribution from the ongoing performance of Avatar: Fire and Ash and Zootopia 2 and the release of Hoppers compared with the ongoing performance of Mufasa: The Lion King and Moana 2 and the release of Captain America: Brave New World in the prior-year quarter.
Sports revenues (18.3% of total revenues) rose 2% year over year to $4.61 billion.
Experiences revenues (37.7% of total revenues) increased 7% year over year to $9.49 billion. Domestic Parks and Experiences revenues were $6.92 billion, up 6% year over year, while international revenues increased 11% year over year to $1.6 billion. Consumer Products revenues rose 3% year over year to $974 million.
Entertainment Segment Results
Total segment’s operating income rose 4% year over year to $4.60 billion. The entertainment segment's operating income grew 6% to $1.34 billion at an operating margin of 11.4%. SVOD operating income surged 88% to $582 million, while other entertainment businesses generated $754 million, down 20% year over year.
Subscription and affiliate fees increased 14% year over year to $7.8 billion, with the Fubo transaction contributing approximately 500 basis points.
Advertising revenues grew 5% year over year to $1.67 billion, with the Fubo transaction contributing more than 100 basis points. Content sales revenues rose 8% year over year to $1.73 billion. Higher costs and expenses reflect a 400-basis-point increase from the Fubo transaction, alongside higher programming production, technology and distribution costs.
Streaming Performance and Strategy
SVOD revenues grew 13% year over year to $5.49 billion, with subscription fees climbing 16% to $4.71 billion and advertising revenues increasing 12% to $821 million. SVOD reported an operating margin of 10.6%.
Disney+ and Hulu reported SVOD operating income of $582 million, up 88% from $310 million in the prior-year quarter. Zootopia 2 generated $1.9 billion in global box office, and the Zootopia franchise surpassed 1 billion hours streamed on the service. DIS launched Verts on Disney+ in March to improve content discoverability and drive higher daily interaction. Disney+ and Hulu are on track to merge into a unified app experience later in the fiscal year, while Hulu has replaced the Star brand in international markets.
Sports Segment Performance
The Sports segment's operating income was $652 million, down 5% year over year. The decline reflected higher programming and production costs driven by contractual rate increases and the timing of rights cost recognition under renewed contracts, specifically a shift of college sports rights costs into the current quarter and NBA rights costs shifting to the third quarter. This was compounded by higher sales and marketing costs.
Subscription and affiliate fees rose 6% year over year to $3.25 billion, benefiting from higher effective rates and the NFL transaction, partially offset by fewer linear subscribers. Advertising revenues declined 2% year over year to $1.13 billion due to fewer impressions, the absence of UFC pay-per-view revenues and fewer NBA games relative to the prior-year quarter.
Despite competitive pressure from the Super Bowl and the Olympics, ESPN garnered the largest share of linear sports consumption among total viewers in the second quarter. ESPN Men's Tournament Challenge recorded 27 million completed brackets, an all-time high and up 7% over 2025. Revenue generated by ESPN's digital subscribers more than offset secular declines in the linear subscriber universe.
Experiences Segment Drives Growth
Experiences operating income was $2.62 billion, up 5% year over year. Domestic Parks and Experiences operating income was $1.91 billion, up 5% year over year, driven by higher guest spending and an increase in passenger cruise days reflecting the launches of the Disney Destiny in November 2025 and the Disney Adventure in March 2026. Per capita spending at domestic parks rose 5% year over year, driven by growth in admissions, food and beverage and merchandise. Domestic parks attendance declined 1% year over year, reflecting continued softness in international visitation, though DIS noted it is beginning to lap prior-year attendance headwinds and expects year-over-year improvement in the third quarter.
International Parks and Experiences' operating income was $227 million, up 1% year over year. Consumer Products operating income increased 8% year over year to $479 million. Theme park admissions revenues grew 6% year over year to $3.09 billion, resorts and vacations revenues climbed 9% to $2.56 billion and parks and experiences merchandise, food and beverage revenues rose 5% to $2.20 billion. Pre-opening expenses for the Disney Adventure and World of Frozen weighed on Experiences operating income growth by roughly two percentage points.
Balance Sheet and Cash Flow
As of March 28, 2026, cash and cash equivalents totaled $5.68 billion, unchanged from $5.68 billion as of Dec. 27, 2025.
The current portion of borrowings declined to $8.89 billion from $10.82 billion sequentially, while long-term borrowings rose to $38.47 billion from $35.82 billion, reflecting a shift in debt maturity profile.
For the second quarter, cash provided by operations was $6.91 billion, up from $735 million in the prior quarter, and free cash flow was $4.94 billion compared with negative $2.28 billion in first-quarter of fiscal 2026.
DIS repurchased $3.47 billion of common stock in the second quarter.
Fiscal 2026 and 2027 Outlook
For the third quarter of fiscal 2026, DIS expects total segment operating income of approximately $5.3 billion. For fiscal 2026, DIS raised its share repurchase target to at least $8 billion from $7 billion and now expects adjusted EPS growth of approximately 12% excluding the 53rd week, or approximately 16% including it.
DIS targets an annual SVOD operating margin of at least 10% and Sports segment operating income growth of mid-single digits, though the NFL transaction is expected to be approximately 3 cents dilutive to fiscal 2026 adjusted EPS. For fiscal 2027, DIS continues to expect double-digit adjusted EPS growth.
Strategic Developments and Leadership
D'Amaro assumed the CEO role this quarter, with Hugh Johnston continuing as CFO.
ESPN completed the acquisition of NFL Network, NFL RedZone and NFL Fantasy in January 2026, bringing DIS' effective interest in ESPN to 72%.
DIS will not proceed with its planned investment in OpenAI following the shutdown of Sora, but continues exploring other AI partnerships.
DIS is pursuing capital-light international expansion via a cruise ship in Japan and a theme park resort in Abu Dhabi.
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Disney Q2 Earnings Surpass Estimates, Revenues Increase Y/Y
Key Takeaways
The Walt Disney Company (DIS - Free Report) reported second-quarter fiscal 2026 adjusted earnings of $1.57 per share, up 8% year over year, beating the Zacks Consensus Estimate by 5.4%.
Revenues of $25.17 billion rose 7% year over year, topping the consensus mark by 0.55%.
Net income was $2.25 billion, or $1.27 per share, down from $3.28 billion, or $1.81 per share a year earlier, representing a 30% decline in reported EPS. The GAAP decline reflected higher income tax expense versus a one-time tax benefit in the prior-year period related to the resolution of a prior-year tax matter.
The Walt Disney Company Price, Consensus and EPS Surprise
The Walt Disney Company price-consensus-eps-surprise-chart | The Walt Disney Company Quote
Segment Performance Overview
Entertainment revenues (46.5% of total revenues) increased 10% year over year to $11.72 billion. Subscription Video on Demand (SVOD) revenues increased 13% year over year to $5.49 billion. Content Sales revenues increased 8% year over year to $1.73 billion, reflecting higher theatrical distribution from the ongoing performance of Avatar: Fire and Ash and Zootopia 2 and the release of Hoppers compared with the ongoing performance of Mufasa: The Lion King and Moana 2 and the release of Captain America: Brave New World in the prior-year quarter.
Sports revenues (18.3% of total revenues) rose 2% year over year to $4.61 billion.
Experiences revenues (37.7% of total revenues) increased 7% year over year to $9.49 billion. Domestic Parks and Experiences revenues were $6.92 billion, up 6% year over year, while international revenues increased 11% year over year to $1.6 billion. Consumer Products revenues rose 3% year over year to $974 million.
Entertainment Segment Results
Total segment’s operating income rose 4% year over year to $4.60 billion. The entertainment segment's operating income grew 6% to $1.34 billion at an operating margin of 11.4%. SVOD operating income surged 88% to $582 million, while other entertainment businesses generated $754 million, down 20% year over year.
Subscription and affiliate fees increased 14% year over year to $7.8 billion, with the Fubo transaction contributing approximately 500 basis points.
Advertising revenues grew 5% year over year to $1.67 billion, with the Fubo transaction contributing more than 100 basis points. Content sales revenues rose 8% year over year to $1.73 billion. Higher costs and expenses reflect a 400-basis-point increase from the Fubo transaction, alongside higher programming production, technology and distribution costs.
Streaming Performance and Strategy
SVOD revenues grew 13% year over year to $5.49 billion, with subscription fees climbing 16% to $4.71 billion and advertising revenues increasing 12% to $821 million. SVOD reported an operating margin of 10.6%.
Disney+ and Hulu reported SVOD operating income of $582 million, up 88% from $310 million in the prior-year quarter. Zootopia 2 generated $1.9 billion in global box office, and the Zootopia franchise surpassed 1 billion hours streamed on the service. DIS launched Verts on Disney+ in March to improve content discoverability and drive higher daily interaction. Disney+ and Hulu are on track to merge into a unified app experience later in the fiscal year, while Hulu has replaced the Star brand in international markets.
Sports Segment Performance
The Sports segment's operating income was $652 million, down 5% year over year. The decline reflected higher programming and production costs driven by contractual rate increases and the timing of rights cost recognition under renewed contracts, specifically a shift of college sports rights costs into the current quarter and NBA rights costs shifting to the third quarter. This was compounded by higher sales and marketing costs.
Subscription and affiliate fees rose 6% year over year to $3.25 billion, benefiting from higher effective rates and the NFL transaction, partially offset by fewer linear subscribers. Advertising revenues declined 2% year over year to $1.13 billion due to fewer impressions, the absence of UFC pay-per-view revenues and fewer NBA games relative to the prior-year quarter.
Despite competitive pressure from the Super Bowl and the Olympics, ESPN garnered the largest share of linear sports consumption among total viewers in the second quarter. ESPN Men's Tournament Challenge recorded 27 million completed brackets, an all-time high and up 7% over 2025. Revenue generated by ESPN's digital subscribers more than offset secular declines in the linear subscriber universe.
Experiences Segment Drives Growth
Experiences operating income was $2.62 billion, up 5% year over year. Domestic Parks and Experiences operating income was $1.91 billion, up 5% year over year, driven by higher guest spending and an increase in passenger cruise days reflecting the launches of the Disney Destiny in November 2025 and the Disney Adventure in March 2026. Per capita spending at domestic parks rose 5% year over year, driven by growth in admissions, food and beverage and merchandise. Domestic parks attendance declined 1% year over year, reflecting continued softness in international visitation, though DIS noted it is beginning to lap prior-year attendance headwinds and expects year-over-year improvement in the third quarter.
International Parks and Experiences' operating income was $227 million, up 1% year over year. Consumer Products operating income increased 8% year over year to $479 million. Theme park admissions revenues grew 6% year over year to $3.09 billion, resorts and vacations revenues climbed 9% to $2.56 billion and parks and experiences merchandise, food and beverage revenues rose 5% to $2.20 billion. Pre-opening expenses for the Disney Adventure and World of Frozen weighed on Experiences operating income growth by roughly two percentage points.
Balance Sheet and Cash Flow
As of March 28, 2026, cash and cash equivalents totaled $5.68 billion, unchanged from $5.68 billion as of Dec. 27, 2025.
The current portion of borrowings declined to $8.89 billion from $10.82 billion sequentially, while long-term borrowings rose to $38.47 billion from $35.82 billion, reflecting a shift in debt maturity profile.
For the second quarter, cash provided by operations was $6.91 billion, up from $735 million in the prior quarter, and free cash flow was $4.94 billion compared with negative $2.28 billion in first-quarter of fiscal 2026.
DIS repurchased $3.47 billion of common stock in the second quarter.
Fiscal 2026 and 2027 Outlook
For the third quarter of fiscal 2026, DIS expects total segment operating income of approximately $5.3 billion. For fiscal 2026, DIS raised its share repurchase target to at least $8 billion from $7 billion and now expects adjusted EPS growth of approximately 12% excluding the 53rd week, or approximately 16% including it.
DIS targets an annual SVOD operating margin of at least 10% and Sports segment operating income growth of mid-single digits, though the NFL transaction is expected to be approximately 3 cents dilutive to fiscal 2026 adjusted EPS. For fiscal 2027, DIS continues to expect double-digit adjusted EPS growth.
Strategic Developments and Leadership
D'Amaro assumed the CEO role this quarter, with Hugh Johnston continuing as CFO.
ESPN completed the acquisition of NFL Network, NFL RedZone and NFL Fantasy in January 2026, bringing DIS' effective interest in ESPN to 72%.
DIS will not proceed with its planned investment in OpenAI following the shutdown of Sora, but continues exploring other AI partnerships.
DIS is pursuing capital-light international expansion via a cruise ship in Japan and a theme park resort in Abu Dhabi.
Zacks Rank & Stocks to Consider
Disney currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Consumer Discretionary sector are Capcom (CCOEY - Free Report) , Sony (SONY - Free Report) and Fox Corporation (FOXA - Free Report) . Each stock carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Capcom is set to report fourth-quarter fiscal 2026 results on May 12. Capcom shares have declined 7.9% year to date.
Sony is slated to report fourth-quarter fiscal 2026 results on May 13. Sony shares have declined 21.4% year to date.
Fox Corporation is set to report third-quarter fiscal 2026 results on May 11. Fox Corporation shares have declined 14.8% year to date.