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Walt Disney Co (DIS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered mixed headline results: revenue rose 2% to $23.65B, adjusted EPS increased 16% to $1.61, and total segment operating income grew 8% to $4.58B; GAAP EPS surged to $2.92 driven by a $3.3B non-cash tax benefit tied to Hulu’s U.S. tax classification change .
  • Versus Street: Disney beat consensus EPS ($1.61 vs $1.45) and slightly missed revenue ($23.65B vs $23.75B); 22 EPS estimates, 20 revenue estimates. The EPS beat was aided by DTC profitability and Experiences strength; the revenue miss reflected softer Content Sales/Licensing vs a tough Inside Out 2 comp .
  • Guidance tilted constructive: FY25 adjusted EPS raised to $5.85 (from $5.75), Experiences OI growth set at 8% (upper end), India JV equity loss lowered to ~$200M; Q4 subscriptions guided +>10M (mostly Hulu via Charter), Disney+ “modest” increase .
  • Strategic catalysts: ESPN DTC launches Aug 21 with enhanced features; landmark NFL and WWE deals expand rights and engagement; Hulu and Disney+ full integration aims to improve engagement, churn, and ad monetization .

What Went Well and What Went Wrong

  • What Went Well
    • Experiences delivered strong OI growth (+13% YoY to $2.52B); domestic Parks OI +22% to $1.65B on higher per caps and volumes, with cruise benefiting from fleet expansion (Disney Treasure) .
    • Direct-to-Consumer swung to a $346M operating profit (+$365M YoY) on pricing/mix and subscriber gains; Disney+ total subs 127.8M (+1.8M QoQ) and Hulu 55.5M (+0.8M QoQ) .
    • Management announced ESPN’s DTC launch and deepened NFL/WWE partnerships; Bob Iger emphasized integration and tech-led features to drive engagement and reduce churn (“we’re not done building”) .
  • What Went Wrong
    • Entertainment segment OI fell 15% YoY to $1.02B as Content Sales/Licensing and Linear Networks softened; titles in quarter underperformed the prior-year comp dominated by Inside Out 2 and higher film cost impairments .
    • Domestic ESPN OI declined 7% on higher programming costs (NBA, college sports), lower affiliate revenue despite rate increases, and lower UFC PPV fees; ESPN+ ARPU fell sequentially ($6.40 vs $6.58) on lower ad revenue .
    • Corporate/unallocated expenses rose to $410M (+$82M) on a legal settlement and higher compensation; equity income dropped ($75M vs $146M) on India JV losses .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$24.690 $23.621 $23.650
Income Before Income Taxes ($USD Billions)$3.660 $3.087 $3.211
Total Segment Operating Income ($USD Billions)$5.060 $4.436 $4.575
Diluted EPS (GAAP) ($)$1.40 $1.81 $2.92
Diluted EPS excl. certain items ($)$1.76 $1.45 $1.61
Cash Provided by Operations ($USD Billions)$3.205 $6.753 $3.669
Free Cash Flow ($USD Billions)$0.739 $4.891 $1.889
Q3 YoY vs Q3 2024Q3 2025Q3 2024Change
Revenue ($USD Billions)$23.650 $23.155 +2%
Diluted EPS (GAAP) ($)$2.92 $1.43 >100%
Diluted EPS excl. certain items ($)$1.61 $1.39 +16%
Total Segment OI ($USD Billions)$4.575 $4.225 +8%

Segment performance (Revenue and Operating Income):

SegmentQ1 2025 Revenue ($MM)Q2 2025 Revenue ($MM)Q3 2025 Revenue ($MM)Q1 2025 OI ($MM)Q2 2025 OI ($MM)Q3 2025 OI ($MM)
Entertainment10,872 10,682 10,704 1,703 1,258 1,022
Sports4,850 4,534 4,308 247 687 1,037
Experiences9,415 8,889 9,086 3,110 2,491 2,516

KPIs (DTC and ESPN+):

KPIQ1 2025Q2 2025Q3 2025
Disney+ Total Subs (MM)124.6 126.0 127.8
Hulu Total Subs (MM)53.6 54.7 55.5
Disney+ ARPU – Domestic ($)7.99 8.06 8.09
Disney+ ARPU – International ($)7.19 7.52 7.67
Disney+ ARPU – Total ($)7.55 7.77 7.86
Hulu ARPU – SVOD Only ($)12.52 12.36 12.40
Hulu ARPU – Live TV + SVOD ($)99.22 99.94 100.27
ESPN+ ARPU ($)6.36 6.58 6.40

Actual vs Street (Q3 FY2025):

MetricConsensusActual
Primary EPS Consensus Mean ($)1.446*1.61*
Revenue Consensus Mean ($)23,753.231MM*23,650MM*
# of EPS Estimates22*—
# of Revenue Estimates20*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025$5.75 $5.85 Raised
Entertainment DTC Operating IncomeFY 2025—$1.3B New specific target
Entertainment Segment OI GrowthFY 2025Double-digit % Double-digit % Maintained
Sports Segment OI GrowthFY 202518% 18% Maintained
Experiences Segment OI GrowthFY 20256%–8% 8% Tightened to upper end
Disney Cruise Line Pre-opening ExpenseFY 2025~$200M (Q3 ~$40M; Q4 ~$50M) ~$185M (Q4 ~$50M) Lowered
Equity Loss from India JVFY 2025~$300M ~$200M Lowered
Total Disney+ and Hulu SubscriptionsQ4 2025—+>10M vs Q3 (majority Hulu via Charter) New
Disney+ SubscribersQ4 2025—Modest increase vs Q3 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY25)Previous Mentions (Q2 FY25)Current Period (Q3 FY25)Trend
Streaming integration (Hulu into Disney+)ESPN tile added; DTC profitability improvement Raised FY EPS; reiterated ESPN DTC and Experiences expansions Full Hulu-Disney+ integration planned; better engagement, churn, ad packaging; tech stack efficiencies Strengthening integration narrative
ESPN DTC + RightsCollege Football Playoff and NFL timing affected Q1/Q2 costs Launch of ESPN DTC reiterated Aug 21 launch with multi-view, personalization, stats/betting/fantasy, commerce; NFL Network asset deal; accretive ~$0.05 post-close; WWE PLE exclusivity in 2026 Accelerating platform/rights strategy
Content performance (Studios)Moana 2 drove CSLO OI in Q1 Moana 2, Mufasa carryover; Snow White, Captain America initial campaigns Lilo & Stitch crossed $1B; Fantastic Four launch; upcoming Zootopia 2, Avatar: Fire and Ash Mixed: strong franchises; tough comps
Parks & ExperiencesDomestic parks impacted by hurricanes; international strong Domestic OI +13%; China per caps stress noted Domestic parks record Q3 revenue, per caps up; bookings +6%; China per caps remain pressured Healthy domestic; cautious China
Cruise expansion (fleet)Disney Treasure launch impact —Destiny and Adventure launching; Adventure ~7,000 passengers; Asia strategy Expanding capacity/geography
Regulatory/TaxStar India deconsolidation effects; tax charge in Q1 Non-cash tax benefit resolved prior-year matter Hulu tax classification change drove $3.3B benefit; OB-3 “bonus depreciation” cash-positive in future Tax items boosting GAAP EPS

Management Commentary

  • “We are building ESPN into the preeminent digital sports platform with our highly anticipated direct-to-consumer sports offering… and our just-announced plans with the NFL…” .
  • “By creating a differentiated streaming offering [Hulu into Disney+], we will be providing subscribers tremendous choice… while… growing profitability and margins… through expected higher engagement, lower churn… and greater advertising revenue potential.” .
  • On ESPN DTC features: “multi-view, enhanced personalization, integration of stats, betting, fantasy sports, and commerce, and a personalized SportsCenter” .
  • “With ambitious plans ahead for all our businesses, we’re not done building, and we remain optimistic about the company’s trajectory.” .

Q&A Highlights

  • NFL asset exchange: ESPN to acquire NFL Network; increases NFL game windows from 22 to 28; distribution within ESPN DTC; expected accretive ~$0.05 in first year post-close before purchase accounting; lowers churn, boosts ad revenue .
  • DTC margin path: No change to 2026 framework; integration aims to lower churn and improve ad packaging; targeting double-digit margins and beyond via growth, not cost cuts .
  • Experiences momentum: Walt Disney World record Q3 revenue; bookings up ~6% in Q4; cruises strong with high occupancies; China per caps challenged .
  • Disney+ bundle pricing: $29.99 for Disney+, Hulu, ESPN expected to drive subs and engagement; potential bundling of NFL+ Premium (including Red Zone) with the trio .
  • Cruise strategy: Disney Adventure (Singapore) ~7,000 passengers; robust sales and brand “ambassador” effect in Southeast Asia .

Estimates Context

  • Q3 FY2025 vs Consensus: Primary EPS beat by $0.16 ($1.61 vs $1.45) and revenue was a slight miss ($23.65B vs ~$23.75B). 22 EPS estimates; 20 revenue estimates.*
  • Implication: EPS beat reflects DTC profitability and Experiences strength; headline GAAP EPS aided by tax benefit. Revenue miss reflects tough content comp vs Inside Out 2 and lower linear networks .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Quality of beat: Adjusted EPS beat with improved DTC profitability and Experiences OI; GAAP EPS inflated by $3.3B tax benefit; focus on adjusted EPS/segment OI for run-rate .
  • Streaming thesis: Hulu-Disney+ integration plus ESPN DTC launch should improve engagement, reduce churn, and monetize advertising more effectively; watch Q4 subscriber guidance (+>10M, mostly Hulu via Charter) .
  • Sports monetization: Expanded NFL rights/windows and WWE PLE exclusivity build ESPN’s DTC value proposition; accretive economics expected post-close; potential for third-party sports bundling .
  • Experiences resilience: Domestic parks per caps/attendance strong; bookings +6%; cruise capacity expansion creates multi-year growth tailwind; monitor China per caps .
  • Content cadence: Near-term CSLO faces tough comps; pipeline includes Zootopia 2 and Avatar; expect variability quarter-to-quarter in theatrical-driven results .
  • FY25 setup: Guidance raised (EPS to $5.85), Experiences at 8% OI growth, lower India JV loss and cruise pre-opening costs; Q4 subs jump could catalyze sentiment .
  • Trading lens: Near-term moves likely tied to ESPN DTC launch execution (features, pricing, churn impact), clarity on NFL deal timing, and Q4 sub adds; medium-term thesis hinges on integrated streaming economics and Experiences expansion .

Appendix: Non-GAAP and Adjustments

  • Adjusted EPS excludes Hulu transaction tax benefit (-$1.56 EPS), amortization of TFCF/Hulu intangibles (+$0.16), and restructuring/impairment (+$0.08); reconciliations provided in press release .
  • Total segment operating income is non-GAAP; reconciled to income before income taxes in press release .