Disney's Q3 earnings top estimates on demand for experiences, company exits A+E Media stake
Disney (DIS) stock rose nearly 2% after the company reported fiscal third quarter earnings that beat expectations on Wednesday as it focused on cutting costs and maintaining growth in parks and streaming.
For the quarter, Disney reported adjusted earnings per share of $2.06, surpassing the Street's forecasts of $1.86. Revenue grew 7% year over year to $25.17 billion, just shy of expectations of $25.38 billion, according to Bloomberg consensus data.
This marked the second quarterly report under new CEO Josh D'Amaro, who took the reins on March 18. Wall Street analysts had been looking for Disney's report to rebuild confidence in the stock, which is down 17% over the past year.
"We believe our shares are undervalued and we continued to lean into share repurchases during the quarter," D'Amaro said in the report.
D'Amaro also highlighted the company's announcement on Tuesday to sell its 50% stake in A+E Global Media, divesting brands such as Lifetime and the History Channel to the Hearst Corporation.
Disney will use the $1.2 billion in proceeds, in addition to cash set aside for an OpenAI (OPAI.PVT) deal that collapsed, to boost share buybacks to $9 billion this year, up from the previously set $8 billion goal, D'Amaro said.
"The goal as a company is to both drive growth and to drive capital return to shareholders," Disney CFO Hugh Johnston said on the call with investors.
Total operating income for the company was $5.6 billion in the quarter, up from $4.6 billion a year ago. In the current quarter, Disney expects operating income of roughly $4.9 billion.
Disney also reaffirmed its expectations for 12% adjusted earnings growth in 2026 and double-digit adjusted earnings growth in 2027.
Disney Experiences drove results in Q3, as attendance at US parks increased 3% from the same period last year and the number of global guests rose by 4%.
Overall revenue from that segment grew 10% from last year to $9.97 billion, returning to the record $10 billion in the first quarter after a slump in Q2. Revenue at US parks and experiences, including the expanding Disney Cruise Line portfolio, grew 11% year over year.
This was primarily driven by a 17% increase in revenue from resorts and vacations, a 10% increase in additional passenger cruise days, and a 2% increase in average daily hotel room rates and occupied hotel nights.
Customers also spent more at Disney parks. Average spending per customer on admissions, food, and merchandise rose by 3% year over year.
This followed Disney's warning earlier this year that consumers faced macro uncertainty and a 1% decrease in attendance at its US parks in the previous quarter.
"We did see strong domestic tourists and local resident growth, and that growth helped offset continued international attendance softness, although we've seen some moderation in that regard," D'Amaro told investors.
Disney's entertainment business revenue grew 6% to $11.35 billion, less than the $11.66 billion expected.
"Toy Story 5" surpassed $1 billion in global box office, bringing the franchise's lifetime global box office to more than $4 billion and surpassing 2 billion hours watched on Disney+, the company said.
The film also boosted Consumer Products revenue as people bought Toy Story merchandise, resulting in the strongest quarter-over-year growth for Consumer Products in 20 quarters.
The company hinted that it plans to "evolve Disney+ into a comprehensive membership ecosystem" with more enhancements debuting in Spring 2027.
"Disney+ provides the global reach to develop new fans and the consumer data to drive personalization, which are both core to our long-term strategy," D'Amaro said, adding that it plans to bring "select premium sports events to the platform to both strengthen the service and drive upsell to the Trio Bundle."
Revenue for its sports segment came in at $4.5 billion, just short of the $4.51 billion forecast.
The company saw its most-watched third quarter for ESPN on ABC, ESPN, and ESPN2 since 2016, as fans tuned in to the 2026 NBA and NHL playoffs, both of which were the most-viewed ever on its networks.
Also worth noting: The company saw approximately $100 million in tariff refunds in the third quarter and may receive additional refunds in the coming quarters.
Correction: A previous version of this article was corrected to update Disney's operating income figure and entertainment business revenue. We regret the errors.
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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