Disney Q3 Earnings Surpass Estimates, Revenues Increase Y/Y

Strong growth in the Experiences business and a sharp improvement in the Entertainment segment supported earnings growth.

DIS Entertainment Segment Delivers Strong Profit Growth

Entertainment revenues (44.9% of total revenues) increased 6% year over year to $11.35 billion. Subscription and affiliate fees increased 12% to $7.55 billion, while advertising revenues declined 1% to $1.63 billion. Content sales revenues decreased 6% to $1.6 billion. 

Entertainment segment operating income surged 64% year over year to $1.68 billion. The improvement reflected higher subscription and affiliate fee revenues, while total costs and expenses remained essentially flat as lower selling, general and administrative expenses offset increases in programming, technology and depreciation costs.

Disney Streaming Business Continues to Improve

Entertainment SVOD revenues increased 11% year over year to $5.53 billion. Subscription revenues rose 15% to $4.72 billion, while advertising revenues increased 3% to $851 million.

Entertainment SVOD operating income more than doubled to $712 million from $329 million in the year-ago quarter. Subscription revenue growth was driven by higher subscribers, improved pricing and favorable foreign exchange. Disney also highlighted lower Disney+ churn, continued Hulu integration and plans to introduce additional membership features beginning in spring 2027.

DIS Sports Business Faces Cost Headwinds

Sports revenues (17.8% of total revenues) increased 4% year over year to $4.5 billion. Subscription and affiliate fees rose 8% to $3.14 billion, while advertising revenues increased 5% to $1.2 billion. Other revenues declined 41% due to the absence of Ultimate Fighting Championship pay-per-view revenues recorded in the prior-year quarter. 

Sports segment operating income declined 17% year over year to $858 million. Higher contractual programming costs, new sports rights costs, the timing of NBA rights cost recognition under renewed contracts and increased sales and marketing expenses weighed on profitability. Management also cited early NBA playoff sweeps and a network carriage dispute as additional headwinds during the quarter.

Disney Experiences Business Leads Growth

Experiences revenues (39.5% of total revenues) increased 10% year over year to $9.97 billion. Segment operating income increased 20% year over year to $3.02 billion, making it the strongest-performing business during the quarter.

Domestic parks and experiences benefited from higher guest volumes, stronger per capita spending and contributions from the expanded Disney Cruise Line fleet. Consumer Products revenues increased 7% year over year, supported by merchandise sales related to Toy Story 5 and Star Wars: The Mandalorian and Grogu. The company also recorded an approximately $100 million tariff refund, which contributed roughly four percentage points to Experiences operating income growth.

Balance Sheet and Cash Flow

As of June 27, 2026, cash and cash equivalents totaled $5.19 billion, down from $5.68 billion as of March 28, 2026. Current borrowings declined sequentially to $8.63 billion from $8.89 billion, while long-term borrowings decreased to $37.41 billion from $38.47 billion.

During the third quarter, cash provided by operating activities increased 33% year over year to $4.87 billion, while free cash flow increased 63% year over year to $3.07 billion.

Disney’s Q4 and Fiscal 2026 Outlook

For the fourth quarter of fiscal 2026, Disney expects total segment operating income of approximately $4.9 billion, including the benefit of the 53rd week. For fiscal 2026, the company reiterated adjusted earnings growth of approximately 12%, excluding the 53rd week, or approximately 16% including it. Disney also raised its fiscal 2026 share repurchase target to at least $9 billion from at least $8 billion and continues to expect double-digit adjusted earnings growth in fiscal 2027.

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 American Public Education APEI, Newsmax NMAX and Target Hospitality TH. 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.

American Public Education is set to report second-quarter 2026 results on Aug. 10. The Zacks Consensus Estimate for American Public Education’s second-quarter EPS is pegged at 36 cents, unchanged over the past 30 days and indicating an improvement of 1900% year over year.

Newsmax is slated to report second-quarter 2026 results on Aug. 13. The Zacks Consensus Estimate for Newsmax’s second-quarter loss is pegged at 2 cents per share, unchanged over the past 30 days and indicating an improvement of 96.61% year over year.

Target Hospitality is slated to report second-quarter 2026 results on Aug. 10. The Zacks Consensus Estimate for Target Hospitality’s second-quarter loss is pegged at 10 cents per share, unchanged over the past 30 days and indicating an improvement of 33.33% year over year.

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