Disney Stock Rallies on Q3 Earnings Beat: ETFs to Consider

Disney’s total segment operating income increased 21% year over year to $5.55 billion in the reported quarter compared with $4.57 billion in the year-ago quarter, modestly surpassing the company’s previous guidance.

As noted in the company’s earnings release, Disney’s latest quarterly results underscore the company’s progress in executing its three strategic priorities: investing in high-quality intellectual property and creative content, leveraging advanced technologies to enhance storytelling, drive monetization and improve returns, and expanding its global reach by connecting with more consumers through seamless, engaging experiences under the unified “One Disney” operating model.

Breaking Down Disney’s Segment Performance

Entertainment

Entertainment revenues, which constitute about 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.

The entertainment segment's operating income surged 64% year over year to $1.68 billion, with the improvement reflecting higher subscription and affiliate fee revenues.

Entertainment Subscription Video on Demand (SVOD) revenues increased 11% year over year to $5.53 billion. Entertainment SVOD operating income more than doubled to $712 million from $329 million in the year-ago quarter.

Driven by higher subscribers, improved pricing and favorable foreign exchange, Subscription revenues rose 15% to $4.72 billion. Advertising revenues increased 3% to $851 million.

Sports

Sports revenues, which constitute around 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.

However, the segment’s 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.

Experiences

Experiences revenues, which constitute about 39.5% of total revenues, increased 10% year over year to $9.97 billion. The segment’s 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.

Disney’s Outlook

For the fourth quarter of fiscal 2026, DIS reiterated adjusted earnings growth of approximately 12%, excluding the 53rd week. The company expects total segment operating income of approximately $4.9 billion, including the benefit of the 53rd week.

For fiscal 2027, DIS continues to expect double-digit adjusted EPS growth, excluding the benefit of the 53rd week.

Beyond Earnings

As per Reuters, Disney is expanding its digital footprint to connect with younger audiences who increasingly consume short-form, vertical video on mobile devices. The TikTok partnership not only adds new content to Disney Plus, but could also help Disney draw more viewers to its streaming platform.

As quoted on the abovementioned article, on Wednesday, Disney announced a partnership with TikTok that will allow creators to incorporate characters and scenes from Disney movies and television shows into short-form videos. The deal will give TikTok creators access to content from hundreds of titles across Pixar, Marvel, Star Wars and FX, with a curated selection of videos also featured on Disney Plus.

Disney’s Stock Outlook

Walt Disney currently has an average brokerage recommendation (ABR) of 1.48 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 32 brokerage firms. The current ABR compares to an ABR of 1.50 a month ago based on 31 recommendations. Of the 32 recommendations deriving the current ABR, 23 are Strong Buy and four are Buy. Strong Buy and Buy, respectively, account for 71.88% and 12.5% of all recommendations.

Based on short-term price targets offered by 29 analysts, the average price target for the media giant comes to $129.66. The average price target represents an increase of 27.42% from the last closing price of $101.76 (as of market close on Aug. 5). The company has a Zacks Rank #3 (Hold) and a Value Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ETFs to Consider

Below, we focus on ETFs that have exposure to Disney.

Corgi Travel & Leisure ETF WNDR has an exposure of 5.70% to Disney.

First Trust S-Network Streaming and Gaming ETF BNGE has an exposure of 4.98% to Disney.

Invesco S&P 500 Equal Weight Communication Services ETF RSPC has an exposure of 4.93% to Disney.

iShares Global Comm Services ETF IXP has an exposure of 4.47% to Disney.

Fidelity MSCI Communication Services Index ETF FCOM has an exposure of 4.55% to Disney.

Vanguard Communication Services ETF VOX has an exposure of 4.36% to Disney.

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This article originally published on Zacks Investment Research (zacks.com).

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