Walt Disney Company (DIS.US) focuses on growth in its theme parks and streaming business: Q3 earnings exceed expectations, buyback goals raised, official announcement of content cooperation with TikTok.

On Wednesday before the market opened, the Walt Disney Company (DIS.US) released its Q3 fiscal report for 2026. In the second quarterly report since CEO Josh DAmaro took over, the company delivered a significantly better-than-expected adjusted earnings per share, with ongoing improvements in the experience business and streaming profitability becoming the core drive. The strong performance of the experience business (theme parks and cruises) alongside Toy Story 5 surpassing $1 billion in global box office revenues served as the twin engines of growth for the quarter. At the same time, the Walt Disney Company announced the sale of a 50% stake in A+E Global Media for $1.2 billion and raised its fiscal 2026 stock buyback target from $8 billion to $9 billion. Following the release of the financial report, Walt Disney Company's stock price jumped over 4% in pre-market trading. Key data: EPS exceeded expectations by 11% For the third quarter ending June 27, 2026, the Walt Disney Company reported revenues of $25.25 billion, a 7% year-over-year increase, slightly below market expectations of $25.39 billion. The adjusted earnings per share were $2.06, exceeding market expectations of $1.86 by 10.8%. Under GAAP, net profit attributable to shareholders was $2.638 billion, a 49.87% year-over-year decrease, with diluted earnings per share at $1.51. The divergence in profit and EPS was mainly due to one-time items and last year's high comparison base. Total segment operating profit reached $5.555 billion, a 21% year-over-year increase, surpassing market expectations of $5.24 billion. Operating cash flow was $4.866 billion, up 33% year-over-year; free cash flow was $3.072 billion, up 63%. Performance guidance: Annual EPS growth of 12%, Q4 operating profit around $4.9 billion The Walt Disney Company reiterated its full-year guidance for fiscal 2026: adjusted earnings per share are expected to grow by approximately 12% (excluding the impact of the 53rd week), and by around 16% if including the 53rd week. The company expects to maintain double-digit adjusted EPS growth in fiscal 2027. For Q4, the company anticipates total segment operating profit of approximately $4.9 billion, which is in line with analysts' expectations. Business performance Experience business: US theme park attendance grew by 3%, Orlando particularly outstanding The experience business (including six major global theme parks, Walt Disney Company cruises, merchandise, and gaming licensing) performed strongly this quarter, becoming the core engine of profit growth. This segment generated revenue of $9.97 billion, up 10% year-over-year; operating profit was $3.02 billion, up 20%. The operating profit of US domestic theme parks increased by 27% year-over-year, while profits from international parks and experience business declined by 13%. The Walt Disney Company stated in its financial report that the Orlando Walt Disney World resort performed particularly outstanding this quarter. Domestic park attendance increased by 3% year-over-year, and total global visitor numbers grew by 4%. Per capita spending on tickets, dining, and merchandise increased by 3% year-over-year. This performance contrasts sharply with its competitor, Comcast Corporation Class A's Universal Studios resorts, which saw a slowdown in demand in June, partly attributed to rising gasoline prices. Universal Studios Q2 theme park revenue rose just 2.7% to $2.4 billion, with a decline in attendance in June. Walt Disney Company anticipates that visitor numbers will continue to grow this quarter as booking levels keep increasing. Entertainment business: Streaming profits doubled, Toy Story 5 surpasses $1 billion globally The entertainment business (including film studios, Disney+ streaming, and traditional television) generated revenue of $11.35 billion this quarter, a 6% year-over-year increase; its operating profit surged 64% to $1.68 billion. Streaming was the biggest highlight of the entertainment business. The combined profit from Disney+ and Hulu reached $712 million, more than doubling from $329 million in the same period last year. Entertainment SVOD (subscription video on demand) revenue grew by 11% year-over-year to $5.53 billion, with subscription revenue up 15% and advertising revenue up 3%. The Walt Disney Company stated that it expects the operating margin for entertainment SVOD for the full fiscal 2026 year to remain in the double digits. In terms of movies, Toy Story 5's global box office has exceeded $1 billion, bringing the series' cumulative global box office to over $4 billion. The cumulative viewing hours on Disney+ have also surpassed 2 billion hours. The Devil Wears Prada 2 performed well in international markets, while Star Wars: The Mandalorian and the live-action Moana had box office performances that fell short of expectations. Walt Disney Company warned that the live-action Moana's underwhelming box office and a weaker-than-expected advertising environment on US streaming platforms would negatively impact this quarter's performance. Sports business: NBA Finals boost revenue, licensing costs pressure profits The sports business (centered around ESPN) generated revenue of $4.5 billion this quarter, a 4% year-over-year increase. NBA and NHL playoff viewership on ABC and ESPN saw significant surges. However, due to the timing of payments related to broadcasting rights, the sports business operating profit fell 17% year-over-year to $858 million. The rise in NBA licensing costs was a primary reason for the pressure on profits. Strategic adjustments: Sale of A+E stake, buyback target raised to $9 billion The Walt Disney Company announced it would sell its 50% stake in A+E Global Media to joint partner Hearst Communications for $1.2 billion. A+E includes brands such as Lifetime and History Channel. The company plans to use the proceeds for stock buybacks and has raised its fiscal 2026 stock buyback target from $8 billion to at least $9 billion. CEO Josh DAmaro stated in the financial report, We believe our stock is undervalued, and in this quarter, we continue to increase our stock buyback efforts. Walt Disney Company also announced that starting in the first quarter of fiscal 2027, the consumer products business will be moved from the experience segment to the entertainment segment to integrate the studios that create IP with the merchandise that monetizes IP. In terms of AI applications, Walt Disney Company stated, AI is not just about efficiency. We are first using it to enhance the creative process, which is always human-centered, artist-driven, and creator-led. TikTok collaboration: First time bringing vertical creator content to Disney+ Walt Disney Company announced a partnership with TikTok on the same day, allowing TikTok creators to use characters and scenes from Walt Disney Company films and television shows in their short videos. This marks the first such agreement between TikTok and a traditional media company. The two companies stated that a pilot program will launch in the coming months in the United States, with plans to expand to other markets. Financial terms of the deal were not disclosed. Under the agreement, selected videos will be simultaneously broadcast on Disney+ under the Verts tab, aiming to attract younger users who prefer vertical videos. TikTok will provide creators with hundreds of clips from Walt Disney Company's films and series, including those from Pixar, Marvel, Star Wars, and FX. The pilot program will kick off in the coming months in the US. This agreement will bring a large volume of carefully selected, Walt Disney Company-themed fan-created content on TikTok to Walt Disney Companys platform. This move comes as media firms compete for streaming service users, particularly among younger consumers who spend significant time on platforms like YouTube and TikTok. In addition to providing new content for Disney+, the collaboration with TikTok will also help the company attract more viewers to its streaming service. According to TikTok data, last year, users shared an average of 6.5 million posts related to movies and television each day. A survey revealed that nearly half of respondents said they watched a movie or TV show after discovering related content on TikTok. Walt Disney Companys Chief Marketing and Brand Officer Asad Ayaz stated, The best storytellers are first fans. This collaboration builds a new bridge between the stories we tell and the creativity they inspire.