Walt Disney (DIS +3.65%) delivered the goods on Wednesday morning. The king of the entertainment industry broadcast its fiscal third-quarter results, and investors clearly found much to like about the company’s recent performance and its future potential.
Two items that were particularly appealing were management’s stated goal of —again — increasing its share repurchase target, and its adherence to the existing double-digit growth guidance. Let’s tune in to the quarter.
Image source: Walt Disney.
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Disney grew its revenue by 7% year over year during the period to $25.2 billion. The company’s net income not under generally accepted accounting principles (non-GAAP, or adjusted) increased by 23% to over $3.8 billion, or $2.06 per share.
The company missed the consensus analyst revenue estimate slightly but beat on adjusted net income. Professional Disney-watchers were anticipating $25.4 billion on the top line, and only $1.86 for adjusted earnings per share (EPS).
Of its three reporting units, experiences posted the highest revenue growth rate. This came in at 10%, to a total of just under $10 billion. The company’s first-in-class theme parks benefited from the annual admission price raises that are becoming routine, and other factors such as a sustained boom in travel and tourism. The overall take for theme park admissions rose 9% to nearly $3.3 billion, while the popularity of travel helped the company’s resorts and vacations segment post a robust 17% improvement to almost $2.8 billion.
The company’s core entertainment operations did well too, with overall revenue rising 6% to $11.3 billion. The growth spot within the category was subscription and affiliate fees; these advanced by 12% to over $7.5 billion. Disney’s sports division (dominated by ESPN) placed last, with revenue growth of 4% to $4.5 billion. Finally, inter-segment eliminations shaved $565 million off the company’s total top-line figure.
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Unified strategy
While this didn’t qualify as a blowout quarter, the across-the-board revenue growth rates demonstrate the effectiveness of the One Disney strategy, which more tightly integrates the sprawling company’s many entertainment operations. New film releases are accompanied by pushes in related merchandise and, at times, new theme park attractions. Disney is a master at this: a customer paying for a movie ticket becomes a buyer of a doll depicting the lead character, and later a Disneyland attendee eager to go on the ride linked to the film.
While investors surely would have loved a guidance raise, management’s reaffirmation of its existing forecasts presages continued growth. Its full-year 2026 earnings projections were maintained: adjusted EPS growth of either 12% or 16% over the previous year, depending on whether you count the year’s extra reporting week. The company also maintained its forecast of a double-digit percentage improvement in profitability for 2027, although it has yet to put a specific number to it.
That steady-and-she-goes stance put a spotlight on the raised goal for share repurchases. The company said it is now targeting total spend of a whopping $9 billion this fiscal year on buybacks, up from the “merely” $8 billion goal stated in the previous quarter, and the $7 billion of the quarter prior to that (also, far above the $3.5 billion spent in fiscal 2025). That huge and steadily rising figure is more than an investor-morale-boosting effort at this point; it clearly shows that management thinks the stock is undervalued.
I would agree with that take. Disney remains miles ahead of any other entertainment company, in both scale and the many sources of revenue growth at its disposal. That, bolstered by the One Disney strategy that maximizes revenue amplification, presages a bright future for the company. I continue to believe that investors seeking the single best entertainment stock for their portfolios will make the right choice with this one.