Industry Insider: Disney’s Earnings Reveal a Company Finally Back in Control
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By the end of fiscal 2025, Disney appeared to be shaping its future rather than reacting to previous missteps. The company reported $94.4 billion in full-year revenue, up 3% year on year, while income before taxes increased by 59% to $12.0 billion. Diluted earnings per share increased to $6.85, more than double from the previous year, owing to operational improvements, restructuring progress, and a stable portfolio across Entertainment, Sports, and Experiences.
While fourth-quarter revenue of $22.5 billion was essentially flat year on year, the underlying theme was discipline rather than top-line acceleration. Total segment operating income fell 5% in the quarter, primarily due to tougher theatrical comparisons and linear network pressure, but full-year segment operating income rose 12% to $17.6 billion. Disney ended the year with higher margins, a healthier balance sheet, and a better understanding of where its next phase of growth will come from.
The most significant shift continues to take place within Disney's direct-to-consumer business. In the fourth quarter, Disney reported 196 million total Disney+ and Hulu subscriptions, up 12.4 million sequentially, driven by growth in both domestic and international markets. Disney+ subscribers alone totaled 132 million, up 3.8 million from the previous quarter. Direct-to-consumer revenue increased by 8% year on year while operating income increased to $352 million, representing another quarter of profitability improvement for a business that was deeply unprofitable just two years ago.
Management attributed this progress to more effective pricing, subscriber growth, and better cost control, which were partially offset by increased programming, marketing, and technology costs. Advertising performance in streaming remained mixed, with higher impressions offset by lower rates and the lack of Star India advertising revenue following the India joint venture. Nonetheless, Disney's DTC results highlighted a broader strategic shift: streaming is no longer viewed as a growth-at-all-costs experiment, but rather as a maturing business that will deliver margins alongside scale.
That discipline had not yet spread to Disney's linear networks, which were still facing structural headwinds. Linear Networks revenue fell 16% in the quarter while operating income dropped 21%, owing to lower advertising revenue, subscriber erosion, and the loss of Star India's consolidated contribution. Domestic advertising was particularly impacted by lower viewership and a $40 million year-over-year drop in political ads. While programming costs for non-scripted content fell, the savings were insufficient to offset top-line pressure.
Sports remained relatively resilient. ESPN generated $911 million in operating income during the quarter, a 2% decrease year on year, despite higher marketing and production costs associated with the August 2025 launch of ESPN's direct-to-consumer service. Advertising revenue grew by 8%, while subscription and affiliate revenue increased due to higher effective rates. International ESPN results have improved year after year, demonstrating the global viability of live sports even as domestic subscriber trends remain under pressure.
Experiences have once again emerged as Disney's most reliable engine. The segment reported a record full-year operating income of $10.0 billion, up $723 million from fiscal 2024, and a record fourth-quarter operating income of $1.9 billion. Domestic Parks and Experiences operating income increased by 9% while international parks saw a 25% increase, thanks to higher attendance, increased guest spending, and a strong performance at Disneyland Paris. Disney Cruise Line also made a significant contribution, helped by increased passenger cruise days following the launch of the Disney Treasure earlier this year.
That momentum coincided with increased capital intensity. Capital expenditures increased to $8.0 billion, up from $5.4 billion the previous year, primarily due to cruise ship fleet expansion and new theme park attractions. Even so, Disney generated $18.1 billion in operating cash flow and $10.1 billion in free cash flow for the year, giving it plenty of room to fund expansion while returning capital to shareholders.
Disney's capital return strategy has clearly changed gears. The company announced plans to double its share repurchase target to $7 billion in fiscal 2026, as well as declare a $1.50 annual dividend payable in two installments. Management also forecasted double-digit adjusted EPS growth in fiscal 2026 and 2027, indicating that recent restructuring efforts and portfolio realignment are starting to pay off.
Looking ahead, Disney anticipates near-term pressure in Entertainment from theatrical slate comparisons, reduced political advertising, and pre-opening costs associated with new cruise ships. However, the longer-term outlook remains positive. The company is targeting double-digit operating income growth in Entertainment, high-single-digit growth in Experiences, and low-single-digit growth in Sports, as well as $24 billion in content investment across Entertainment and Sports in fiscal 2026.
Taken together, Disney's fiscal 2025 results show a company emerging from a long period of strategic turbulence with renewed clarity. Streaming reduces losses and generates profit. Experiences are growing with confidence. Sports continues to be a profitable industry. Linear networks are becoming smaller but more manageable. Disney may not yet be in a pure growth phase, but for the first time in several years, it appears to have regained control of its business.
