Disney stock plummets 8% on weaker TV and movie revenue

It was a volatile day for Walt Disney (NYSE:DIS) stock, as shares were down some 8% on mixed fiscal fourth quarter earnings.

It didn’t help much that stock markets were plunging on Thursday, with the Dow Jones down more than 800 points, the S&P 500 off 115 points, and the Nasdaq Composite dropping more than 500 points.

Disney could not buck the downward trend, as it fell short of revenue expectations while beating earnings estimates.

• Revenue: $22.5B, the same as Q4 of 2024. This missed revenue estimates of $22.8B.
• Net income: $1.3, up from $460 million.
• Earnings: 73 cents per share, up from 25 cents per share a year ago.
• Adjusted earnings: $1.11 per share, down 3% year-over-year. This beat estimates of $1.05 per share.

“This was another year of great progress as we strengthened the company by leveraging the value of our creative and brand assets and continued to make meaningful progress in our direct-to-consumer businesses,” Robert Iger, CEO at Disney, said.

Rough quarter at the box office  

Disney’s Entertainment division, which includes its films, TV networks, and streaming properties, saw revenue decline 6% to $10.2 billion in the quarter.

Linear networks revenue dropped 16% to $2.1 billion in the quarter, with operating income plummeting 21% to $391 million.

Meanwhile, its content sales/licensing division, which includes its films, was off 26% to $1.9 billion. The weaker box office performance looked even worse in comparison to last year, when Q4 featured massive hits, Inside Out 2 and Deadpool and Wolverine.

This year, while solid hits like Fantastic Four and Freakier Friday generated revenue, it was nowhere near the income that the 2024 blockbuster brought in.

Disney is more hopeful about the December quarter, which includes releases like Zootopia 2 and the new Avatar film.

The theatrical division had a net operating loss of $52 million in the quarter compared to a $316 million net gain a year ago.

ESPN streaming a success

On the brighter side, the direct-to-consumer streaming business saw revenue increase 8% to $6.25 billion with operating income up 39% to $352 million. Disney+ saw a 3% increase in subscribers in the quarter while Hulu saw subscribers jump 15%.

In addition, Experiences revenue, which includes its theme parks, jumped 6%. Also, sports revenue, which includes its recently launched ESPN streaming service, increased 3%.

“The ESPN launch has been a real success for a number of reasons. First of all, what we set about to do was to attract basically new users, people who had either been subscribers to the multi-channel linear bundle or people who had not but wanted to engage more with ESPN. We’ve done extremely well in that regard, signing up essentially new users,” Iger said on the earnings call … “We’re very, very encouraged. I think it’s a very positive step for the future of ESPN.”

On its dispute with YouTube TV, Disney officials were relatively mum.

“The only thing I would say is in terms of our guidance, we built a hedge into that with the expectation that these discussions could go for a little while,” Carlos Gomez, treasurer, and head of investor relations at Disney, said about negotiations with YouTube TV.

In terms of the revenue impacts, Gomez said there are two pieces to it.

There’s the piece that we’re not getting paid for, and then the piece that we’re picking up by virtue of subscribers moving elsewhere,” he said.

For fiscal year 2026 and 2027, Disney expects digit adjusted EPS growth in both years.

Analysts rate Disney stock as a buy with a $139 per share median price target, suggesting 29% growth. The stock is trading at just 18 times earnings with a PEG ratio in value territory. This selloff might be an opportunity to kick the tires a bit.