Disney Faces High-Stakes Q2 as Parks Cool, Tariff Risks Loom

Walt Disney Company (DIS) is set to report its fiscal Q2 2025 results before the market opens on Wednesday, and expectations are high for a performance that could help propel the stock through a technical ceiling near $92 and possibly retest the key $100 level. Shares have rebounded from an April 7 low of $80 and are now sitting just beneath critical resistance. A solid quarter could build on recent momentum and help re-establish investor confidence after a volatile start to the year.

Analysts expect adjusted EPS of $1.19, down modestly from $1.21 in the prior year, while revenue is forecast to rise 4.8% to $23.14 billion. UBS expects Q2 to reflect strong demand at domestic theme parks, early contributions from the new cruise ship, and steady sports advertising revenue. However, concerns around macro headwinds and consumer discretionary pullbacks have led several firms, including UBS and Loop Capital, to trim their price targets while maintaining Buy ratings. CFRA analyst Ken Leon also flagged the potential risks tied to tariffs, international travel declines, and weakening consumer sentiment.

Watch: CFRA's Ken Leon tells us what to watch when Disney reports Q2 earnings Wednesday morning.

Key drivers this quarter will include performance at Disney's Experiences segment, profitability in Direct-to-Consumer (DTC) streaming, sports media growth, and management commentary around tariffs, succession planning, and macroeconomic conditions. In Q1, Experiences operating income was flat due to hurricane impacts and cruise line pre-opening expenses. Attendance, particularly at domestic parks, has shown mixed trends according to geolocation data from KeyBanc, with Florida improving but California lagging. Analysts remain cautious about Universal's new Epic Universe park siphoning demand starting May 22. Disney is already responding with promotional offers like half-price children’s tickets and complimentary water park access for hotel guests.

In streaming, investors will watch closely for profitability metrics and Disney+ subscriber trends. Management previously guided for a modest decline in Q2 subs following recent price hikes and the expiration of a European wholesale deal. Consensus calls for 123.7 million Disney+ subscribers, down slightly from 124.6 million in Q1. However, DTC operating income turned profitable last quarter and could again post year-over-year gains, particularly if advertising stabilizes and international content investments drive engagement. Leon emphasized that Wall Street will be watching the DTC segment's EBITDA improvement as a key inflection point in Disney's turnaround strategy.

The sports segment, led by ESPN, remains a vital profit engine. Q1 delivered $247 million in operating income, up from a loss the year before, aided by a strong ad market. Q2, however, faces timing-related headwinds from the NCAA Football Playoffs shifting into the quarter and the wind-down of the Venu Sports joint venture. Management previously warned this could clip $150 million from segment operating income, though the full-year forecast for 13% growth remains intact.

Another key narrative surrounds the CEO succession plan and geopolitical pressures. Chairman James Gorman recently stated the process is "going well", and many expect a formal transition plan by 2026. Investors will also look for commentary on looming tariff threats—including a proposal for 100% duties on overseas film production—which could impact Disney's cost base and content strategy.

The Q2 report could serve as a technical and narrative catalyst. With positive earnings, stable guidance, and clarity on succession and tariffs, Disney could reassert investor confidence. Misses on subscriber trends or weaker-than-expected park metrics, however, risk derailing the rally just as shares approach key moving averages.

Disney Q1 Fiscal 2025 Earnings Review: Solid Beat with Cautious Guidance Ahead of Q2

The Walt Disney Company posted a strong start to fiscal 2025, delivering a solid beat on both earnings and revenue in Q1. Adjusted EPS came in at $1.76, well ahead of the $1.42 consensus estimate and up 44% year-over-year, while revenue rose 4.8% to $24.69 billion, surpassing the $24.57 billion estimate. Despite a modest decline in Disney+ subscribers, segment operating income surged 31% to $5.1 billion, with notable strength across Entertainment and Sports. Management reaffirmed guidance for high-single digit adjusted EPS growth and $15 billion in operating cash flow for the full year. As Q2 approaches, investors will be focused on ongoing streaming profitability, pricing dynamics, and macro-driven park trends.

Segment Performance: Revenue and Profit Growth Across the Board

• Entertainment revenue rose 8.9% to $10.87 billion, while segment operating income nearly doubled to $1.70 billion (+95% y/y). This was driven by a turnaround in Direct-to-Consumer, which swung to a $293 million profit from a loss last year. Content sales also delivered $312 million in operating income, supported by box office hits like Moana 2.
• Sports revenue edged up 0.3% to $4.85 billion, with segment operating income improving to $247 million from a $103 million loss in the prior year. ESPN domestic ad revenue rose 15% y/y. However, Disney expects Q2 sports profitability to decline by $150 million due to college football timing, an additional NFL game, and the wind-down of the Venu JV.
• Experiences revenue increased 3.1% to $9.42 billion, with segment operating income up slightly to $3.11 billion (+0.2% y/y). International parks rose 28% y/y on stronger attendance and spending, while domestic parks declined 5% due to hurricane impacts and cruise-related pre-opening expenses. These headwinds shaved ~9 percentage points off year-over-year growth.

Streaming Metrics and DTC Strategy

Disney+ subscribers declined modestly to 124.6 million (-0.7 million q/q), in line with internal expectations following recent price hikes. Domestic subs totaled 56.8 million and international came in at 67.8 million. Hulu added 1.3 million subscribers in the quarter, bringing the total to 53.6 million. Direct-to-Consumer advertising revenue dropped 2% y/y, but excluding Hotstar in India, it was up 16%.

Looking ahead, Disney guided for a "modest" decline in Disney+ subscribers in Q2 due to expected churn from pricing changes and the expiration of a European wholesale deal. However, full-year Direct-to-Consumer operating income is projected to grow by $875 million, and the company reaffirmed confidence in its margin-expansion strategy.

Outlook and Strategic Initiatives

Disney reiterated full-year targets for:

• High-single digit adjusted EPS growth
• $15 billion in operating cash flow
• Double-digit Entertainment segment income growth
• 6% to 8% growth in Experiences segment income
• 13% growth in Sports segment income

The company noted pre-opening expenses of ~$200 million for Disney Cruise Line this fiscal year (with $40 million expected in Q2) and anticipates a ~$300 million equity loss from the India JV deconsolidation. Despite macro headwinds, management said it remains on pace to repurchase $3 billion of stock in fiscal 2025 and will pay a $1.00 per share dividend split across two payments.

Implications for Q2 Earnings Preview

With the stock up modestly post-earnings, investors will look to Q2 for continued streaming profitability and signs of resilience in domestic parks. Revenue comparisons will be measured against Q1's:

• +8.9% y/y Entertainment revenue growth
• +0.3% y/y Sports revenue growth
• +3.1% y/y Experiences revenue growth.

Q2 risks include streaming churn, sports cost timing, and hurricane-related comps. Still, Iger’s commentary reinforced confidence in the company’s strategic trajectory, including a sports content push on Disney+, cruise expansion, and disciplined capital returns.