Disney's Q4 2025: Contradictions Emerge on ESPN Subscription Strategy, Content Spend & Revenue Growth, Cruise Line Impact, and Budget Adjustments & Fire Impact

Date of Call: November 13, 2025

Financials Results

• EPS: Adjusted EPS for fiscal 2025 up 19% YOY
• Operating Margin: Streaming operating income up 39% in Q4; full-year streaming operating income $1.3B, up $1.2B YOY and $300M ahead of prior guidance

Guidance:

• Fiscal 2026: expect double-digit adjusted EPS growth vs prior year
• Targeting $7.0B in share repurchases in 2026 (vs $3.5B in fiscal 2025)
• Board declared cash dividend $1.50 per share (50% increase vs $1.00)
• DTC: target double-digit margins and aspire to double-digit revenue growth
• Experiences: expect high-single-digit operating income growth in fiscal 2026
• Continued strong free cash flow growth enabling increased return of capital

Business Commentary:

• Financial Performance and Growth:
• Disney's adjusted EPS for fiscal 2025 was up 19% from fiscal 2024, showcasing a 19% compound annual growth rate over the past three fiscal years.

• The growth in earnings and cash flow is attributed to the company's strong balance sheet and complementary business strategy that leverages its creative and brand assets effectively.

• Direct-to-Consumer and Streaming Success:

• Disney's streaming business reported a 39% increase in operating income for Q4, with a full-year operating income of $1.3 billion, exceeding guidance by $300 million.

• This success is driven by a strategic focus on growth in direct-to-consumer businesses, identifying high-quality international content, and consolidating entertainment content within a single app.

• ESPN Direct-to-Consumer Launch:

• The launch of ESPN's direct-to-consumer service resulted in attracting new subscribers, with about 80% opting for the trio bundle that includes Disney+ and Hulu.

• The new app's features and consumer engagement, coupled with a consumer-friendly product and growth in advertising opportunities, are key factors in its success.

• Theme Park and Experiences Expansion:

• Disney's Experiences segment reported record operating income, with a 13% increase in Q4 and an 8% increase for the full year.
• Growth is driven by strategic investments in cruise ships and theme parks, such as the upcoming World of Frozen at Disneyland Paris, and high guest satisfaction scores in cruise operations.

• Studio and Content Success:
• Disney's film studios achieved two $1 billion franchises in fiscal 2025, with global box office revenue surpassing $4 billion for the fourth consecutive year.
• The success is attributed to popular storytelling and IP investments, like the live-action Lilo & Stitch, and a strong slate of upcoming titles.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "another year of great progress," "Adjusted EPS for fiscal 2025 was up 19%," streaming operating income up 39% in Q4 and "we expect to deliver double-digit adjusted EPS growth" for fiscal 2026; Bob repeatedly called the studio slate and ESPN launch "very, very encouraging" and "very bullish."

Q&A:

• Question from Benjamin Swinburne (Morgan Stanley): Early learnings on ESPN direct-to-consumer adoption/engagement and does it change the long-term outlook; clarification on cash-from-operations guidance and tax timing impact?
  Response: ESPN DTC launch has been a clear success—attracting many net-new users, high authentication among linear subscribers, strong uptake of the premium/ultra product and ~80% of new ESPN subscribers taking the trio bundle; cash from operations, adjusted for a $1.7B tax timing swing, rose ~28% YOY and management expects continued free cash flow growth enabling greater shareholder returns.

• Question from Steven Cahall (Wells Fargo): Outlook for the studio slate this year and did you provision guidance for a sustained YouTube TV blackout?
  Response: Management is very bullish on the studio slate (Zootopia 2, Avatar, Mandalorian, Toy Story 5, etc.); Q1 guide softness is driven by timing/overlap (Avatar at quarter end) and the company built a hedge into guidance expecting negotiations with YouTube could extend.

• Question from Robert Fishman (MoffettNathanson): Roadmap to make Disney+ a super-app/portal for Disney assets and can DTC sustain double-digit revenue growth?
  Response: Disney+ is undergoing a major product and tech overhaul to create a unified, AI-enabled portal (commerce, parks, games, UGC) and the company aspires to sustain double-digit DTC revenue growth and margin expansion through revenue growth and operating leverage rather than cost cutting.

• Question from Jessica Reif Cohen (BofA Securities): Any role for Disney in potential M&A activity and underwriting on advertising outlook for fiscal 2026?
  Response: Management does not foresee a need for significant M&A given the IP portfolio built (Fox, Lucas, Pixar) and thus no expectation of major deals; advertising grew ~5% in FY25, CPMs have improved in recent quarters and management expects advertising growth in FY26 despite political ad overlap in Q1.

• Question from Michael Morris (Guggenheim): Drivers of Experiences segment into fiscal 2026 and strategic rationale/benefit of NBA investment?
  Response: Experiences growth will be driven by cruise capacity ramp (benefits in H2 as launch costs abate), pricing and attendance gains and consumer-products contribution; NBA rights add scale audiences that attract advertisers and are strategically beneficial despite some timing-driven cost 'bumpiness' in portions of the year; bookings are up (bookings up 3% in Q1).

• Question from Kannan Venkateshwar (Barclays): Any interest in broader bundling of streaming and impact of ESPN bundling on churn/acquisition costs?
  Response: Bundling materially lowers churn and produces healthier subscribers—~80% of new ESPN subscribers chose the trio bundle—and Disney is open to additional bundling partnerships given demonstrated subscriber benefits.

• Question from John Hodulik (UBS): Domestic parks attendance softness cause and cruise demand/margins as cruise capacity grows?
  Response: Parks demand was in line with expectations (Epic noted as expected); cruise demand is very strong with utilization matching historical levels as capacity is added; cruise margins are described as attractive but specific margins are not disclosed.

• Question from Kutgun Maral (Evercore ISI): DTC cost dynamics in 2026 (tech/programming/integration savings) and impact of the 53rd week on comps and EPS cadence?
  Response: DTC will continue investing in content (leaning international) and product while capturing SG&A savings from tech/integration to drive P&L leverage (expenses growing slower than revenue); the 53rd week impact will be quantified later but management expects to target double-digit growth off that comp in subsequent years.

• Question from David Karnovsky (JPMorgan): Views on licensing IP to AI/video platforms and role of generative AI in lowering production costs?
  Response: Disney is actively engaging with AI firms to both protect IP and explore productive partnerships; management expects AI to drive efficiencies across production, operations and DTC engagement while enabling new user-generated content opportunities.

Contradiction Point 1

ESPN App Launch and Subscription Strategy

It involves the company's approach to launching the ESPN app and its impact on subscription numbers, which are crucial for understanding the company's growth strategy.

As ESPN transitions to direct-to-consumer, what insights have you gained on adoption and engagement? How does this model impact the business outlook? - Benjamin Swinburne (Morgan Stanley)

2025Q4: 80% of new subscribers are bundling Disney+, Hulu, and ESPN. - Robert Iger(CEO)

How will the ESPN launch impact DTC growth and engagement? - John Christopher Hodulik (UBS)

2025Q3: The ESPN bundle at $29.99 is an attractive offer, expected to increase subs and engagement. - Robert Iger(CEO)

Contradiction Point 2

Content Spend and Revenue Growth Strategy

It involves the company's strategy for content spending and revenue growth, which are critical for understanding the company's financial outlook.

What is the content growth outlook for the studio this year and next? Does the carriage dispute with YouTube TV affect EPS guidance? - Steven Cahall (Wells Fargo)

2025Q4: We do expect the content spend for the studio to be lower in '26 than it was in '25, just given the fact that we've got 2 Avatar releases in '25. - Robert Iger(CEO)

How will Singapore’s new ship affect Disney’s business, and what are the content strategy plans for next year? - Jessica Jean Reif Ehrlich Cohen (BofA Securities)

2025Q3: The content guide considers tough comps with Inside Out 2 but is expected to meet the provided $585 million guidance. - Robert Iger(CEO)

Contradiction Point 3

Cruise Line Financial Impact

It involves the financial implications of cruise line expansion, which are crucial for understanding the company's growth and investment strategies.

What are the key growth drivers for the Experiences segment through fiscal 2026? How will the NBA investment contribute to growth? - Michael Morris (Guggenheim)

2025Q4: Disney Cruise Line delivered another record quarter. Through September 30, year-to-date results reflect booking strength with 110% of available space booked for the current fiscal year. - Robert Iger(CEO)

What are the financial implications of cruise line expansion from new ships? - Kutgun Maral (Evercore ISI)

2025Q3: We are already half booked for next year, and new ships are pre-booked at high levels. - Robert Iger(CEO)

Contradiction Point 4

ESPN Direct-to-Consumer Strategy and Impact on Business

It involves the strategic direction and impact of ESPN's transition to a direct-to-consumer model, which could significantly affect the company's revenue and competitive positioning.

How is adoption and engagement trending with ESPN's direct-to-consumer model? Does this product alter the business's outlook? - Benjamin Swinburne (Morgan Stanley)

2025Q4: The ESPN launch has been successful, attracting new users and giving existing subscribers more features. 80% of new subscribers are bundling Disney+, Hulu, and ESPN. The app's features, like SportsCenter for You and Verts, engage users effectively. - Robert Iger(CEO)

What Disney+ platform enhancements this year will be most impactful for the business and what realistic timeline can investors expect to see tangible results reflected in reported numbers? - Ben Swinburne (Morgan Stanley)

2025Q1: We are very much committed to ESPN+, which is our direct-to-consumer product. We expect that to be our long-term focus and strategy, as opposed to, as I said, building a linear streaming service. - Bob Iger(CEO)

Contradiction Point 5

Content Budget Adjustment and L.A. Fires Impact

It involves the explanation for an adjustment in the content budget and whether or not it was related to the L.A. fires, which could have implications for the company's financial planning and disaster management strategy.

What's the outlook for studio content growth this year and next? Does the current carriage dispute with YouTube TV affect EPS guidance? - Steven Cahall (Wells Fargo)

2025Q4: We just reduced our content budget for this year, as we've shown you, but that's not related to the fires. - Robert Iger(CEO)

Why was the content budget reduced from $24 billion to $23 billion, and is this linked to L.A. fires? Can you explain the cadence of earnings growth for the remainder of the year? - John Hodulik (UBS)

2025Q1: The content budget adjustment does not reflect fire impact. - Hugh Johnston(CFO)