Walt Disney’s Parks and ESPN Power Strong Q2 Results, Fueling Bullish Analyst Outlook

Walt Disney (DIS) reported a robust fiscal Q2 2025, with revenue rising 7% year-over-year to $23.6 billion, surpassing analyst expectations by 200 basis points. The surge was driven by record performance at domestic parks and a resilient ESPN division, which offset headwinds in international markets and programming costs. Analysts at Morgan Stanley, which raised Disney’s price target to $120, highlighted these segments as key growth engines, signaling optimism about the company’s ability to navigate macroeconomic challenges and execute strategic initiatives.

Domestic Parks: The Growth Engine

Disney’s domestic parks and experiences segment delivered a 13% jump in operating income to $1.8 billion, fueled by higher attendance, spending, and the debut of the Disney Treasure cruise ship. Theme parks saw increased guest traffic, while cruise days rose due to the new vessel’s launch. Disney Vacation Club unit sales also climbed, reflecting strong demand for premium experiences.

However, international parks faced a 23% operating income decline, driven by softer attendance at Shanghai and Hong Kong resorts and rising costs. This underscores the reliance on domestic markets, which remain a critical growth lever.

ESPN’s Advertising Surge, Despite Cost Pressures

ESPN’s domestic revenue grew 7% to $4.16 billion, with advertising revenue surging 29%—a standout performance attributed to higher rates and expanded viewership from additional College Football Playoff (CFP) games and an extra NFL game. Domestic affiliate revenue also edged higher due to improved pricing.

Yet, ESPN’s operating income fell 17% to $648 million, as programming costs rose sharply to cover the added games. The segment’s challenges were further compounded by a write-off from exiting the Venu joint venture. Despite these headwinds, Morgan Stanley emphasized ESPN’s long-term potential, citing its planned direct-to-consumer (DTC) offerings and cost management strategies.

Streaming Gains and Strategic Shifts

Disney’s Direct-to-Consumer (DTC) segment, including Disney+ and Hulu, posted a 14% rise in operating income to $443 million, driven by licensing deals like the Marvel Rivals game. Disney+ added 1.4 million subscribers in the quarter, reaching 126 million globally, while Hulu grew to 54.7 million. Average revenue per user (ARPU) rose 3% for Disney+ and 5% internationally due to pricing adjustments and mix shifts.

The Star India joint venture transaction also reshaped results, removing prior-period losses from its sports programming. Going forward, Disney expects a $300 million equity loss from the venture due to amortization costs, though this is factored into its FY2025 guidance.

Financial Outlook and Analyst Take

Disney reaffirmed its FY2025 guidance, projecting adjusted EPS of $5.75 (+16% year-over-year) and $17 billion in cash from operations. The company anticipates modest Disney+ subscriber growth in Q3 and pre-opening costs of $200 million for new cruise ships through fiscal 2025.

Morgan Stanley’s bullish stance hinges on Disney’s ability to leverage its parks and ESPN strengths while managing costs. Analysts noted that Disney’s FY27 EPS target of $7+ could push shares toward a $155 “bull case” if macroeconomic conditions stabilize and growth accelerates.

Conclusion: Strength in Experiences, Challenges Ahead

Disney’s Q2 results underscore its resilience in high-margin segments like domestic parks and ESPN’s advertising-driven revenue. Parks remain a cash cow, benefiting from cruise expansion and theme park demand, while ESPN’s ad growth demonstrates the power of live sports in a fragmented media landscape.

However, risks persist. International parks face execution challenges, and ESPN’s programming costs could remain volatile. Still, with $12.3 billion in free cash flow year-to-date and a disciplined capital allocation strategy—including $1 billion in Q2 share repurchases—Disney is well-positioned to weather near-term headwinds.

Morgan Stanley’s raised price target reflects confidence in Disney’s long-term narrative: a blend of experiential entertainment dominance, streaming stabilization, and strategic cost discipline. For investors, the company’s Q2 outperformance reinforces its status as a top-tier media and entertainment play, even as it navigates an uncertain macroeconomic environment.