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Walt Disney (DIS) edged past Q4 EPS expectations, but missed on revenue, which was down 0.5% yr/yr to $22.46 bln, marking the company's first annual revenue decline since 1Q24. The stock is trading sharply lower following these mixed results.

• Top-line weakness stemmed mainly from ongoing pressure in the Linear Networks business. Segment revenue plunged 16% yr/yr and operating income dropped 21%, driven by cord-cutting and a persistent downturn in ad spending.
• The film slate was less robust than last year, when blockbusters like Inside Out 2 and Deadpool & Wolverine drove strong comps. As a result, Content Sales/Licensing revenue declined 26% to $1.90 bln.
• Direct-to-Consumer (DTC) remained a bright spot for Entertainment, with revenue up 8% to $6.25 bln and operating income surging 39% to $352 mln.
• Disney+ exceeded subscriber expectations, adding 3.8 mln for a total of 132 mln. DIS implemented another price hike in October, reflecting its emphasis of profits over subscriber growth.
• Overall, Entertainment segment revenue fell 6% to $10.2 bln. DIS guided for double-digit operating income growth in FY26 for Entertainment, supported by a strong upcoming film slate (Zootopia 2, Avatar Fire and Ash, Toy Story 5, Avengers Doomsday) and expansion of AI-powered platform features.
• Experiences posted solid results, with revenue up 6% to $8.77 bln and operating income up 13% to $1.88 bln.
• Key drivers for Experiences included robust cruise demand (utilization remained high despite added capacity), strong consumer products sales (notably the Lilo & Stitch franchise), and healthy advance domestic park bookings (up 3% for Q1).
• Sports revenue grew 2% to $3.98 bln, though operating income slipped 2% to $911 mln. The new ESPN Unlimited App launched in August was well received, attracting new digital users and boosting engagement.
• DIS captured strong advertising interest from its DTC sports assets, but faced content-driven cost pressure, notably due to NBA rights investment timing.
• DIS is targeting double-digit EPS growth in FY26, above consensus expectations for 10% growth.
• The company increased its semi-annual dividend by 50% to $1.50 per share, doubling its annual share repurchase target to $7 bln.

Briefing.com Analyst Insight:

DIS’s mixed quarter highlights persistent challenges in its Linear Networks segment due to secular cord-cutting and weak ad demand, offset by impressive profit gains in streaming and Experiences. The DTC pivot is yielding consistent margin improvement and subscriber retention, especially through bundled offerings like Disney+, Hulu, and ESPN, which have lowered churn rates. Experiences are benefiting from heavy cruise investment and blockbuster-driven retail, but film comps remain tough year/yr. The company’s ambitious FY26 profit guidance and capital return plans reflect growing free cash flow and a commitment to shareholder yield, but execution risks persist -- especially around film content performance and macro-driven park attendance. DIS’s streaming profitability focus, strong IP franchises, and AI-powered product roadmap support its premium narrative, but lingering headwinds in Linear and cyclical content sales merit caution until top-line growth resumes more broadly.