Earnings call transcript: Disney Q3 2025 beats EPS forecast, stock dips

Walt Disney Company, with a substantial market capitalization of $203 billion, reported its third-quarter earnings for 2025, showcasing a robust financial performance that exceeded analysts’ expectations on earnings per share (EPS) but slightly missed on revenue forecasts. The entertainment giant’s EPS came in at $1.61, surpassing the forecasted $1.45, marking an 11.03% surprise. However, revenue was slightly below expectations at $23.65 billion compared to the $23.7 billion forecast. Despite the earnings beat, Disney’s stock fell 4.04% in pre-market trading, closing at $115.94. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, with 6 analysts recently revising their earnings estimates upward for the upcoming period.

Key Takeaways

• Disney’s Q3 EPS outperformed expectations with an 11.03% surprise.
• Revenue fell slightly short of forecasts, with a $23.65 billion actual versus $23.7 billion expected.
• The stock price declined by 4.04% in pre-market trading.
• Disney raised its full-year guidance amid strong performance in various segments.
• New product launches and strategic initiatives were highlighted, including the integration of Hulu into Disney+.

Company Performance

Disney demonstrated strong overall performance in Q3 2025, driven by its Direct-to-Consumer (DTC) and Experiences segments. The DTC segment reported operating margins of 6%, while the Experiences segment saw operating income growth of 7-8%. With an impressive EBITDA of $19.12 billion and overall revenue growth of 5.42% over the last twelve months, Disney World achieved record Q3 revenue, underscoring the company’s strength in its theme park operations. The company continues to expand its global footprint, announcing new theme park attractions and cruise line expansions. InvestingPro data reveals the company maintains a GOOD Financial Health Score of 2.91, suggesting strong operational fundamentals. Discover 8 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Financial Highlights

• Revenue: $23.65 billion, slightly below the forecast of $23.7 billion.
• Earnings per share: $1.61, exceeding the $1.45 forecast.
• Direct-to-Consumer operating margins: 6%.
• Experiences segment operating income growth: 7-8%.

Earnings vs. Forecast

Disney’s earnings per share exceeded expectations with an 11.03% surprise, reflecting strong operational performance and strategic initiatives. However, revenue fell short by 0.21%, a minor miss in the context of the company’s overall financial health.

Market Reaction

Despite the positive earnings surprise, Disney’s stock fell by 4.04% to $115.94 in pre-market trading. This decline may reflect investor concerns about the slight revenue miss and broader market trends affecting the entertainment sector. Trading at a P/E ratio of 24.23, the stock remains within its 52-week range, between $80.10 and $124.69. For deeper insights into Disney’s valuation and comprehensive analysis, including exclusive Fair Value calculations and peer comparisons, check out the detailed Pro Research Report available on InvestingPro, part of their coverage of 1,400+ top US stocks.

Outlook & Guidance

Disney raised its full-year guidance, maintaining a focus on double-digit EPS growth. The company highlighted upcoming product launches, including a standalone ESPN app and new Disney Cruise Line ships. Strategic initiatives such as the integration of Hulu into Disney+ and international market expansion are expected to drive future growth.

Executive Commentary

CEO Bob Iger emphasized the company’s strategic focus, stating, "We are operating from a position of strength and building across our company with a continued focus on quality and innovation." CFO Hugh Johnston added, "Our objective with this business is to maximize operating income over time through a growth-oriented strategy."

Risks and Challenges

• Market saturation in streaming services could limit growth potential.
• Macroeconomic pressures may impact consumer spending on entertainment.
• Regulatory challenges in international markets could affect expansion plans.
• Competition in sports media rights could drive up costs.
• Supply chain issues may affect theme park operations and product launches.

Q&A

During the earnings call, analysts focused on Disney’s strategic initiatives, including the NFL deal, which expands game windows from 22 to 28. Questions also addressed the company’s cruise line expansion into new markets like Singapore, and the potential impact of bundling Disney+, Hulu, and ESPN on subscriber growth and pricing strategy.

Full transcript - Walt Disney (DIS) Q3 2025:

Conference Operator: Day, and welcome to The Walt Disney Company Third Quarter twenty twenty five Financial Results Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please also note, today’s event is being recorded. I would now like to turn the conference over to Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations.

Please go ahead.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Good morning. It’s my pleasure to welcome everyone to The Walt Disney Company’s Third Quarter twenty twenty five Earnings Call. Our press release, Form 10 Q, and management’s posted prepared remarks were issued earlier this morning and are available on our website at www.disney.com/investors. Today’s call is being webcast, and a replay and transcript will be made available on our website after the call. Before we begin, please take note of our cautionary statement regarding forward looking statements on our IR website.

Today’s call may include forward looking statements that we make pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements, including regarding the company’s future business plans, prospects and financial performance, are not historical in nature and are based on management’s assumptions regarding the future and are subject to risks and uncertainties, including, among other factors, economic, geopolitical, operating and industry conditions, competition, execution risks, the market for advertising, our future financial performance, and legal and regulatory developments. Refer to our IR website, the press release issued today, and the risks and uncertainties described in our Form 10 ks, Form 10 Q, and other filings with the SEC for more information concerning factors and risks that could cause results to differ from those in the forward looking statements. A reconciliation of certain non GAAP measures referred to on this call to the most comparable GAAP measures can be found on our IR website. Joining me this morning are Bob Iger, Disney’s Chief Executive Officer and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer.

Following introductory remarks from Bob, we will be happy to take your questions. So with that, I will now turn the call over to Bob.

Bob Iger, Chief Executive Officer, Walt Disney Company: Thank you, Carlos, and good morning, everyone. Before we take your questions, I’d like to share some updates related to our strategic priorities, including a few exciting announcements. At a time of great change for our industry, when a number of companies are contracting, we are operating from a position of strength and building across our company with a continued focus on quality and innovation. We’re building on the creative success in our film studios resulting in the continued emergence of popular new franchises at a level that is unparalleled in the industry. We are building on Disney’s value proposition in streaming by combining Hulu into Disney plus to create a unified app experience featuring branded and general entertainment, news, and sports resulting in a one of a kind entertainment destination for subscribers.

We’re building ESPN into the preeminent digital sports platform with our highly anticipated direct to consumer sports offering launching on August 21, and our just announced plans with the NFL that would expand ESPN’s programming and content offerings for fans. We’re building on our best in class parks and experiences businesses with more expansions underway around the world than at any other time in our history. I’d like to dive deeper into the steps we’re taking to drive growth for our company, beginning with our film studios. Our renewed momentum continued in Q3, adding to our popular brands and franchises and further demonstrating their ability to generate ongoing long term value across our businesses. The live action Lilo and Stitch recently crossed the $1,000,000,000 mark at the worldwide box office, making it Hollywood’s first film to reach that milestone this year and Disney’s fourth billion dollar film in just over a year.

Lilo and Stitch is on track to become the company’s second largest consumer products merchandise franchise this year behind only Mickey Mouse with more than 70% revenue growth compared to last year. Meanwhile, Marvel’s The Fantastic Four First Steps opened a rave reviews two weeks ago, successfully launching this important franchise into the Marvel Cinematic Universe. And later in the calendar year, we will release more highly anticipated titles, including Zootopia two and Avatar Fire and Ash. Turning to our streaming business, today we are announcing a major step forward in strengthening our streaming offering by fully integrating Hulu into Disney plus This will create an impressive package of entertainment pairing the highest caliber brands and franchises, great general entertainment, kids programming, news, and industry leading live sports content all in a single app. By creating a differentiated streaming offering, we will be providing subscribers tremendous choice, convenience, quality, and enhanced personalization, while at the same time continuing to grow profitability and margins in our entertainment streaming business through expected higher engagement, lower churn, operational efficiencies, and greater advertising revenue potential.

As we detail in our shareholder letter, Hulu will now become our global general entertainment brand. In the fall, it will replace the star tile on Disney plus internationally. Over the coming months, we will be implementing improvements within the Disney plus app, including exciting new features and a more personalized homepage, all of which will culminate with the unified Disney plus and Hulu streaming app experience that will be available to consumers next year. The other key component of our streaming strategy is sports. And on August 21, will launch ESPN’s direct to consumer offering, making ESPN’s full suite of networks and services directly available to fans for the first time.

The enhanced ESPN app will be a sports fan’s dream with key new features planned for launch such as multi view, enhanced personalization, integration of stats, betting, fantasy sports and commerce, and a personalized sports center. And fans with subscriptions to the Disney plus Hulu and ESPN bundle will be able to watch ESPN content directly inside Disney plus In addition, yesterday, ESPN and the NFL announced plans for ESPN to acquire NFL Network and certain other media assets owned and controlled by the NFL. In exchange, the NFL will receive a 10% equity stake in ESPN. This announcement paves the way for the world’s leading sports media brand and America’s most popular sport to deliver an even more compelling experience for NFL fans in a way that only ESPN and Disney can. Separately, ESPN and the NFL reached an agreement which includes expanded NFL highlight rights within multiple fan engagement platforms and more interactive features for ESPN’s DTC offering and ESPN app, including betting and fantasy.

ESPN will also gain the ability to sell and bundle NFL plus Premium, which includes NFL Red Zone to ESPN DTC subscribers, along with rights to additional non exclusive preseason NFL games for its DTC offering, both starting in the 2025 season. And an additional agreement extends ESPN’s NFL draft rights with the ability to stream ESPN and ABC’s draft coverage on ESPN DTC, Hulu, and Disney plus We’re also excited to announce that ESPN will be the exclusive home for WWE Premium Live Events, further expanding ESPN’s rights portfolio, and we look forward to sharing more soon. Looking to our experiences segment, expansion projects are underway across every one of our theme parks globally. From a new world of Frozen Land opening at Disneyland Paris in 2026, to the villains and cars themed areas at Magic Kingdom, to a Monsters Inc. Area at Disney’s Hollywood Studios, to an Avatar themed destination at Disney California Adventure, in addition to a new theme park coming to Abu Dhabi.

And Disney Cruise Line continues to grow as we prepare for the launch of two new ships later this year, the Disney Destiny and the Disney Adventure, our largest ship ever and the first to be docked in Asia, bringing our fleet to a total of eight cruise ships operating around the globe. Taken in their totality, our efforts across the entire company reinforce that Disney operates in a league of its own. With a robust portfolio of growth businesses that work seamlessly together to generate value, supported by a deep library of beloved IP and enabled with cutting edge technology. With ambitious plans ahead for all of our businesses, we’re not done building and we remain optimistic about the company’s trajectory. And with that, Hugh and I would be happy to take your questions.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks, Bob. As we transition to Q and A, we ask that you please try to limit yourself to one question in order to help us get to as many questions today as possible. And with that, operator, we are ready for the first question.

Conference Operator: Thank you. Our first question today comes from Ben Swinburne with Morgan Stanley. Please go ahead.

Ben Swinburne, Analyst, Morgan Stanley: Thanks. Good morning. A lot of news to digest this morning. Bob,

: guess I’d love

Ben Swinburne, Analyst, Morgan Stanley: to hear a little more on the NFL relationship. Clearly, strategically aligning with that league is good for ESPN. I think that’s pretty obvious. But you gave up 10% of the network from a value point of view. How does this agreement and the content you’re getting help Jimmy grow that business faster?

Can you talk a little bit about how you see this playing out in terms of revenue growth, subscriber growth and the benefits you think it means to the business? And I just wanted to check with Hugh, is the ’26 guidance that you’ve given in the past still intact? So double digit EPS growth and low single digit growth OI at sports given all the stuff we learned today. Thank you very much.

Bob Iger, Chief Executive Officer, Walt Disney Company: Ben, there are a number of aspects of these deals, and I say plural because there are separate deals, one to license content, another to basically cover the asset exchange. Let me start with the fact that the result of these agreements will give ESPN more games, more NFL games, than they’ve ever had before. Basically, there will be 28 windows for NFL games, which is an increase over what we’ve had before. Previously, there were 22. That obviously is of major significance in terms of both ESPN, but also in terms of the audience.

We’re basically giving NFL fans more opportunities to watch NFL games than they’ve ever had before. Because of the acquisition of the NFL Network, not only will we continue to distribute it from a linear perspective, but it will be fully essentially included in or ingested within the ESPN direct to consumer app. So those games, the seven games that are on the will be on the NFL Network will all be part of ESPN’s direct to consumer offering. That’s obviously where the major value will come. But in addition to that, there’s a number of other elements, we’re calling features and functionality, that will improve the quality of the experience and and actually grow the quality experience of the fan on the ESPN app.

And that includes smooth integration with with fantasy, with betting, and a combination of our fantasy businesses, by the way, with stats, with the ability to basically personalize SportsCenter with NFL highlights. I could go on and on. Commerce opportunity off of the ESPN app to buy NFL merchandise. All of it added up, obviously, gives ESPN the opportunity to go forward with a more compelling app. But I should also note that from an economic perspective, even with this exchange of assets and the fact that the NFL obviously will be paid a dividend from ESPN’s earnings, it will be accretive in the first year after it closes.

And I think that’s significant. So that the revenue that we will derive from distributing the NFL network and from distributing other NFL properties will obviously increase our revenue and increase our operating income for the ESPN business. That does not even factor in a potentially lowered churn rate for the ESPN app once we go to market and once the NFL games are all included. And obviously, there’s advertising value as well. I probably could go on and on because but there are many different elements to this, but it’s extremely exciting.

I’ve talked about it being one of the most important steps ESPN has taken really since they went from half a season to a full season of the NFL back in 1987.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: Yeah, hey Ben, it’s Hugh. Just as a reminder, we try to stay pretty disciplined about doing guidance for the following year on the fourth quarter call. The one thing I would say is, given we have the NFL deal and the WWE deal, if we had something of substance in terms of a change to that, we’d be sharing that with you right now. The fact that we’re not sharing with that should tell you that we don’t see it as materially different. And as Bob noted, we feel great about the NFL deal.

It likely won’t close until the end of next calendar year, but it’ll be about a nickel accretive before purchase accounting. So we certainly feel good about the financials of the deal.

Ben Swinburne, Analyst, Morgan Stanley: Thank you so much.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks, Ben. Operator, next question please.

Conference Operator: Absolutely. Our next question comes from Robert Fishman at MoffettNathanson. Please go ahead.

Robert Fishman, Analyst, MoffettNathanson: Thank you. Bob, can you talk more about how you can accelerate DTC growth by fully integrating Hulu into Disney plus and the related subscriber and advertising revenue opportunities? Just curious also what does that mean for the future of Hulu as a standalone app? And then for Hugh, if I can, just again back to the guidance, the strong DTC profitability and raised full year guidance that we saw there, any updated thinking to your double digit margin target there on DTC, especially with the opportunity to take out costs at Hulu now?

Bob Iger, Chief Executive Officer, Walt Disney Company: Thank you. I think the way to look at the combination is to start with the consumer. You’re going to end up with a far better consumer experience when those apps are combined by combining all of the program assets of both apps, both current apps. And obviously, with an improved consumer experience comes the ability to lower churn, which is obviously something that we’re very, very focused on and committed to doing. We obviously will deliver efficiencies when these are together.

They’ll be on one tech stack, for instance, one tech platform. We already sell the advertising together, but this will give our sales organization a chance to package them far more effectively than they have before. I imagine down the road, it may give us some price elasticity as well that we haven’t had before. And it also provides us with a tremendous bundling experience because when you have the one app that has a significant amount of all of the Disney and the other Disney branded programming with the general entertainment programming bundled, for instance, with the ESPN direct to consumer app, I think you end up with a proposition from not only a consumer perspective, but also from our perspective that’s far better than what we’ve had before.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: Yeah, and Robert, no update on the guidance versus what we’ve talked about in the past. As I said, we’ll talk about ’twenty six guidance on the Q4 call, but no update on DTC at this point.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks, Robert. Operator, next question please.

Conference Operator: Absolutely, our next question comes from Michael Morris at Guggenheim. Please go ahead.

Michael Morris, Analyst, Guggenheim: Thank you, good morning guys. Hugh, know you don’t want to talk about ’26 yet, but I have to ask, on the Experiences side, your guide for the fourth quarter implies that you’ll be exiting the year at a high in terms of operating income growth. So as we look to fiscal twenty twenty six, can you give us any preview on how to think about any puts or takes with respect to the rate of growth next year that might be informed by the fourth quarter guide? And then secondly, on the stand alone ESPN app, I think there’s a perception and a fear that when you launch an app like this, it’s sort of all or nothing with respect to how people sign up. But clearly, you’re going to make it available to your Pay TV partners as well.

So I’m curious if you can talk about your expectations for engagement with the app from people who come from outside the ecosystem like cord cutters versus those inside and how it benefits you to have people who pay for Pay TV to also engage with the app? Thank you.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: Okay, let me talk about the ’26. It’ll sure shock you, Michael, that I’m gonna defer on talking about ’26 until the Q4 call. The only thing I would remind you is we are launching a couple of ships at the tail end of this year and into next year. So we’ll have the costs associated with launch on those in the earlier part of the year, which obviously impacts the line of business. Regarding engagement generally with the deals and the ESPN app, we think it’s all going to be additive.

And as a reminder, goal with ESPN is to basically reach sports fans as they choose to be reached. So if they choose to be reached through the ESPN app, great. If they choose to be reached through the Disney plus Hulu app, great. If they choose to be reached through cable, great. Our goal is to engage them where they are.

Bob Iger, Chief Executive Officer, Walt Disney Company: And let me just add to that, if you don’t mind. We’re asked a lot about linear versus streaming. We’re at a point, given the way we’re operating our businesses, where we don’t really look at being in the linear business and the streaming business. We’re in the television business. And what we’re doing is we’re giving our customers or our viewers a chance to watch our programming, really, as Hugh just said, wherever they want.

If you’re watching ABC primetime shows on the linear channel, great through a multi television provider, fantastic. Or if you wanna go to a streaming and watch it on the Disney plus and Hulu app, that’s fine as well. The same is true for National Geographic, for FX, for the Disney channel, and that will also be true for ESPN. Now I will say that the features and functionality of the ESPN app will have more on them or in the app than obviously any linear channel can provide. It will really be a sports fan’s dream in terms of everything they’ll be able to do and watch on that channel.

There’ll also be a far greater volume of sports covered on the ESPN app than is covered on their linear channels. But we are, generally speaking, as a company now, operating these businesses completely as one. And that gives us an opportunity to not only run them more efficiently, but to aggregate fees and advertising revenue across a very, very broad range of television distribution platforms.

Michael Morris, Analyst, Guggenheim: Thank you.

: Appreciate Thanks,

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Operator, next question please.

Conference Operator: Absolutely. And our next question comes from Steven Cahall with Wells Fargo. Please go ahead.

Steven Cahall, Analyst, Wells Fargo: Thanks. So first on Experiences, I think fiscal year to date OI is up about 7% and you raised the guidance to 8%. Hugh, I think on CNBC this morning, you were talking about the strong domestic per caps, which accelerated nicely in the quarter. So could you give us a little color as to what you’re seeing in both domestic parks and cruises that’s driving some of that acceleration into the fiscal fourth quarter? It sounds like things there are pretty good, but there’s always a little bit of economic uncertainty.

And then a different fiscal twenty six question that that maybe you can address. So you have some new sports rights coming on. How do we think about overall cash content spend next year? My guess is sports are gonna be going up with things like WWE, And then, of course, content is the lifeblood of the company. So any good way to think about content spend as we look out for the next twelve months or so?

Thank you.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: Yeah, good morning. A couple of things. In terms of experiences, obviously we really have a terrific portfolio of experiences businesses. As I mentioned this morning, Walt Disney World just had a record Q3 revenue number as we emerged from last quarter. So we certainly feel great about that.

In addition to that, the Disneyland Paris business, we expect to do very well. As a reminder, we have some easier overlaps due to the Olympics last year, but in addition to those laps, the business is performing strongly. China, as we’ve noted on past calls, is a little bit challenged, not so much from an attendance perspective, but from a per cap’s perspective, as there’s some stress with the China consumer. And then in addition to that, the cruise ships are doing extremely well right now. Forward bookings look great, we’re running at very high occupancies in terms of the cruise ships.

In terms of thinking about bookings for experiences for the fourth quarter, right now they’re up about 6%. So we certainly feel positively about that as well. As regards to cash content spent for ’26, I know you’re going to be shocked at this, but I’m gonna defer on talking about that until the Q4 call.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks, Steve. Operator, next question please.

Conference Operator: Yes, sir. Next question comes from Jessica Ehrlich with Bank of America. Please go ahead.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company0: Thank you. One follow-up on experiences and then maybe move on to content. So on experiences, I know everyone’s trying to get some guidance for next year, but you do have a ship launching in Singapore, a large ship. Can you talk about how you see the impact on that? You know, moving to another region, another side of the world, how you think about the impact of that ship on pretty much all of Disney’s businesses?

And then on content, you’ve given positive commentary, but the guide indicates very tough fourth quarter. Can you talk a little bit about the ins and outs of what you see in content in the year ahead?

Bob Iger, Chief Executive Officer, Walt Disney Company: Regarding the ship in Singapore, launching out of Singapore, Jessica, that’s the biggest ship that we’ve ever built. And to give you some perspective, our big ships today sail with about 4,000 passengers each. This will sail with about 7,000 passengers. We’ve said in previous calls that sales when we went to the market and started selling trips on this ship were extremely robust, sold out very, very quickly over, I think, the first two quarters of operation. This will give us an opportunity to basically sail or float the Disney brand in all of its glory into a region that we think is huge Disney brand affinity and it creates a huge opportunity for us.

It’s a floating, essentially, ambassador for the Disney brand because if you’ve been on any one of our ships, particularly the new ones, we effectively use our IP built into the entire experience. And so I think this will create a great opportunity for us in Asia, but particularly in Southeast Asia.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: Hi, Jessica. Yeah, and regarding your question on content, I assume you’re asking generally about CSLO and entertainment in Q4. The thing I would remind you of is we will be overlapping Inside Out too from last year, which is obviously a tough comp, But all of that is considered in the guide that we gave you of five eighty five for the overall company for the year.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks Jessica. Operator, next question please.

Conference Operator: Our next question comes from David Karnovsky with JPMorgan. Please go ahead.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company1: Hi, thank you. Bob, I wanted to follow-up on your comments regarding theatrical franchises. Disney’s had great success recently with sequels and reboots. Interested though in how you think about launching new IP into today’s exhibition market. Is it a fair comment that that’s a tougher proposition, than in the past?

And then, separately for Hugh, it might be early, but can you discuss or even quantify potential tax benefits at Disney from the big beautiful bill and return of 100% bonus depreciation? Thanks.

Bob Iger, Chief Executive Officer, Walt Disney Company: Thank you, David. We continue to be focused on creating new IP. Obviously, that’s of great value to us long term. But we also know that the popularity of our older IP remains significant, and the opportunity is to either produce sequels or to basically bring them forward in a more modern way, as we’ve done, or convert what was previously animation to live action like we’re doing with Moana in 2026. It’s just a great opportunity for the company and supports our franchise.

So I wouldn’t say that we’ve got a priority one way or the other. Our priority is to put out great movies that ultimately resonate with consumers. The more we can find and develop original property, the better, of course. We are developing original property for under the twentieth Century Fox banner and under the Searchlight banner. And look, you could even argue that Marvel continues to mine its library of characters for original property.

Even though, for instance, there have been Fantastic Four movies before, we kind of consider the one that we did an original property in many respects because we’re introducing those characters to people who were not familiar with them at all.

Michael Morris, Analyst, Guggenheim: And Go

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: ahead. Yep, I got it, Bob. In regarding tax, I assume you’re asking about impact of OB3. Basically, from a book tax perspective, it won’t have any material impact on the company. From a cash perspective, it will be a positive to us.

And again, we’ll talk about that more on the Q4 call, but we do expect a positive cash tax impact, which obviously benefits us from a cash flow perspective.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks, David. Operator, next question please.

Conference Operator: Absolutely. Our next question comes from John Hodulik with UBS. Please go ahead.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company1: Great. Thank you. Maybe just following up on ESPN launch. Given the attractive pricing for the service from an ESPN D2C bundle standpoint, can the launch of the ESPN platform accelerate growth on the D2C side, either from a subscriber standpoint or from an engagement standpoint? Thanks.

Bob Iger, Chief Executive Officer, Walt Disney Company: The answer is absolutely. We won’t predict exactly how much, but for $29.99 you can get Disney plus Hulu and ESPN, which is an incredible, incredible bargain for the consumer. And we would hope that that will enable us to grow our sub base. Additionally, with ESPN and all of its programming bundled with Hulu and Disney plus we fully expect that engagement will increase as well, which we know is one of the key ways that you can reduce churn. So we’re very excited about those prospects.

The other thing we haven’t even touched upon is that with the NFL deal, we have the ability to bundle NFL NFL’s Plus Premium service, which includes Red Zone digitally. And we’ll bundle that with the Trio bundle of Disney plus Hulu and ESPN, and with ESPN. And that’s also an opportunity to lower churn, increase engagement across basically the apps that we’ll be selling.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Great. Thank you. Thanks, John. Operator, next question, please.

Conference Operator: Absolutely. And our next question today comes from Ketan Mural with Evercore ISI. Please go ahead.

: Good morning and thanks for taking the questions. I had a follow-up on the cruise line, maybe not just the Disney adventure, but more broadly about the business where you’ve laid out a transformational roadmap with the fleet set to double over the coming years. It feels like we’re nearing a major inflection point, particularly with Treasury launched last December and both the Destiny and Venture coming online later this calendar year. As we work through trying to better understand the financial implications, can you help frame the opportunity ahead? I’m not trying to tease out 2026 guidance and I understand that it might be too early to give specifics and that there are still unknowns around pricing, maybe cannibalization and margins.

And I’m not sure if we should look at the current fleet’s economics per ship or maybe stateroom and apply them to what you have coming ahead. But the point is more that even with conservative assumptions, the potential operating income contributions look quite meaningful. So would appreciate any views you could share. Thank you.

Bob Iger, Chief Executive Officer, Walt Disney Company: Hugh. I’ll let you handle the economic side of that question. Let me just point out a few, I think, salient points regarding the expansion of the cruise ship line. First of all, we’ve discovered that many of the people who sail on our current ships have such a great experience that they are the first to wanna sail on our new ships. So interestingly enough, what we’re getting is, in effect, repeat visitation onto new ships.

So when we’re building a bigger base of consumers, it’s also one of the best experiences that we offer across our experiences business. So that’s one way to look at it. The other way to look at it, which I referenced with regard to Singapore, is that there are many destinations in the world that we haven’t visited. And this gives us an opportunity to not only bring our brand to those destinations, but to attract customers from those regions who may wanna sail in their region. And so by expanding, we feel we expand the business in terms of our access to people around the world.

And we also give people who have sailed on our current ships an opportunity to sail again, but with a different experience because they’re on a new ship.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: Right, and from a financial perspective, the best way to think about it, I think, really is in the multi year guidance that we gave you back last fall for the experiences business. Obviously, don’t break out cruise ships, but we did contemplate all of the builds that we had coming on as a part of providing that guidance. The thing I can tell you in addition to that is, and as Bob noted, our cruise ships continue to be incredibly well received. As we sit here today, we’re already basically half booked out for all of next year, and the newer ships are even higher in that regard. So we feel terrific from the perspective of consumer receptivity to our new offerings.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks, Scott Gunn. Operator, next question please.

Conference Operator: Absolutely. Our next question today comes from Peter Supino with Wolfe Research. Please go ahead.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company2: Hello, good morning. I wondered if you could comment on engagement trends regarding or of your existing subscribers on Disney plus and Hulu, and how your current DTC strategies could contribute to those trends? And then a related longer term question, not a 2026 guidance question. Your DTC segment reported 6% operating margins. As DTC surpasses your 10% margin objective, is there an opportunity to accelerate DTC content spending for the sake of market share over the long run?

Thank you.

Bob Iger, Chief Executive Officer, Walt Disney Company: Well, I’ll take the first part. Maybe I’ll take the second too. When we combined, when we gave people an opportunity to have a more seamless experience between Disney plus and Hulu, we saw engagement increasing. And we would hope that when we take this next step, which is basically full integration, that engagement will go up even more. In addition to that, we’ve implemented a number of technological improvements that are designed to increase engagement.

And we’re really pleased with what we’re seeing already, but we also know that it’s still a work in progress and we have a lot more work to do. For instance, just the strength of our recommendation engine. We’re also experimenting like crazy where we’re basically trying different elements out on consumers and getting data back from them in order to figure out what works the best. That includes basically the homepage experience and basically what they see when they open up an app. In addition, we’ve added streams, was which a technological advancement.

There’s some great streams you can watch, I think, 30 some five seasons or whatever it is of The Simpsons on one stream as as a for instance. That’s also something that increases engagement. There’s an ABC News stream that you can watch, so there’s some news on all the time on the service. So what we’re basically doing is by one, combining them, we hope to increase engagement more. Two, with all the technological advances, we will increase engagement more.

In addition to that, as it relates to content spend, I’d say that from a domestic perspective, you shouldn’t expect that we need to increase the spend on content significantly. Where we believe we should be investing is to grow our international businesses. So one, we’re going to brand the general entertainment from Star to Hulu across the country across the world, for instance. Two, these technological advancements will obviously help in markets where our engagement has not been as high as they need to be. Three, we probably will invest in very selected markets internationally where we really feel there’s a potential to grow our bottom line, to grow subs, to grow advertising revenue, and to grow our bottom line.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: The only thing I’ll add to Bob’s comments, our objective with this business is to maximize OI over time through a growth oriented strategy, not through cost management, although we’ll manage cost effectively, but through growing this business. We have a significant opportunity in The US to grow through higher engagement, and internationally we have a significant penetration opportunity. As we grow engagement and reduce churn in The US, that presents opportunities from a marketing spend perspective, some of which can be basically reinvested into international content. And our intent is to do that through a rifle shot approach with specific markets. We intend to be deep rather than broad in terms of the way that we do that in a number of markets around the world.

As a result of that, I would tell you, we certainly don’t intend to stop at 10 margin. We think there’s still lots of margin opportunity once we hit double digits, but we’re gonna do it through a growth oriented strategy, not through a cost oriented strategy.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Thanks, Peter. Operator, next question please.

Conference Operator: Our next question today comes from Mike Ng with Goldman Sachs. Please go ahead.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company3: Hi, good afternoon, thanks for the question. I just have one on domestic theme park trends. The per caps in the quarter were up 8% year over year. I think that was the best growth in over two years. I was just wondering if you could talk about whether the per cap growth was impacted by the mix of attendance between local, out of state, international?

And were there any divergent attendance trends between those cohorts of domestic park patrons just given the noise around competitive park openings and international visitation to The United States? Thank you.

Hugh Johnston, Senior Executive Vice President and Chief Financial Officer, Walt Disney Company: Yeah, hey Mike. In terms of the mix of visitors, that’s obviously one of the factors that plays into per caps. That said, the ones that you mentioned specifically, international, nothing material going on there. It’s always gonna be a mix of local versus visitors from elsewhere, and there isn’t a particularly material trend that’s worth trying to model or worth trying to note. Overall, we feel good certainly about the per CASK, but frankly, we feel good about the attendance as well, In light of the fact that there’s a competitive offering in the marketplace, the fact that attendance came in as well as it did is something that we feel terrific about.

Overall, as we’ve talked about in the past, the intent is to grow through both increased attendance and increased per caps in a balanced way, and I expect that’s what we’re gonna continue to do.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company3: Great, thank

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: one question, last question.

Conference Operator: Thank you. And our final question today comes from Kanan Venkateswar with Barclays. Please go ahead.

: Thank you. Bob, with respect to the sports offering, in terms of your go to market strategy, what we see right now, how close is that to the potential end state? And is there an opportunity maybe to tier the product now that you have products like Red Zone, for instance, as a pay per view offering, or a separate tier? Or even bundling with others, like Fox launching their own sports offering, for instance, is that an opportunity for you to bundle other sports offerings in the market and consolidate streaming more broadly?

Bob Iger, Chief Executive Officer, Walt Disney Company: Yes. We we we believe there may be opportunities for us to bundle other companies’ sports offerings. We’ve actually had some discussions with some other companies on doing just that. Nothing to report on that. But, obviously, we’re not only interested in growing engagement and growing our own subs, but we’re interested in serving consumers better as well.

And the more sports can be offered in one destination for the consumer or an ease of if we can improve the ease of use for consumers, ease of finding things. Because as a as a devoted sports fan, I often have to work to try to find, where what platform sports are on. If we can help that if we can help consumers in that regard, we’re certainly going to try.

Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations, Walt Disney Company: Okay. Thanks, everyone, for the questions. We want to thank you again for joining us this morning and wish everyone a good rest of the day.

Conference Operator: Thank you. This concludes the conference call. You may now disconnect your lines.

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