Disney Streaming Profit Margin Exceeds 10% for the First Time

The Walt Disney Company announced its financial performance for the second quarter on Wednesday, with its Disney+ streaming media business's operating profit margin breaking through 10% for the first time. All three business segments exceeded Wall Street expectations, prompting the company to raise its full-year earnings per share growth guidance to about 12%.

Disney's stock soared by over 7% on the day.

Streaming Inflection Point Established

The operating profit of Disney's direct-to-consumer business (SVOD, including Disney+ and Hulu) reached $582 million this quarter, representing an 88% year-over-year increase. The profit margin stands at 10.6%, a significant increase of over four percentage points from 6.4% in the same period last year, and it is the first time since the launch of Disney+ in 2019 that the business has entered the double-digit profit range.

Subscription revenue increased by 16% year-over-year, with price hikes, user growth, and the incorporation of Fubo contributing approximately five percentage points of growth. Advertising revenue grew 12%, benefiting from an expansion of paying advertising layer users.

The management adjusted the SVOD profit margin target from "about 10%" to "at least 10%," a change in wording that the market interpreted as a signal of confidence in the sustainability of profit improvement.

Park Expansion Hedges Demand Softening

The experience business (theme parks and cruises) reported quarterly revenue of $9.487 billion, a 6.7% year-over-year increase, higher than the company's previous guidance of about 5%; operating profit was $2.615 billion, a 5% year-over-year increase.

Domestic park attendance declined by 1% year-over-year, but per capita spending grew by 5%, with contributions from ticket price increases and increased spending on food, beverage, and merchandise. International business revenue grew by 11%, benefiting from the expansion of the cruise fleet—the Disney Wish joined in November 2025, and the Disney Explorer officially commenced operations in March of this year.

The start-up costs for the new "Frozen" themed area in Disney Paris and the Disney Explorer dragged the operating profit growth of this business segment by about 2 percentage points. Excluding these one-time costs, the actual growth rate approaches 7%.

The company stated that current domestic park demand is "healthy," but acknowledged that global economic uncertainty remains a potential pressure. Management expects domestic attendance to turn positive year-over-year in the third quarter, partly because the base pressure from the opening of Universal Orlando's "Epic Universe" theme park in May last year will gradually subside.

Sports Business: Pacing Disruptions, Full-Year Guidance Raised

The sports business's quarterly operating profit was $652 million, about 11% higher than market expectations, but a 5% decrease year-over-year. J.P. Morgan analysts pointed out that the better-than-expected result was mainly due to the deferral of NBA copyright costs to the third quarter, rather than substantial business improvement.

As a result, the company expects a year-over-year decline of about 14% in sports business operating profit for the third quarter, with program production costs (including WWE copyright and NBA playoff apportionment) expected to grow at a double-digit rate.

Nevertheless, the confirmation of the NFL deal has prompted an upgrade in the annual sports business operating profit guidance from "low single digits" to "mid-single digits."

Guidance Upgraded, Buybacks Increased

Disney has specified its FY26 adjusted EPS growth guidance to about 12% (excluding the 53rd week), and about 16% including the 53rd week, based on the FY25 baseline of $5.93, corresponding to about $6.64, slightly higher than Wall Street's previous expectation of $6.58.

The company has also raised its annual stock repurchase target from $7 billion to at least $8 billion, with $5.5 billion of repurchases completed in the first half of FY26.

J.P. Morgan maintains an **Overweight** rating on Disney, believing that this quarter's performance has fulfilled the mid-term improvement logic of "streaming media profitability + park expansion" dual-wheel drive. The company reiterated that it will achieve double-digit EPS growth in FY27 (excluding the drag caused by the 53rd week), further strengthening the market's expectation of profit sustainability.

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