Disney Shares Rise Over 8% as Josh D’Amaro Touts Disney+ as ‘Digital Centerpiece’ in First Earnings Call

• Disney reported revenue of $25.2 billion on adjusted earnings earnings of $1.57 per share. Wall Street expected revenue of $24.9 billion on earnings of $1.50 per share, per estimates compiled by Yahoo Finance.
• CEO Josh D’Amaro laid out a three-pillar strategy that centers on investing in IP, reaching and engaging consumers in more seamless ways and leveraging technology, including AI, to power storytelling
• Shares of the entertainment giant jumped over 8% following the results

Disney’s new CEO Josh D’Amaro made a strong first impression with Wall Street, with shares climbing over 8% on Wednesday following the release of its second quarter results.

In D’Amaro’s first earnings report as CEO, he laid out a three-pillar strategy that will focus on investing in IP that “breaks through, builds connections, and endures,” reaching consumers around the world in “more seamless, engaging ways” and using advanced technologies, including AI, to power storytelling and increase monetization and returns.

“We believe Disney is uniquely positioned in the global entertainment industry with meaningful growth opportunities,” he said. “We compete in a dynamic marketplace, which requires us to navigate rapid technological  change and business model transitions. Even so, we believe Disney has enduring structural advantages  that enable us to drive long-term value for our shareholders in the years ahead.”

Disney beat Wall Street expectations, with revenue climbing 7% year over year to $25.2 billion and operating profit increasing 4% to $4.6 billion in its fiscal second quarter, primarily driven by growth in its theme parks and streaming businesses, but weighed down by higher sports rights fees and marketing costs. Net income came in at $2.25 billion, or $1.57 per share on an adjusted basis.

The quarterly results come as D’Amaro has already had a busy first month and a half since taking the reins of the company from Bob Iger, having dealt with the implosion of the company’s AI partnership with OpenAI and layoffs at key partner and investment Epic Games — on his very first week.

In the last few weeks, he’s also dealt with a renewed spat between President Donald Trump and late-night TV host Jimmy Kimmel, which Disney has stayed largely silent on. At the same time, D’Amaro has been trying to refocus on the company’s priorities, including turning Disney+ into the company’s “digital centerpiece.”

Looking ahead, the company forecast earnings per share growth of 12% in fiscal 2026 and is targeting at least $8 billion in share repurchases. For the third quarter, total operating income is expected to come in at approximately $5.3 billion. It also anticipates double-digit growth in adjusted earnings per share in fiscal 2027.

Disney-Epic Games partnership ‘central’ to growing reach, engagement

Disney said its $1.5 billion stake in “Fortnite” creator Epic Games would be “central” to its strategy to grow reach and engagement, but acknowledged that its games unit is not a significant revenue driver yet.

The companies are collaborating on a new universe that will offer consumers the ability to play, watch, shop and engage with content, characters and stories from Disney, Pixar, Marvel, Star Wars, Avatar and more. Disney also touted the popularity of its characters in Fortnite, noting that “The Simpsons” collaboration saw 780 million hours played by over 80 million unique players following its launch in November.

In March, Epic Games said it would cut $500 million in costs and lay off over 1,000 employees amid a downturn in Fortnite engagement. At the time, President Adam Sussman told TheWrap that the vision for the new universe with Disney is “unchanged” and that he’s “excited by our progress.”

Disney touts AI opportunity

In the shareholder letter, D’Amaro cites opportunities for AI to play a role across five areas: content creation and production, monetization, workforce productivity, guest and consumer experiences and enterprise operations.

Specifically, the company will use AI to make its production processes more efficient and increase the volume of its content. In March, Disney’s $1 billion licensing partnership with OpenAI was scrapped after the latter shut down its Sora video app. The company said it continues to explore “potential commercial opportunities” with OpenAI and others.

A source familiar with the original agreement told TheWrap that alongside the licensing deal, Disney agreed to become a major customer of OpenAI, using its APIs to build new products, tools and experiences, including for Disney+, and deploying ChatGPT for its employees. Those deals are now being reevaluated.

It also is using the technology to make content recommendations more personalized and improve ad targeting. Additionally, it plans to use AI to simplify the booking and planning processes around vacations at its theme parks.

While Disney has said human creativity would remain at the center of everything it does, the company notably laid off 1,000 employees across several divisions, including marketing and publicity, as well as Marvel and Disney Home Entertainment, in an effort to create a “more technologically-enabled workforce.”

“We’re aligning structures, capabilities and talent to what the business needs next,” Chief Financial Officer Hugh told analysts on Wednesday. “We’re simplifying where we can while investing where it matters most, and we’re using technology to fundamentally change how work gets done. We have been and will continue to look for these types of opportunities to redeploy capital, both financial and human, to areas we see driving the highest returns for shareholders.”

Disney Entertainment enjoys a trio of hits

Disney’s Entertainment division, which is now unified under newly promoted Chief Creative Officer Dana Walden, grew revenue 1o% to $11.7 billion and profits rose 6% to $1.34 billion. Disney+ and Hulu’s combined profit grew 88% to $582 million, while the rest of the unit saw profits fall 20% to $754 million.

Total streaming revenue grew 13% year over year to $5.5 billion, driven by improved monetization from last year’s price increases and volume growth including the benefit of new international wholesale agreements. Total subscription and affiliate revenues grew 14% due to rate increases, while ad revenue grew nearly 5% due to higher impressions.

Content sales grew 8%, reflecting the performance of “Avatar: Fire and Ash,” “Zootopia 2” and “Hoppers.” The entertainment segment also got a 4% revenue boost from its Fubo deal.

Disney is currently generating more from its streaming business than it is from linear TV and expects that shift to continue to grow over time. The company also said it sees “meaningful opportunity” for growth internationally and is increasing investment on local content in overseas markets. Disney is on track to deliver a streaming operating margin of at least 10% for fiscal 2026.

Looking ahead, the company said its top priority would be increasing engagement on its streaming platforms, which has already seen a boost from the revamp its user interface and efforts to improve personalization.

Disney execs talk M&A, partnerships and leaning into short-form video

D’Amaro said short-form is any area that Disney is actively leaning into and cited its recent experiment with the creators collection initiative, which saw creator-led videos related to Predator and Lilo & Stitch appear on its streaming platform.It also is encouraged by the “early momentum” with Verts on Disney+, its vertical short video format that launched in March.

D’Amaro added that the company would be “selective” but “not closed off” to content or distribution partnerships. However, he said they have to “strengthen the Disney+ experience and then deepen that fan relationship and our bundling approach inside of Disney.”

Johnston also indicated there are no plans to spin off the company’s linear networks, nothing that the move is “highly complex” and “unlikely to create incremental value” for shareholders. He said that Disney’s networks would operated as “brands with studios.” He also gave shoutouts to ESPN, calling it a key part of the company’s distribution strategy, and ABC, which is “strategically connected” to its sports strategy.

“We’re always evaluating the merits of our brands, org structure and business priorities to deliver long term value for our shareholders,” Johnston said. “If there is a compelling case to consider strategic alternatives for any non-core assets, you can reasonably conclude that we’ve already looked at it and will continue to do so in the future as the marketplace and our businesses evolve.” 

Disney Sports a mixed bag

Disney’s sports business reported mixed results, with revenue climbing 2% to $4.61 billion, but profits falling 5% to $652 million. Weighing on the results were higher rights fees and marketing costs, as well as lower ad revenue due to fewer NBA games during the quarter and the comparison to last year’s 4 Nations Hockey tournament.

In January, the company closed its acquisition of the NFL Network, which contributed 3% of the 6% growth in ESPN subscription and affiliate fee revenue during the quarter. It also broadened its relationship with Major League Baseball and added CW Sports into the ESPN app for Unlimited plan subscribers. Additionally, ESPN App and DraftKings Sportsbook users can now link their accounts.

While acknowledging that ESPN’s direct-to-consumer business is still ramping up, the company said that revenue generated by digital subscribers during the quarter “more than offset the secular declines in the linear subscriber universe.”

Looking ahead, Disney plans to scale the ESPN streaming business through product improvements, adding content partners and distribution through direct and wholesale channels. It also said it was seeing strong demand for ad inventory for Super Bowl LXI in 2027.

Sports operating income is expected to decline 14% in the third quarter, driven by a double-digit percentage increase in programming  expenses, including the timing of new rights agreements. When including the NFL transaction, sports operating income is expected to grow by mid-single digits in fiscal 2026, but will cut adjusted earnings per share by roughly 4 cents, due to the “increase in noncontrolling interest.”

When asked about the upcoming NFL rights renegotiations, Johnston said that it hasn’t engaged with the league yet, but are “not dogmatic about the process.

“We’re always willing to have a conversation with the NFL in an effort to find new opportunities for growth,” Johnston said. “We expect to be in the business with the league for years to come, and we’ll, of course, evaluate this deal as we would any deal with discipline and a focus on driving value for Disney shareholders.”

Disney Experiences gets a boost

The Disney Experiences business saw record growth in the second quarter, with revenue increasing 7% to $9.49 billion and profits growing 5% to $2.62 billion, driven by increased guest spending at its domestic theme parks and experiences and increased passenger cruise days reflecting the launches of the Disney Adventure and Destiny ships.

Operating income growth was slightly impacted by pre-opening expenses from the new Disney Adventure cruise ship and the new theme park land World of Frozen. The unit also faced higher costs from inflation and the Disney Cruise Line fleet expansion.

Global guests, which includes domestic and international parks attendance along with passenger cruise days, grew 2% compared to the prior-year quarter. But attendance at domestic theme parks fell 1% year over year, in part due to “continued softness in international visitation.”

Disney sees no material impact from higher fuel prices

While acknowledging the potential impact of heightened global macroeconomic uncertainty on consumers, Disney said demand at its domestic theme parks and resorts is “healthy” and that anticipates a year-over-year attendance improvement in the third quarter.

“We haven’t seen any change in consumer behavior from elevated gas prices thus far and aren’t currently seeing a material impact on the remainder of the fiscal year based on forward bookings,” Johnston said. “However, we’re mindful of the macro uncertainty consumers are facing, and we’re not immune to the impacts, including how a significant further rise in fuel prices from current levels could eventually lead to changes in consumer behavior if that possibility were to occur each business has levers in place to make adjustments in order to help offset those kinds of macro pressures.”

When asked about capital expenditures in the parks business, D’Amaro said the majority of 2026 would be focused on its new cruise ship and expansions at Walt Disney World in Orlando, Disneyland in Anaheim and Shanghai Disney Resort.

Looking beyond 2026, Disney touted multiple expansions underway using a “capital-light model,” including bringing a new cruise ship to Japan and a theme park resort to Abu Dhabi. Disney said the strategic logic of the Abu Dhabi plans is unchanged despite macroeconomic uncertainty.

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