Disney Q3 2025 earnings: doing good, but the markets expected more

Disney delivered the turnaround it had promised, with earnings per share hitting last quarter their highest level since the pandemic. Yet, the company’s focus on discipline and bottom-line fell short of analysts’ expectations in overall revenues. Despite good optics and stronger subscriber figures, flat year-on-year revenues led to its shares dropping by 8% on the trading day. Parks and cruises’ margins rely on attendance, streaming turned profitable by achieving scale. Walt Disney will have to keep demonstrating growth to sustain its profits, beyond the structural adjustments made under Iger. Here are the main takeaways of the situation. Disney did achieve net growth through a DTC strategy, holding on to synergies between cable and streaming Sizing the Entertainment operations over the long term is tricky, as Disney changed segments twice between 2019 and 2023. When excluding parks, cruises, and merchandise, revenues roughly amounted to $60B in fiscal year 2025, against $43 billion in 2019. Income, however, is softly recovering to $7.6B, after a dip below $5B in 2022 and 2023, as a direct reflection of the streaming investments; this used to be above $8B back in 2019.  Disney made the distinctive bet of retaining its cable assets, while Comcast and Warner Bros. Discovery are spinning them off to differentiate their high-growth potential platforms, from assets under “managed decline”. Although Disney remains under scrutiny, the corporation’s own integrated approach seems to prove successful again. In North America, the ARPU has reportedly stabilized since advertising income offset the cannibalization from cheaper tiers, confirming advertising-supported tiers as a sustainable subscriber growth driver. The next move in this scale effort is the merger of Hulu into Disney+. Internationally, DTC grew both in volume and value for the second quarter in a row, after experiencing difficulties across 2024. The service reached an ARPU of $8.00 overseas, $1.22 more than the year before, boosted by a lower USD valuation. Disney intends to make Direct-To-Consumer (DTC) a cash-generating business, like TV networks. They’ve set the ambitious goal to double their margin in a year, which they already achieved in FY2025: “Looking ahead, we are positioned to continue to grow our streaming business in fiscal 2026, driving to an operating margin of 10% for Entertainment DTC SVOD.” Despite a convincing profitability trend, in blue in the graph, the decision to stop disclosing subscriber figures from next quarter is casting doubts on the corporation's trust in its expansion. Distribution partnerships remain a concern in this DTC strategy The streaming turnaround was quite straightforward: shutting down declining international TV networks, retaining key titles rather than licensing them, onboarding content partners on their own platforms. Now that this strategy is bearing fruit, distribution partnerships remain a hot topic. The company just launched...