Disney stock plunges as Q4 revenue misses estimates amid linear TV pressures

Disney's stock fell 7.8% after reporting mixed Q4 results, with revenue of $22.46 billion missing analyst expectations due to a 6% decline in its entertainment division and a 16% drop in linear network revenue driven by cord-cutting. Despite the revenue miss, adjusted EPS of $1.11 surpassed estimates, and the company achieved a strong full-year 2025 adjusted EPS of $5.93, exceeding both internal guidance and Wall Street projections. Disney also announced plans to double its share repurchase target to $7 billion, increased its dividend, and forecast double-digit adjusted EPS growth for fiscal 2026, underpinned by robust Disney+ subscriber additions and continued profitability in its direct-to-consumer segment.

Analysis

Disney (DIS) reported mixed fourth-quarter results, with revenue of $22.46 billion missing analyst expectations of $22.83 billion, leading to a 7.8% stock decline. This top-line miss was primarily driven by a 6% revenue drop in the entertainment division and a 16% year-over-year decline in linear network revenue, where operating income fell 21% due to accelerated cord-cutting and shifting ad dollars. Lower advertising revenue from weaker viewership and a $40 million decline in political ad spending further pressured domestic linear networks.

Despite revenue challenges, adjusted EPS of $1.11 surpassed analyst expectations of $1.07, although it represented a 3% decrease year-over-year. More positively, full-year 2025 adjusted EPS reached $5.93, a 19% year-over-year jump, exceeding both internal guidance and Wall Street's $5.87 projection. The company projects double-digit adjusted EPS growth for fiscal 2026, signaling confidence in future profitability.

Strategic initiatives showed strength, with Disney+ adding 3.8 million subscribers, significantly beating the 2.4 million forecast. The direct-to-consumer segment achieved a profit of $352 million, up from $253 million a year ago, and met its fiscal 2025 streaming operating income target of $1.3 billion. Concurrently, Disney announced a doubling of its share repurchase target to $7 billion and increased its cash dividend by $0.50 to $1.50, reflecting a commitment to capital returns.

Key Decisions for Investors

• Investors should consider the divergence between the immediate revenue miss and the strong full-year EPS performance and positive fiscal 2026 guidance.
• Monitor the continued transition from linear TV declines to streaming profitability and subscriber growth, as this is key to long-term value creation.
• Evaluate the increased share repurchase program and dividend hike as signals of management's confidence and commitment to shareholder returns, potentially supporting the stock price.