Disney Shares Tumble as Streaming Pivot Weighs on Profits
Shares of Walt Disney (NYSE: DIS) tumbled more than 7% on Monday, a stark signal of Wall Street's growing impatience with the entertainment behemoth's costly journey from cable television dominance to the streaming era.
The company reported a 5% year-over-year revenue increase to $26 billion for its fiscal first quarter. However, this top-line growth was overshadowed by a 7% decline in adjusted earnings per share to $1.63, as soaring expenses across its divisions squeezed profitability.
The core of the pressure lies in Disney's entertainment segment, which houses its streaming services, film studios, and linear networks. Operating income for this division plunged 35% to $1.1 billion. Analysts point to ballooning content and production costs, partly linked to integrating Fubo's operations into Hulu + Live TV, as a key driver.
Meanwhile, the sports division, home to ESPN, saw operating profit drop 23% to $191 million, hit by the double whammy of rising rights fees and ongoing subscriber attrition.
Looking ahead, Disney cautioned that growth in its highly profitable Experiences segment (theme parks and cruises) would moderate this quarter. Factors include softer domestic park trends, pre-launch costs for a new cruise ship, and expenses related to opening the "World of Frozen" land at Disneyland Paris.
In an effort to reassure markets, management reiterated long-term targets, including double-digit adjusted EPS growth for fiscal 2026 and roughly $19 billion in full-year operating cash flow. The path to those goals, however, appears rockier than many investors anticipated.
Investor Reactions:
"This is the painful reality of the pivot," said Michael R. Chen, a portfolio manager at Horizon Capital. "The legacy cable profits that funded Disney's empire are evaporating faster than streaming can replace them. The guidance for 2026 is a promise, but today's numbers are the proof. The market is demanding a clearer path to streaming profitability."
"It's a bloodbath driven by pure mismanagement," argued Sarah J. Feldstein, an independent media analyst. "They're burning cash on streaming while their crown jewels—ESPN and the parks—are showing cracks. Chasing Netflix was a strategic blunder that's destroying shareholder value. Iger's magic is gone."
"The headline drop is severe, but we've seen this volatility before in a transformation of this scale," noted David Park, a senior lecturer in media economics at Carter University. "The underlying subscriber trends for Disney+ remain solid. If they can execute on cost rationalization and the integration of Hulu, this quarter could be remembered as a painful but necessary step. The cash flow guidance is a critical anchor."