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The Walt Disney Company(DIS) shares plunged more than 8% during Thursday trading, closing near $106.56 after reporting mixed fourth-quarter results.

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The Walt Disney Company, DIS 

The entertainment giant posted quarterly revenue of $22.5 billion, nearly flat from a year earlier, while adjusted earnings per share slipped 3% to $1.11. Despite a strong full-year rebound, softer quarterly performance and cautious guidance weighed heavily on market sentiment.

Disney reported income before taxes of $2.0 billion for the quarter, up from $0.9 billion a year earlier, driven by cost controls and improved efficiency. Total segment operating income declined 5% to $3.5 billion, pressured by weaker results from its Entertainment division. The combination of lower theatrical comparisons and reduced political advertising led to earnings volatility across major business segments.

Disney’s domestic advertising environment remained under pressure as viewership trends shifted away from traditional networks. The company cited a $40 million reduction in political advertising revenue versus the prior year, further limiting overall growth. The mixed quarter overshadowed otherwise solid full-year metrics, including a 3% revenue increase to $94.4 billion.

Entertainment Segment Faces Theatrical and Linear Headwinds

The Entertainment division recorded a 19% full-year income rise to $4.7 billion, yet fourth-quarter profits fell sharply to $691 million. The decline stemmed from weaker theatrical releases compared to blockbuster performances of Inside Out 2 and Deadpool & Wolverine in the previous year. Direct-to-consumer revenue grew 8%, with Disney+ and Hulu subscriptions reaching 196 million combined.

Disney’s direct-to-consumer unit posted operating income of $352 million, reflecting improved profitability despite higher marketing and production costs. However, linear networks suffered a $107 million income decline due to reduced advertising and the absence of Star India’s contribution. These combined factors created a drag on segment margins, emphasizing the impact of shifting consumer behavior.

The company expects first-quarter fiscal 2026 entertainment income to face a $400 million headwind from film release timing. Management also anticipates another $140 million reduction in political advertising revenue compared with last year’s election-driven quarter. The company projected double-digit segment income growth for the full year, mainly in the second half.

Experiences Division Sets Records While Sports Remains Steady

Disney’s Experiences segment delivered record results, generating $1.9 billion in fourth-quarter income and $10 billion for the full year. Domestic parks grew 9%, and international parks surged 25%, fueled by strong travel demand and higher per-guest spending. The segment continues to serve as Disney’s most consistent profit engine despite rising pre-opening and dry dock costs for new cruise ships.

The Sports division maintained steady performance, posting $911 million in operating income, slightly below last year’s result. ESPN faced higher marketing and programming expenses, partially offset by an 8% increase in domestic advertising revenue. Disney expects low-single-digit growth in Sports for fiscal 2026, with stronger momentum later in the year.

The company forecast double-digit adjusted EPS growth for fiscal 2026 and 2027, supported by disciplined investment and expanding share repurchases. It plans $24 billion in total content spending and $9 billion in capital expenditures. Additionally, Disney announced a $1.50 per-share cash dividend for 2026, reinforcing its commitment to returning value to shareholders.

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