The Walt Disney Company 2026 Q3 Earnings Call

release and Form 10-Q were issued earlier this morning and are available on our IR website. Our IR website includes a cautionary statement regarding forward-looking statements. Today's webcast may include forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including regarding the company's future business plans, prospects, and financial performance, are not historical in nature and are based on management's assumptions regarding the future and are subject to risks and uncertainties, including, among other factors, economic, geopolitical, operating, and industry conditions, legal and regulatory developments, and the company's decisions. Refer to our IR website, the earnings release, and 10-Q issued today, and the risks and uncertainties described in our Form 10-K and subsequent filings with the SEC for more information on risks that could cause results to differ.

A reconciliation of certain non-GAAP measures referred to in this webcast to the most comparable GAAP measures is on the IR website.

Good morning, everyone, and welcome to Walt Disney's fiscal third quarter earnings call. Thank you for joining us. I'm Ben Swinburne, Executive Vice President of Investor Relations and Corporate Strategy. With me today are Josh D'Amaro, our Chief Executive Officer, and Hugh Johnston, our Chief Financial Officer. We will begin today's call with prepared remarks from Josh. After Josh's remarks, we will take analyst questions. With that, let me turn it over to Josh.

Thanks, Ben, good morning, everyone. This was an excellent quarter for us, our Q3 results and reiterated full-year outlook show we're operating from a real position of strength. Total segment operating income came in ahead of our prior guidance, up 21%, with total company revenue growth of 7%. Disney Experiences delivered record fiscal Q3 revenue and segment OI. Our core platforms, Disney Experiences, Disney+, and ESPN, grew guests, users, and audiences respectively versus the prior year quarter. We are executing well across our businesses and delivering on the back-half acceleration commitments we made to investors. Despite the continued macroeconomic uncertainty, we're on track to finish the year strong. During my first five months as CEO, I've been focused on ensuring that we execute as one company around a unified strategy.

What we're seeing this quarter is proof that coordinating our franchises, sharing data and technology, and building seamless fan experiences works. Disney's fundamental advantage is the depth of our fan relationships, and that translates directly to durable financial returns. Today, we find ourselves in an environment where consumers have more options than ever for their time, and yet our results show they keep choosing to spend their time with Disney. This success reflects our continued execution across our three strategic priorities. First, investing in creative excellence and world-class IP. Second, leveraging technology to accelerate growth and drive returns. And third, deepening our direct relationships with fans by creating a more connected Disney experience. Anchoring these strategic priorities is our One Disney operating model, which will allow us to fully capture the value of our portfolio for both fans and shareholders.

I'd like to highlight a few examples from the quarter that demonstrate how the strength of our consumer connections and the power of our IP are expanding our reach and our relevance. First, we grew our global guests 4% year-over-year with particular strength at Walt Disney World, while also benefiting from additional capacity at Disney Cruise Line. Forward bookings at Walt Disney World and Disney Cruise Line remain healthy. Second, the strength of our franchise IP was evident in the financial and cultural impact of "Toy Story 5," which recently surpassed $1 billion at the global box office. Third, the unique passion of sports fandom drove over 100% growth in NBA Finals and NHL postseason viewership across ESPN and ABC versus the prior season, making this the most-viewed fiscal Q3 across ESPN, ESPN2, and ESPN on ABC since 2016.

Let's dive deeper into our Q3 performance and our full-year outlook. Starting with Disney Experiences, we're proud of the growth that we've had this year, and we're investing to sustain that growth and over the lifetime of these projects, deliver double-digit returns. As always, we're being disciplined in our capital allocation with a focus on expanding our capacity around the world and driving incremental demand. The pipeline includes major attractions at every site, including Villains Land in Orlando and the Avengers Campus expansion in Anaheim, amongst others in the U.S., and our previously announced cruise ship expansion. At our studios, the blockbuster success of the latest "Toy Story" installment shows exactly why Disney is different from the competition and how our stories translate into recurring earnings power. The five "Toy Story" films have delivered over $4 billion in global box office and over 2 billion hours streamed on Disney+.

Across all retailers, "Toy Story" generates more than $1 billion in annual global retail sales and reaches fans across every Disney park and cruise ship, including four immersive lands, 19 attractions, and two hotels. That's the Disney flywheel in action. One powerful and enduring story told across theaters, streaming, retail, and physical experiences. That integration creates a structure no one else has been able to replicate. Even when our franchise films don't meet our box office expectations, as with "The Mandalorian" and Grogu and the live-action "Moana," our investments in these core properties fuel other parts of our company. "The Mandalorian" and Grogu drove healthy growth in retail sales for the Star Wars franchise and drew guests to the updated Millennium Falcon attraction at Disneyland and Walt Disney World and led to significant engagement in gaming as well.

The live-action "Moana" is expected to be a strong title on Disney+, building on the success of the original film, which is one of the most-streamed movies of all time. Our ability to outperform our prior consolidated fiscal Q3 guidance and reiterate our full-year outlook despite the mixed box office performance demonstrates the strength of our diversified entertainment model. Of course, I'd be remiss not to acknowledge and congratulate everyone on this past weekend's record-breaking opening for "Spider-Man." Congratulations to Sony, Kevin Feige, and the Marvel Studios team. It's an unbelievable result, and it's one more example that audiences will turn out in force for great theatrical experiences. 65 years after his debut, Spider-Man remains one of the most popular characters through consumer products, parks, and streaming. This weekend, it's a great reminder of just how much strength this franchise still has.

It goes without saying that the success of "Spider-Man" bodes well for our upcoming and highly anticipated "Avengers: Doomsday" film. The appeal of our IP across multiple consumer touchpoints is central to our strategy, and Disney+ is the digital centerpiece for that. We're the only entertainment company with global scale in both the physical and digital worlds. During the quarter, we passed an important milestone in app unification, allowing Hulu standalone and bundle subscribers to link profiles and manage subscriptions on Disney+. We delivered a 13% SVOD operating margin in fiscal Q3, and we remain on track for double-digit margins in fiscal 2026, excluding the 53rd-week impact. Now, we still have work to do scaling Disney+ outside the U.S., and we're focused on driving growth and returns over the long term in under-monetized markets.

Our strategy is clear: leverage regional relationships and bring local content onto Disney+ at scale, and that's how we'll grow internationally. Disney's long-term streaming strategy rests on two pillars: make the core streaming experience the best in the marketplace and connect our businesses into a single digital ecosystem. Beyond our films and series, Disney+ will continue to evolve, bringing together games, merchandise, and other experiences while offering increased personalization, exclusivity, and benefits for subscribers. All of this is designed to deepen engagement, improve the value proposition, lower churn, and most importantly, increase lifetime fan value. We expect to introduce elements of this expanded ecosystem beginning in spring of 2027. Disney+ provides the global reach to develop new fans and the consumer data to drive personalization, which are both core to our long-term strategy.

That same strategy also extends to sports, where ESPN gives us another powerful way to deepen our relationship with fans. We've all witnessed the unparalleled power of live sports over the past few months. The NBA Finals between the champion New York Knicks and San Antonio Spurs were the highest-rated NBA Finals in 28 years, and ESPN generated its most-watched first half of the calendar year since 2012. As we evolve Disney+, we'll continue to bring select premium sports events to the platform to both strengthen the service and drive upsell to the Trio Bundle, our highest LTV product. At the same time, ESPN remains the primary destination for daily sports content. Live sports aren't just a viewership play, they're a fan engagement and ecosystem play. When a sports fan engages with ESPN, Disney+, or our parks, their lifetime value increases.

Underpinning all of this work is our deep commitment to embracing emerging technology. Our company was founded on the convergence of creativity and breakthrough technology, continuing that tradition is a priority for me and this leadership team. That's why we're leveraging AI to bring the most innovative tools to our storytellers. As I've said before, AI isn't simply about efficiency. It's about enhancing a creative process that will always be human-centered, artist-driven, and creator-led. AI lets us work faster and smarter, particularly in areas of pre- and post-production. Our teams can personalize content and experiences for fans around the world at scale. We're doing all this while keeping human creativity at the center. AI amplifies what our storytellers can do. It doesn't replace them. This efficiency, it matters financially, too.

When our teams work smarter, we can serve more people across our parks and digital platforms and do it more cost-effectively. That frees up capital to reinvest aggressively in what drives long-term value: new content and next-generation guest experiences, as well as technology infrastructure that keeps Disney at the forefront of entertainment. To sum it all up, there is clarity of purpose inside this company right now. We know what Disney is, a storyteller with an unmatched ability to reach fans across every format and every geography. We know how technology amplifies that power, we know that when we operate in an integrated fashion with speed, discipline, and efficiency, we can create long-term shareholder value. With that in mind, let me turn the call back to Ben for analyst Q&A.