Analyst Cheers Disney's DTC Profits, Parks Strength, But Flags Capex, Linear TV Risks

Walt Disney (NYSE:DIS) reported stronger-than-expected earnings for its fiscal third quarter of 2025 on Wednesday, driven by a profitable direct-to-consumer (DTC) segment and robust performance in its Parks business.

Despite a slight revenue miss and concerns over rising capital expenditures and linear TV declines, the entertainment giant raised its full-year earnings guidance, signaling confidence in its strategic shift towards streaming profitability and experiential offerings.

Needham analyst Laura Martin reiterated Walt Disney with a Buy and a $125 price forecast on Thursday. Martin responded positively to Disney’s fiscal third-quarter 2025 results, noting stronger-than-expected earnings and operating income despite slightly lower-than-forecast revenue.

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Disney reported revenue of $23.7 billion (up 2% year over year, but 1% below Martin’s estimate), operating income of $4.6 billion (up 8% and 2% above her forecast), and adjusted EPS of $1.61 (up 16%, beating her estimate by the same margin).

Martin highlighted several positives, including Disney’s raised full-year EPS guidance to $5.85 (up 18%), $346 million in DTC operating income, $710 million in share buybacks, a timely ESPN flagship launch planned for August, and strong 13% year-over-year growth in Parks operating income. She also pointed out the record revenue at Walt Disney World, despite competition from Epic Universe.

She expects fiscal 2025 revenue to reach $95.6 billion (up 5%) and adjusted EPS to hit $5.85.

For fiscal 2026, she maintained her forecast of $99.7 billion in revenue and $6.13 in EPS, projecting continued strength in direct-to-consumer, experiences, and sports segments.

Martin also expects Disney’s DTC segment to deliver $1.3 billion in operating income for fiscal 2025, citing stronger ARPU from password sharing enforcement, AI-powered personalization, and improved user interfaces.

However, Martin expressed concern over several items: a 60% increase in fiscal 2025 capital expenditure guidance, lack of fiscal 2026 DTC subscriber or ARPU disclosure, continued declines in linear TV and sports revenue, and lingering uncertainty around Bob Iger’s successor.

Despite weak international park performance and a 15% decline in linear network revenue, Martin views Disney’s strategic shift toward AVOD, improved DTC profitability, and domestic parks growth as encouraging signs for long-term value creation. She estimated fiscal 2025 free cash flow at $8.6 billion, with continued momentum expected into fiscal 2026.

Price Actions: DIS stock is trading lower by 2.50% to $112.30 at last check Thursday.

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