Disney surges 10% after blowing past earnings estimates in Q2 FY25—Here’s what sparked the rally

How Did Disney Deliver Strong Q2 FY25 Results Across Segments?

The Walt Disney Company delivered a better-than-expected performance in its fiscal second quarter of 2025, reporting 7% year-on-year revenue growth to $23.6 billion. Operating income across segments rose 15% to $4.44 billion, while adjusted earnings per share climbed 20% to $1.45. This reflected a strong rebound in its streaming and theme park businesses, alongside improved profitability from content licensing.

CEO Robert A. Iger highlighted the strength of Disney’s strategic transformation, citing improved monetization from its Direct-to-Consumer (DTC) business, steady growth at domestic parks and cruises, and the long-term potential of upcoming ESPN direct streaming initiatives. Net income attributable to shareholders stood at $3.28 billion for the quarter, a sharp turnaround from the $20 million net loss recorded in the same quarter a year earlier.

What Boosted Disney’s Entertainment Business in Q2?

Disney’s Entertainment segment generated $10.68 billion in revenue, marking a 9% increase compared to the year-ago period. Operating income surged 61% to $1.26 billion, driven largely by profitability improvements in the Direct-to-Consumer segment. Disney+ added 1.4 million net subscribers to reach 126 million, while Hulu subscriptions rose 2% to 54.7 million. Disney+ average revenue per user also increased 3% sequentially, supported by effective pricing changes and favorable subscriber mix.

Content sales and licensing revenue increased 54% to $2.15 billion, boosted by strong home entertainment results from Moana 2 and a rise in TV licensing agreements. However, theatrical releases like Snow White and Captain America: Brave New World did not yield significant income during the quarter due to high marketing costs, partially offset by lingering revenue from Mufasa: The Lion King.

Why Did Disney See a Decline in Linear Networks Revenue?

Linear Networks revenue fell 13% year-on-year to $2.42 billion. Domestic operating income rose 20% as lower programming and marketing costs helped offset a drop in advertising revenue. Conversely, international revenue was significantly impacted by the deconsolidation of Star India following Disney’s joint venture with Reliance Industries Limited, with results now recorded as equity income.

The international losses were partially offset by improved affiliate revenues and rate increases in certain markets, although viewership softness remained a concern in some regions.

How Did the Sports Segment Contribute to Performance?

The Sports segment posted $4.53 billion in revenue, a 5% increase over the prior year. Domestic ESPN revenues led the growth with a 7% increase. However, segment operating income declined 12% to $687 million, impacted by higher content costs, including the broadcast of additional NFL and College Football Playoff games. ESPN also exited its stake in the Venu Sports joint venture, incurring a one-time write-off.

Despite these cost pressures, ESPN+ improved its average monthly revenue per paid subscriber to $6.58, up 3% sequentially, aided by tier migration and pricing changes.

What Fueled Experiences and Consumer Products Growth?

The Experiences segment delivered strong operating income of $2.49 billion, up 9% year-over-year, as Disney’s domestic theme parks, cruises, and vacation businesses posted double-digit growth. Domestic parks saw a 13% rise in income, with cruise passenger days increasing significantly following the launch of the Disney Treasure vessel. Guest spending and attendance also improved across U.S. resorts.

Disney Vacation Club and Consumer Products both performed well, with the latter reporting a 14% rise in operating income on the back of licensing gains from video game properties like Marvel Rivals and increased merchandise sales across franchises.

How Is Disney Managing Operational Efficiency and Cash Flow?

The company reported a robust improvement in free cash flow, which surged to $4.89 billion from $2.41 billion in the same quarter last year. Operating cash flow increased 84% year-over-year to $6.75 billion, primarily driven by higher segment income and deferred tax benefits related to California wildfire relief. Capital expenditure for the first half of FY25 stood at $4.33 billion, largely allocated to cruise fleet expansion, new attractions, and digital infrastructure.

Disney incurred $109 million in restructuring and impairment charges, a significant drop from $2.05 billion in the year-ago period. These primarily involved content write-downs and severance costs related to strategic streamlining.

What Are the Key Strategic and Financial Priorities Ahead?

The company reaffirmed its guidance for full-year adjusted EPS of $5.75, reflecting a 16% increase over FY24. Disney expects segment operating income to grow at double-digit rates across Entertainment and Sports, with a 6%–8% increase in Experiences. The firm plans to complete $3 billion in share buybacks this year, with $1 billion already executed in the first half.

Looking ahead, Disney plans to launch ESPN’s direct-to-consumer platform, expand cruise operations with pre-opening costs of $200 million across Q3 and Q4, and maintain disciplined investment in park infrastructure. The company also anticipates headwinds from FX volatility and advertising softness but remains confident in its ability to deliver growth through content monetization and global brand expansion.

How Did Markets React to Disney’s Q2 FY25 Results?

Investor sentiment following Disney’s Q2 FY25 earnings release has been overwhelmingly positive, with the stock gaining 10% in a single trading session. The shares closed at $101.24 on earnings day, up $9.07 or 9.84%, reflecting strong market approval of the company’s outperformance against analyst expectations. Disney had reported EPS of $1.45 and revenue of $23.62 billion, both exceeding consensus estimates of $1.20 EPS and $23.17 billion revenue.

The reaction was also supported by improved profitability in streaming, where Disney+ and Hulu saw subscriber growth and higher ARPU. Institutional investors have maintained bullish positions, with 65.71% of the company’s outstanding shares held by large institutions. Over the last 12 months, net institutional inflows totaled over $2.17 billion, according to MarketBeat, highlighting continued confidence from asset managers.

Although specific Foreign Institutional Investor (FII) and Domestic Institutional Investor (DII) activity on Disney is not publicly disclosed in isolation, broader flows suggest a stable to mildly bullish positioning by these investor classes. The significant rebound in free cash flow to nearly $5 billion in Q2 further boosted institutional confidence in Disney’s liquidity and capital deployment flexibility.

Most equity research houses have reiterated “Buy” or “Overweight” ratings on the stock. Analysts pointed to the credible full-year guidance and improving operating leverage as core reasons for maintaining upward revisions in target prices. However, some caution was observed around international parks and Star India‘s ongoing amortisation burden, particularly as the India JV generated a $103 million equity loss in Q2.

For existing shareholders, Disney appears to remain a “Hold” with upside potential, while for growth-focused portfolios, analysts see Disney as a tactical “Buy” on the back of improving DTC unit economics and high-margin park expansion.

What Is the Market Outlook for Disney Through FY25?

With streaming profitability now coming into focus, Disney is increasingly viewed as a diversified content and experience powerhouse with multiple levers for growth. The anticipated ESPN standalone streaming service and new animated and live-action releases offer further revenue catalysts in the second half. Continued progress on cruise fleet rollouts, combined with the expected recovery of international travel to parks, could also lift full-year earnings.

While macroeconomic risks, including FX fluctuations and inflationary park costs, remain on the radar, Disney’s cost control initiatives, resilient IP franchises, and shareholder return plans position the company to weather volatility. If execution on ESPN’s DTC launch and international asset monetization meets expectations, analysts believe the stock could trend significantly higher before FY25 ends.