3 Lessons From Disney's Latest Financial Results

In a rare move, Walt Disney (NYSE: DIS) announced its fiscal first-quarter results ahead of the market's first trades of February. The media giant announced its latest performance on Monday morning.

The numbers and Disney's own guidance are respectable, but the shares didn't initially react favorably to the news. Let's go over a few of the lessons investors can learn about the House of Mouse in its new report.

Image source: Disney.

1. The quarter itself was just north of OK

The bar of expectations was set low heading into this week's update. Revenue rose just 5% to $26 billion for the holiday quarter, but that was narrowly ahead of the 4% step up to $25.6 billion that analysts were targeting. Adjusted earnings per share declined 7% to $1.63, but that's better than the $1.58 mark where Wall Street pros were perched.

Disney's business is a potluck feast of consumer-facing leisure dishes. As usual, the performances were all over the map on the way down to the bottom line.

The top-line growth was somewhat consistent. Revenue for its flagship entertainment business, which includes its media networks, studios, and streaming operations, rose 7%. This was the strongest top-line growth of Disney's three segments, but the 35% year-over-year drop in operating income was also the worst performance of the three.

Despite a 72% surge in operating profit for its now-thriving streaming business, the overall profitability of the segment was pulled back by higher production cost amortization for its movie studio and the Fubo (NYSE: FUBO) transaction that closed during the quarter. Disney now has a majority stake in Fubo after handing over its Hulu + Live TV streaming platform to the streaming TV operator in October.

Experiences -- consisting of its theme parks, cruise line, and consumer products -- was once again the star pupil. The segment's revenue rose a modest 6%, but it was the only business to deliver growth in operating profit. Experiences matched the 6% top-line gain with its operating income.

The results were positive across its domestic and international theme parks. Perhaps most notably, the segment accounted for 39% of the revenue mix but 72% of the overall operating profit.

Sports remains the smallest of the three segments in terms of revenue, operating results, and margins. Revenue inched 1% higher. Weighed down by the steady drumbeat of rising programming and production costs driven by contractual rate increases, the business saw its operating income decline 25% in the quarter.

2. The earnings beats are getting less impressive

Disney checked off the boxes in delivering better-than-expected results on both ends of its income statement. Guidance also isn't problematic. It's sticking to its earlier outlook, calling for double-digit earnings-per-share growth for all of fiscal 2026. It will continue to be a money machine, generating $19 billion in cash provided by operations this year. It's on pace to repurchase $7 billion of its stock.

Unfortunately, the market isn't following along with the buybacks. Disney stock has remained flat over the past year, despite consistently exceeding Wall Street profit targets.

There is one wrinkle worth pointing out. See if you can spot it before I spell it out. Here are the last five Disney financial updates.

Data source: Yahoo! Finance.

All four quarters in fiscal 2025 and the first quarter of the new fiscal year were clear beats, but the degree of the surprise has contracted with every passing quarter.

Disney expects its bottom-line performance to improve in the second half of the fiscal year. It remains to be seen if Disney can start growing faster than market expectations again.

3. The new CEO announcement should come soon, but not now

Many beefy headlines began rising late last week. There were reports of Disney's board meeting to decide on its next CEO by this week, current helmsman Bob Iger not waiting until the end of this calendar year to step down, and even the likelihood that front-runner Josh D'Amaro -- now serving as Disney Experiences chairman -- had the job all but locked up.

None of these news items were announced in the earnings release or made official in the subsequent earnings call. However, the decision is still likely imminent. Unlike Iger's last handoff of his CEO keys -- in early 2020, as the COVID-19 crisis was just beginning -- this time, the climate could be substantially better for whoever takes over.

Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.