Walt Disney Co. posted a first-quarter earnings beat, supported by its parks and cruises business, even as investors weigh execution risks tied to higher costs, streaming investments and a pending leadership change. The company is targeting stronger profitability across its businesses as it begins a new fiscal year.
BNN Bloomberg spoke with Ken Leon, director of research at Global Fundamental Research, about Disney’s uneven segment performance, progress in streaming profitability and what investors need to see for the stock to regain core-holding status.
Key Takeaways
- Disney beat first-quarter earnings estimates, but results were uneven across business segments as higher costs weighed on performance.
- Parks and cruises delivered the bulk of profits, though attendance pressures and rising prices could limit near-term growth.
- Streaming profitability improved sharply, with operating margins rising to about 8.5 per cent as the company deemphasized subscriber disclosures.
- Legacy television advertising continues to decline, increasing the importance of sustained improvement in streaming and experiences.
- Investors remain cautious, viewing Disney as a “show-me” story that requires more consistent execution to justify long-term ownership.
Read the full transcript below:
ANDREW: Disney beat estimates in its first quarter, and most of the profits came from the parks and cruises unit led by Josh D’Amaro, who is set to succeed current CEO Bob Iger later this year. Let’s get more from Ken Leon, director of research at Global Fundamental Research. Thank you very much indeed for joining us.
KEN: Great to be here.
ANDREW: What jumped out for you with the Disney quarter and the forecast from the company?
KEN: Well, it’s the beginning of a new fiscal year, and it’s one where we really didn’t see all businesses firing on all cylinders. It’s also a transition year, as noted, with a change of management. All that leads investors, I think, to question execution risk here. We certainly did see some improvement in operating income, particularly in the streaming business, Disney+. But overall, there are lots of puts and takes.
Disney, with its sports segment, ESPN, has a tremendous franchise, but the cost of acquiring major sports rights has added to expenses and put some pressure on operating income. So I think, in total, for Disney, it’s about how you get all the different businesses moving in the same direction so that you have a strong quarter. That was not the case with the first quarter just reported.
ANDREW: Can you remind me, are investors still worried about streaming and the enormous investment there, and the risk that it won’t produce returns?
KEN: Well, they are. You just can’t drive subscriber growth without really having a good business and generating positive operating income. It’s interesting — Disney has followed Netflix and is no longer disclosing subscriber numbers, and instead points to nearly a doubling of operating income in the quarter versus a year ago, with margins of about eight-and-a-half per cent. That’s pretty good, but there’s more work to be done.
Disney also provided less information related to its legacy broadcast network business, which again showed a single-digit decline in advertising. So the pivot is happening, and Disney really has to orchestrate strong improvement in the streaming business, because the network business is still declining.
ANDREW: It was interesting that foreign visitors, including many Canadians, are skipping the U.S. as a destination right now, and that’s not great for the parks business.
KEN: You’re right. It’s not only international travel. Attendance has also been weaker than expected domestically, even in Florida. For average Americans, taking a family to the parks for one or two days has become very expensive, and I think that’s impacted revenue growth, especially given the large capital investments Disney is making.
You raise a good question, because the strategy — the North Star, if you will — for Disney is the theme parks. The company expects to spend US$60 billion over the next 10 years on new venues and improvements. Outside the U.S., Disney remains a strong brand, but performance in markets like Shanghai or Europe, including Paris, will be important to watch.
ANDREW: Longer term, would you be a holder of Disney? At one time — maybe more than a decade ago — people felt Disney belonged in every portfolio.
KEN: As investors, we look at Disney in terms of when it can deliver attractive returns on invested capital and return capital to shareholders. Disney did buy back US$2 billion of stock in the quarter, compared with about US$740 million a year ago.
But to your point, if this is going to be a core holding in the communication services sector, which is critical for the U.S. equity market, the company has to execute better. When you look at valuation and target prices from more than 30 analysts over the past year or two, concerns come back to slower growth and uneven execution across the businesses. This is a show-me story, and whether you’re an institutional investor or an individual investor, you want more visibility into consistent performance.
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This BNN Bloomberg summary and transcript of the Feb. 2, 2026 interview with Ken Leon are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
