Walt Disney Co: quarterly profit halves on one-off charges, but operating cash flow hits records

On August 5, Walt Disney Co reported results for the third quarter of fiscal 2026. Revenue rose 6.8% to $25,248 million, EBITDA grew 18% to $6,969 million, but net profit fell 49.9% to $2,638 million due to one-off charges, including an $812 million impairment of its A+E investment. At the current price, the share looks rather attractive: EV/EBITDA (9.7) is below its own three-year average (10.4), and the portal's model implies 22% upside.

Key takeaways

— Revenue +6.8% driven by growth across all segments, especially Experiences (+10%) and Entertainment (+6%)

— EBITDA +18% to $6,969 million – margin expanded to 27.6% from 25.0% a year ago

— Net profit fell 49.9% due to one-off charges, including an $812 million impairment of A+E

— Quarterly free cash flow rose 63% to $3,072 million despite higher capital expenditures

— Net debt declined by $0.8 billion quarter-over-quarter but rose by $4.0 billion over 12 months

— Company increased share repurchase program to at least $9 billion for fiscal 2026

— Shares rose 3.6% on the release day and another 7.3% by September 4

Attractiveness

Key figures, USD bn

Revenue +6.8% driven by growth across all segments, especially Experiences (+10%) and Entertainment (+6%)

In the third quarter of fiscal 2026, Walt Disney Co's revenue reached $25,248 million, up 6.8% year-over-year. Growth was recorded across all three segments: Entertainment rose 6% to $11,345 million, Sports 4% to $4,500 million, and Experiences 10% to $9,968 million.

In Experiences, the key driver was domestic parks and cruises: Domestic Parks & Experiences revenue grew 11% to $7,116 million, helped by the launch of two new cruise ships – Disney Destiny and Disney Adventure – which increased stateroom capacity by approximately 50% year-over-year. In Entertainment, growth was driven by subscription and affiliate fees (+12%), supported by the Fubo transaction.

In Sports, growth slowed to 4% due to the absence of UFC revenue, whose rights expired in December 2025, and the negative impact of a carriage dispute. Nevertheless, subscription and affiliate fees rose 8% thanks to higher effective rates and the NFL transaction.

EBITDA +18% to $6,969 million – margin expanded to 27.6% from 25.0% a year ago

EBITDA for the reported quarter rose 18% to $6,969 million, with EBITDA margin reaching 27.6% versus 25.0% in the year-ago quarter. The main contributors were Entertainment and Experiences, whose operating income grew 64% and 20%, respectively.

In Entertainment, operating income rose to $1,680 million from $1,022 million, driven by higher subscription and affiliate fees and lower marketing costs. In Experiences, operating income reached $3,017 million, helped by a tariff refund of approximately $100 million, which contributed about four percentage points to growth.

In Sports, operating income fell 17% to $858 million due to higher sports rights costs, including the NBA contract, and the impact of a carriage dispute. Nevertheless, overall EBITDA growth significantly outpaced revenue, reflecting operating leverage and cost control.

Net profit fell 49.9% due to one-off charges, including an $812 million impairment of A+E

Net profit attributable to Walt Disney Co shareholders for the third quarter was $2,638 million, down 49.9% year-over-year. The decline is due to one-off charges: the company recorded an impairment of its A+E Global Media investment of $812 million in connection with the agreement to sell its 50% stake for $1.2 billion, as well as restructuring charges of $900 million.

Excluding these and other one-off items, adjusted EPS rose 28% to $2.06 from $1.61 a year ago. Diluted GAAP EPS was $1.51 versus $2.92 in the prior year.

The profit decline does not reflect deteriorating operations: operating income rose 21% to $5,555 million (on a segment basis), and pre-tax income increased 14% to $3,645 million. The one-off charges are non-cash in nature and relate to portfolio decisions, not the ongoing business.

Quarterly free cash flow rose 63% to $3,072 million despite higher capital expenditures

Operating cash flow for the third quarter was $4,866 million, up 33% year-over-year. Capital expenditures rose to $1,794 million from $1,780 million, but free cash flow still increased 63% to $3,072 million.

For the first nine months of the fiscal year, operating cash flow declined 8% to $12,515 million due to higher tax payments and increased sports content spending. The company reaffirmed its full-year fiscal 2026 guidance for operating cash flow of at least $19 billion and capital expenditures of approximately $9 billion.

The quarterly free cash flow growth is a positive signal, especially amid higher investments in parks and cruises. It provides resources for share repurchases and dividend payments.

Net debt declined by $0.8 billion quarter-over-quarter but rose by $4.0 billion over 12 months

At the end of the reported quarter, Walt Disney Co's net debt stood at $40,856 million, down $0.8 billion from the previous reporting date ($41,676 million). However, over the trailing twelve months, net debt rose by $4.0 billion – a year ago it was $36,896 million.

Net debt to EBITDA for the trailing twelve months is 1.68. This is a moderate level for a company of this scale with stable cash flow.

The annual debt increase is related to investments in parks and cruises, as well as share repurchases. Nevertheless, the company maintains an investment-grade rating and the ability to fund its programs.

Company increased share repurchase program to at least $9 billion for fiscal 2026

Walt Disney Co announced that it now expects share repurchases for fiscal 2026 to be at least $9 billion, raising its previous target. In the first nine months of the fiscal year, the company has already repurchased shares worth $7,245 million.

An additional source of funding will be the sale of its 50% stake in A+E Global Media for $1.2 billion, with proceeds directed to buybacks. The transaction is expected to close by the end of fiscal 2026.

Active buybacks support the share price and offset dilution from option programs. The trailing twelve-month dividend yield is 1.43%, below the market average, but the company combines dividends with substantial buybacks.

Shares rose 3.6% on the release day and another 7.3% by September 4

The closing price before the release was $98.18; shares rose 3.6% on the release day and another 7.3% by September 4. Investors reacted positively to strong operating results and the raised buyback guidance.

The company's market capitalization is $188,788.6 million, trailing P/E is 21.95, and EV/EBITDA is 9.66, below the three-year average of 10.44. This suggests relative undervaluation compared to its own history.

The portal's model estimates upside potential to fair value of +22%. The shares are held in the US Leaders (FVC quality) strategy on the portal, reflecting their fit with quality screening criteria.

Valuation on the latest reported figures

Bottom line

Walt Disney Co's third-quarter fiscal 2026 report was strong operationally: revenue and EBITDA grew at double-digit rates (in EBITDA's case), margins expanded, and free cash flow rose 63%. The decline in net profit is due to one-off non-cash charges and does not reflect deteriorating business. The company raised its buyback program to at least $9 billion, supporting shareholder returns. At the current price, the share trades at a discount to its own three-year EV/EBITDA history, and the portal's model indicates 22% upside. Key questions for holders are the sustainability of Experiences growth and Sports' ability to recover operating income after higher rights costs. Overall, the share looks rather attractive.