Record parks, profitable streaming, shares at fifteen times earnings. Where's the catch?
Segment operating income up 21%, record quarter in parks, streaming with a decent margin for the first time, and share buybacks of at least nine billion dollars. Yet the stock costs roughly half what it did in spring 2021, trading at fifteen times this year's earnings. The explanation for that gap isn't found in reported profits, but in two items hardly mentioned on the earnings call.
Key points
Segment operating income rose 21% and adjusted earnings per share 28%, yet the stock is still down since January.
Reported earnings per share dropped 48% to $1.51. Almost the entire difference from last year comes from a single tax item from 2025.
The sports division with ESPN lost 17% of its operating profit in a quarter when it had its highest viewership since 2016.
Share buybacks of nine billion a year alone retire about 5% of shares annually.
Net debt rose by $4.5 billion over nine months - and that's the part of the story that didn't make the headlines.
On August 5, 2026, Walt Disney $DIS reported its third fiscal quarter, one nobody would have expected three years ago. Revenue of $25.25 billion, up 7% year-over-year. Segment operating income of $5.56 billion, up 21%. Adjusted earnings per share of $2.06 against expectations of $1.86. The Experiences division - parks, hotels and ships - delivered record quarterly revenue of $9.97 billion and operating income of $3.02 billion. And streaming, which cost the company billions for years, earned $712 million.
The company slightly missed on revenue, with analysts on average expecting about $25.43 billion. Yet the market responded with a 3.7% rise, followed by another 2.9% gain the next day. The stock closed on August 6 at $104.68. It sounds like a victory - until you recall where that jump started: from $98.18. And that even after it, the stock is down about 13% year-to-date.
Even more interesting is a look five years back. In March 2021, Disney traded around $200 and for the then-ongoing fiscal year it ended up reporting revenue of $67.4 billion. Over the last twelve months it has $98.9 billion, and in fiscal 2025 it earned $17.6 billion in its divisions versus $7.8 billion in 2021. The company is substantially better and worth half as much.
Such a disconnect usually means one of two things. Either the market is overlooking something, offering forgotten value. Or the market sees something the financials don't show - and the low multiple is simply the right price for a business whose earnings will drain away in the coming years. Which is true for Disney?