The Walt Disney Company 10-Qquarter ended 2026-03-28
A prior-year tax benefit drove the earnings decline despite Experiences gains; parks and content spending reduced free cash flow.
Filed 2026-05-06 06:41 ET
Key figures · Q2 FY2026 · period ended 2026-03-28
- Revenue$25.2BYoY +6.5%QoQ −3.1%
- Operating income— Not reported
- Net income$2.2BYoY −31.4%QoQ −6.5%
- Total assets$205.2BYoY +4.8%QoQ +1.5%
- Total debt$47.4BYoY +10.4%QoQ +1.5%
How total debt adds up Borrowings $38,471M + Current portion of borrowings $8,887M Total debt $47,358M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$108.7BYoY +4.2%QoQ +0.2%
- Tangible book value$24.0BYoY +14.0%QoQ −1.4%
How this filing reads
- Health+0.1H1 free cash flow was $2.66B; borrowings rose to $47.4B, with $12.3B facilities unused.
- Momentum+0.3Q2 revenue rose 6.6%, pretax income 9%, and segment operating income 3.8%.
- Outlook−0.2Rising sports-rights costs threaten margins as planned content and capital spending totals $33B.
Executive Summary
Disney grew revenue and pretax income in the quarter ended 03/28/2026, but earnings attributable to Disney fell largely because the prior-year quarter benefited from a tax resolution. Experiences remained the principal profit engine; Entertainment’s first-half profit declined as programming costs rose, while Sports rights costs outpaced revenue growth. Disney is investing more in parks and content while accelerating repurchases, leaving less cash after capital expenditures and a higher borrowing balance. For investors, the question is whether those investments produce durable growth without further compressing cash available for shareholder returns.
Key Financial Highlights
| Metric | Q2 FY2026; H1 where reported | Investor interpretation |
|---|---|---|
| Revenue | $25.2B, +6.6% Y/Y; H1 $51.1B, +5.9% | Services, Experiences and content sales drove growth; acquisitions contributed. |
| Pretax income | $3.37B, +9% Y/Y; H1 $7.06B, +5% | Underlying pretax results improved despite the decline in reported earnings. |
| Net income attributable to Disney | $2.25B, down 31% Y/Y; H1 $4.65B, down 20% | The prior-year tax benefit distorted the earnings comparison. |
| Segment operating income | $4.60B, +3.8% Y/Y; H1 $9.20B, down 3.1% | Experiences growth did not fully offset first-half Entertainment and Sports pressure. |
| Total assets | $205B at 03/28/2026 | Includes substantial acquired goodwill and content assets. |
| Equity attributable to Disney; total equity (incl. noncontrolling interests) | $109B; $115B at 03/28/2026 | The distinction matters following transactions that gave partners interests in consolidated businesses. |
| Borrowings | $47.4B, up from $42.0B at 09/27/2025 | Investment and shareholder returns coincided with higher borrowings. |
- Earnings quality: H1 operating cash flow (OCF) of $7.65B vs $4.65B of net income attributable to Disney; OCF fell 23% Y/Y, chiefly on higher tax payments and content spending. After $4.99B of capital expenditures, free cash flow (FCF) was $2.66B vs $5.63B a year earlier.
- Tax comparison: Q2 tax expense was $902M vs a $314M benefit a year earlier, when resolution of a tax matter produced a $1.02B benefit. H1 tax expense also included $422M of noncash charges related to the Fubo and NFL transactions; the earnings decline is not a like-for-like measure of operating performance.
- Capital return: H1 repurchases totaled $5.50B; shares net of treasury shares fell from 1.79B to 1.75B, a 46M-share reduction. Stock-based compensation was $737M, up from $647M.
- Balance-sheet exposure: Goodwill reached $74.7B, up from $73.3B, including $1.41B associated with the Fubo and NFL transactions. Disney had $12.3B of unused committed bank facilities at quarter-end.
Business Developments
Experiences generated $2.62B of Q2 segment operating income, up 5%, supported by higher guest spending, resort and cruise activity, despite a 1% decline in domestic park attendance. Entertainment revenue rose 10% to $11.7B, helped by subscriptions, affiliate fees and theatrical releases; its H1 operating income nevertheless fell 18% as programming and production costs increased. Sports Q2 operating income fell 5% to $652M: fee growth did not overcome costs and weaker advertising and other revenue.
Disney consolidated Fubo after combining it with certain Hulu Live TV assets and retaining 70% ownership and control. Fubo added $0.4B of Q2 revenue without a significant net-income contribution, illustrating why acquired revenue alone is not evidence of improved margins. ESPN also acquired NFL media assets in exchange for a 10% noncontrolling interest in ESPN; the noncash transaction had no significant period revenue or earnings effect but broadens ESPN’s sports offering. Beginning in FY2027, Disney plans to report its games business in Entertainment rather than Experiences.
Risk Assessment
- Programming rights and distribution: Rising sports-rights costs and FY2026 carriage renewals threaten margins and affiliate revenue; Disney channels were temporarily removed from YouTube TV in Q1 after an agreement expired.
- Investment and cash demands: Planned FY2026 content spending of ≈$24B and capital expenditures of ≈$9B compete with an $8B repurchase target after H1 FCF declined materially.
- Valuation: A $147M impairment reduced Disney’s A+E Global Media investment to ≈$2B; further deterioration could require another potentially material charge.
- Litigation and regulation: A securities class action concerning Disney+ costs and subscriber growth seeks unspecified damages, while an April 2026 Federal Communications Commission order requires early license-renewal applications for Disney-owned television stations by 05/28/2026.
- Intellectual property and trade: Piracy, uncertain generative-artificial-intelligence rules and potential tariffs could increase enforcement or operating costs and constrain international demand.
This 10-Q lists only the risk factors that changed since the annual report. Full list: the company's 10-Ks on SEC.
Strategic Outlook and Investor Actionables
Management is prioritizing parks expansion, content and sports distribution while continuing substantial shareholder returns. The opportunity is broader subscription and sports reach alongside resilient Experiences demand; the constraint is whether spending converts into profit and cash quickly enough to support that allocation.
- Entertainment and Sports margins: Watch segment operating income against programming costs and carriage outcomes; revenue growth without margin recovery weakens the investment case.
- Experiences returns: Watch attendance, guest spending and segment operating income as park and resort capital expenditures rise.
- Cash allocation: Watch OCF less capital expenditures, borrowings and the net share-count change to test whether investment and repurchases can coexist without sustained balance-sheet expansion.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 005 · prompt 9e47f58d3c