Not sure I agree with all the conclusions but this is as good an explanation for the long stagnant stock price as I've seen...
https://seekingalpha.com/article/48...-concerning-trends-are-emerging-maintain-hold
Disney Q4 Earnings: Some Concerning Trends Are Emerging
Nov. 13, 2025 10:30 PM ET
The Walt Disney Company (DIS) Stock,
DIS:CA StockDIS,
DIS:CA
Vladimir Dimitrov, CFA
6.75K Followers
Summary
- The severe negative reaction post Disney's Q4 2025 earnings release is justified.
- Although the quarter was somewhat mixed, there are some problems beneath the surface.
- Contrary to what the relatively low valuation multiples might indicate, the stock poses more downside risk.
blanscape/iStock Editorial via Getty Images
After it became clear that The Walt Disney Company's (
DIS)(
DIS:CA) exciting narrative around streaming
has fizzled out when the company reported Q3 2025 earnings, today the company reported the last quarter for the fiscal year, and the stock is now down by almost 6% since the last report.
In the meantime, as we could see on the graph below, the S&P 500 has continued its ascend, and with that, the negative performance gap between DIS and the market is now approaching 12% in just 3 months.
Data by
YCharts
On the surface the report was not quite bad, but it seems that the optimism around the stock has driven it to unsustainable levels in the short-term. Earnings on a Non-GAAP basis came-in above the analysts' estimates, but the revenue miss was noteworthy.
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When looking at the results on a segmented basis, it appears that the Entertainment segment is responsible for the daily drop in the share price. Revenue within the sector was down by 6%, which is not something that investors would expect, as Disney is looking to expand profitability in streaming.
Revenue dipped 0.5% year-over-year, including gains across the Sports (+2%) and Experiences (+6%) segments, while the Entertainment segment saw revenue decline 6%.
Source:
Seeking Alpha
There were, however, other moving parts, and the investors' reaction to the quarter opens up the question of whether or not current expectations are too high to justify the share price.
A Sobering Quarter
Overall, there was nothing exciting about the fourth quarter, and the sharp drop confirms that investors were betting on a sustained turnaround. Revenue for the quarter was flat year-on-year, which was not something that believers of
Disney+ success were expecting.
At the very top of the earnings press release, DIS management stressed the fact that "total segment operating income" was up by 12%, which would seem like a positive development for anyone interested in the company's operating performance. However, the term "total segment operating income" is actually a Non-GAAP measure that adjusts Disney's income before income taxes with a number of items (see them in blue below). Moreover, even the adjusted operating income measure fell by 5% in the last quarter.
Disney Q4 2025 Earnings Release
More importantly, however, there are some concerning trends emerging on a segmented basis. Starting with the most important segment for future growth and profitability improvement - streaming. By simply looking at the year-on-year change in revenue and profits, one could assume that margin expansion is ongoing, and with topline growth of 8%, this could have a notable double whammy effect on the bottom line.
Disney Q4 2025 Earnings Release
Underneath the surface, the main factor behind the operating income increase was the higher average revenue per user, coupled with fixed cost economies of scale due to the 5% growth in subscribers. However, the vast majority of the ARPU increase occurred at Disney+ International, while Domestic roughly kept up with inflation over the period.
prepared by the author, using data from quarterly earnings releases
When we plot the quarterly changes of ARPU in both of Disney+ segments, it becomes clear that ARPU in Domestic has stayed flat for the most part of the past 12 months.
prepared by the author, using data from quarterly earnings releases
Moreover, the lower U.S. dollar has been a tailwind of the International segment which is worth considering as Disney+ now derives more sales from overseas.
Data by
YCharts
By far the most concerning part, however, is the fact that the DTC margin seems to be settling at around 5%. The hype from the first profitable quarter of Q2 2024 and the initial sharp increase in margins is now over, and there is now a risk that Disney+ might not be as profitable as initially anticipated.
prepared by the author, using data from quarterly earnings releases
Bear in mind that this segment was anticipated to take over from Disney's highly profitable legacy business, and now the probability of DTC margins settling at mid-single digits appears as a very risky outcome for Disney's shareholders.
The earnings release also portrayed results in the Experiences segment as a massive success with record operating income for both the fiscal year and the last 3-month period.
Experiences: Record full year segment operating income of $10.0 billion, an increase of $723 million compared to the prior year. Record Q4 segment operating income of $1.9 billion, an increase of $219 million compared to the prior-year quarter.
Source: Disney Q4 2025 Earnings Release
When it comes to actual margins, however, the segment's performance has been relatively stable over the past two years, with quarterly margins in line with those reported in FY 2023.
prepared by the author, using data from quarterly earnings releases
In terms of growth, the optimism through the first nine months of FY 2025 has now suddenly come to a halt, with year-on-year revenue growth down to around 6%.
prepared by the author, using data from quarterly earnings releases
Disney Stock Is Not Cheap
Similarly to the Q4 2025 results, Disney's stock might appear cheap when looking at certain valuation metrics in isolation. The Non-GAAP earnings multiple, for example, appears relatively low in comparison to the P/E multiple of the S&P 500, which is now
above 30.
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Investors could easily be led to the wrong conclusion by looking at the multiple on a historical basis. Although the multiple below is not adjusted for Non-GAAP items, it is now much closer to what DIS was trading prior to 2019 - roughly when
problems within the company began surfacing.
Data by
YCharts
This might seem like a reason enough to assume that DIS is at least reasonably priced at the moment and that the market might be overreacting to what was a somewhat mixed quarter.
The main issue, however, is that Disney is no longer the company that it was prior to 2019. At the very least, the all-in bet on streaming is transforming the business, and a simple comparison of valuation multiples on a historical basis is not enough.
A good example of this is to compare the price/sales multiple and the operating income margin over time. As we could see on the graph below, Disney's sales multiple has been moving roughly in-line with the margin increases from the past few years, but the stock now trades at roughly the same sales multiple as it did all the way back in FY 2012, when margins were significantly higher. And as growth remains low, it becomes harder to justify the current multiple by anything other than the fact that the
overall equity market is richly priced.
prepared by the author, using data from Seeking Alpha and SEC Filings
Even though peers like Netflix (
NFLX) have problems of their own, Disney is no longer seen as one of the most profitable entities in the Media space. Having operating margins of around 15% is now twice as low as those of the leader in streaming - Netflix.
Data by
YCharts
Lastly, there's the dividend, which some might consider an indication that things are moving in the right direction. However, since the dividend was reintroduced, the stock's yield has been way below what it used to be before the company went all-in on streaming.
Data by
YCharts
Given the fact that DIS now has an annual cash outflow of around $1.8bn in dividends, it is highly likely that we will continue to see dividend increases in the coming years. The reason why this might be shrugged off by the market is because the current dividend would need to increase by at least 50% in order for the yield to approach the normal pre-2019 levels.
Conclusion
When looking at the current earnings release in further detail, we could understand why the market is reacting so negatively to the results. There are some concerning trends emerging within Disney's streaming segment, and the stock does not reflect that. Quite the opposite, the company would have to continue to deliver on the margin and dividend front for a couple more years before one could justify DIS stock as a buy.
reaction to the possibiilty.
