The Disney story

What drives the business

• Disney earns from the same characters and stories through theatrical releases, Disney+ and Hulu subscriptions, merchandise licensing and park attractions, linking its Entertainment and Experiences businesses rather than relying on a single distribution channel.
• Experiences generated $36 billion in annual revenue in fiscal 2025, and the Disney Destiny and Disney Adventure helped increase cruise stateroom capacity by approximately 50% in the quarter to June 2026 compared with the prior-year quarter.
• Disney is integrating Hulu with Disney+ and expanding international programming, while its subscription streaming services produced a 13% operating margin in the quarter to June 2026.
• ESPN combines television distribution with ESPN Select and ESPN Unlimited subscriptions, supported by sports rights including the NFL and NBA, and its agreement with NFL Enterprises exchanged a 10% noncontrolling interest in ESPN for NFL Network and certain other media assets.
• Disney agreed to transfer its 50% stake in A+E Global Media to an affiliate of Hearst for approximately $1.2 billion in cash, with proceeds intended for additional share repurchases.

What the price assumes

At $105.59, the reverse DCF implies that free cash flow after stock pay grows 11.7% a year for ten years, using a 10.2% discount rate.

Disney delivered -3.8% annual growth in that measure over the last 7 years, while the TenQ check sets a 0.1% growth bar by moving the historical rate halfway toward 4%.

That implied acceleration contrasts with revenue growth of 4.6% and free cash flow of $8.3 billion over the last twelve months, before deducting $1.5 billion of stock-based pay.

Value DIS on your own assumptions

What could change the story

• Sports operating income declined 17% in the quarter to June 2026 as higher programming costs outweighed subscription and affiliate fee growth, while distribution disputes involving Comcast Xfinity and YouTube TV illustrate the risk of service blackouts.
• The 13% streaming operating margin benefited partly from marketing and programming spending timing, and Disney expects softer domestic streaming advertising and continued weakness at its Asia parks in the fourth quarter of fiscal 2026.
• The FCC's early license renewal requirements for Disney's owned television stations create regulatory uncertainty, while evolving AI rules could increase compliance costs or restrict use.
• Shareholder distributions exceeding free cash flow leave less cash for other uses, with total debt of $46.0 billion against cash and short-term investments of $5.2 billion and a failing TenQ near-term liquidity check.
• The A+E transaction prompted an $812 million impairment charge, illustrating how exiting businesses can reduce reported earnings even when transactions generate cash.

What to watch next

• Disney expects approximately $4.9 billion in total segment operating income in the fourth quarter of fiscal 2026, including about $600 million from the 53rd week, making that calendar contribution important when assessing growth.
• Fiscal 2026 guidance calls for at least $19 billion in operating cash flow and approximately $9 billion in capital expenditures, the key figures for assessing funding of expansion and share repurchases.
• Streaming subscription growth and spending will show whether Disney maintains its expected double-digit fiscal 2026 streaming operating margin, excluding the 53rd week, while global guest growth and cruise occupancy will indicate demand for added capacity.
• Disney plans to move much of Consumer Products from Experiences to Entertainment beginning in the first quarter of fiscal 2027, so segment profit comparisons will need to distinguish reporting changes from operating performance.

Sources

• Disney's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The DIS stock report, for every figure and check