Disney Promises a Strong Finish to 2025

The Walt Disney Company’s stock has struggled a bit since it announced its fiscal third quarter earnings.

However, most of the noise is external due to the implementation of many international tariffs.

Wall Street deems Disney more susceptible to these charges than most corporations.

But please don’t miss the forest for the trees here. Disney has promised a strong finish to 2025.

Here are several reasons Disney will end the year on a high note…and a couple of potential sticking points.

The Rise of Stitch

Corporate earnings calls rarely mention specific characters. Disney’s most recent analysis did.

Here’s the quote:

“Lilo and Stitch is on track to become the company’s second largest consumer products merchandise franchise this year behind only Mickey Mouse, with more than 70% revenue growth compared to last year.”

Yes, Lilo and Stitch has become THE biggest merch seller someone other than Walt Disney created.

That’s a mind-boggling thought on its own, but it’s that much more impressive when we recall another quote.

Here’s the Wall Street Journal from earlier this year: “Retail sales of Stitch products grew to $2.6 billion in Disney’s 2024 fiscal year from $200 million five years earlier.”

So, you don’t need to be a math genius to do the calcs here. Lilo & Stitch merch should cross $4.4 billion in 2025.

That total makes the film’s $1 billion in box office feel kinda trivial, doesn’t it? And that’s not all!

The live-action remake of Lilo & Stitch hits Disney+ in less than a month, which ties into the next story…

Disney’s Digital Strategy Is Working

The Direct-to-Consumer (DtC) division at Disney had been a lodestone under former CEO Bob Chapek.

Bluntly, DtC got Chapek fired from Disney, as this division was losing billions of dollars annually.

Less than a year ago, Disney made a bold proclamation. CEO Bob Iger called his shot.

Iger informed investors that DtC, which had only been profitable in a couple of quarters thus far, would net $1 billion in fiscal 2025.

That’s a lot like my saying I’ll hit 30 homers next season…except I won’t hit 30 homers next season.

Disney WILL net $1 billion in fiscal 2025. In fact, the company just updated its financial guidance.

Now, the projection has increased to $1.3 billion in operating income for fiscal 2025.

Since Disney is already three-quarters of the way done with the fiscal year, it knows.

The company has done an excellent job of cutting expenses while maximizing profits.

So, this division that was previously a loss leader has evolved into a viable revenue stream.

DtC’s future growth hints at high-margin profits, too. In other words, the best has yet to come.

When Iger returned to Disney, Wall Street gave him specific marching orders: fix Disney streaming.

We can already consider that mission accomplished, and that’s before we factor in the NFL and WWE deals.

There’s one other thing to know about DtC’s future, too…

Yes, Ten Million

Not that long ago, Charter Communications picked a fight it was NEVER going to win.

The longstanding cable vendor blacked out Disney’s channels in an attempted power play.

Since Charter has been the most shorted stock on the S&P 500 a lot lately, it was never going to end well.

Disney held all the power and negotiated from a position of strength.

That power bargaining paid dividends when Charter capitulated to Disney’s demands.

Disney confirmed a timeline for its victory lap on its quarterly earnings report.

During the fiscal fourth quarter of 2025, there’s this tidbit leading the Guidance and Outlook section:

“Total Disney+ and Hulu subscriptions: Increase of more than 10 million compared to Q3 fiscal 2025, with the majority of the increase coming from Hulu as a result of expanded Charter deal.”

Yup, the DtC division will add a massive ten million subscriptions this quarter from the Charter agreement.

So, that’s part of the explanation for why DtC’s operating income is about to explode.

Charter believes those discounted customers will maintain their cable subscriptions since they’re getting free Disney+/Hulu.

Meanwhile, Disney views the situation as a Trojan horse, planning to poach those customers.

Once those subscribers ditch cable, they’ll naturally onboard to Disney’s streaming services.

After all, they’ve been using Disney+ and/or Hulu as part of their cable package for a while. I reiterate that the Charter deal was a masterstroke for Disney.

Mo’ Money, Mo’ Money

The best news of all on the Disney front comes from the financial side.

Specifically, Disney had promised lofty earnings per share (EPS) totals for fiscal 2025.

When Disney said that, more than one cynical analyst dismissed Iger and his team for their optimism.

That’s understandable since Disney wasn’t great about EPS forecasts from 2020-2023, with one caveat.

Chapek got fired for saying Disney would have upper single-digit revenue growth.

So, the Board of Directors brought back Iger, only for Disney to turn around and report…upper single-digit revenue growth.

Wall Street has a dry sense of humor. Anyway, the point is that Disney has faced consistent skepticism lately.

Well, guess who had the last laugh here? Okay, I guess I should say “probably will have the last laugh.”

Disney has updated its guidance to suggest EPS of $5.85 for fiscal 2025.

This total beats Wall Street’s and Disney’s own previous EPS projections, suggesting that all is well within the company.

That doesn’t mean it’s perfect, though. Linear Networks has struggled mightily this fiscal year.

The most recent quarter’s operating income dropped 15 percent, with Disney explaining the problem thusly.

“Equity loss from India JV of ~$200 million driven by purchase accounting amortization” caused most of the drop.

However, Linear Networks would have been down around $65 million anyway.

The hidden part of the NFL Media acquisition and WWE deal is that they prop up linear, too.

Red Zone and WWE’s PLEs provide new live sports content for ESPN and ABC to monetize.

So, Disney should maintain its current carriage agreements and maybe even increase prices.

The contracts would work like the Charter one, which, as I explained earlier, is tremendous for Disney.

The Other Highlights of Late 2025

Disney listed one other notable Downside attribute. It’s this one:

“Disney Cruise Line (will have a) pre-opening expense of ~$185 million, with ~$50 million in Q4 fiscal 2025.”

I’m mentioning this transaction because it’ll impact Disney Experiences slightly in the current fiscal quarter.

However, this temporary negative is a VERY good thing in the long term. It’s a sign of a ship delivery.

Technically, it may be two, depending on how the financials work.

Since the Disney Adventure and Disney Destiny are making their maiden voyages soon, DCL has to pay the delivery fees.

After that, the fleet will have increased by 25 percent with roughly 32 percent more capacity.

So, DCL’s revenue will increase by at least 15 percent if the short-term hit is $185 million.

The improvement could be as much as 30 percent, depending on operating expenses.

On top of that, Disney confirmed that it has already sold roughly half of its cruise ship itinerary for next year.

Since Disney’s fiscal year starts in early October, the Adventure and Destiny have already virtually sold out their initial cruises, DCL is on fire right now.

One Last Thing

And I’m not even going to get into the Disney Entertainment division much.

I merely want to mention that the only reason revenue was down year-over-year was the comparison.

In Q3F2024, Inside Out 2 absolutely wrecked the box office, ultimately becoming the top release of the year.

If we compare Disney’s fiscal third quarter of 2025 to the same period in 2023, it’s $1.022 billion versus $408 million.

So, Disney did better with Inside Out 2 than Lilo & Stitch, but they both absolutely crush 2023’s nonsense.

In short, Disney Entertainment is back in a big way, Marvel’s struggles notwithstanding.

Oh, and Disney will finish the year with Zootopia 2 and Avatar: Fire and Ash. That’s pretty strong.

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Feature Photo: Disney