Disney’s Gonna Have a Rough Start to 2026
Timing is everything in life, and The Walt Disney Company just proved it.
After narrowly missing its quarterly revenue estimates, Disney’s in the downward spiral now.
Walt Disney Company
Disney’s stock fell $9.04 or nearly eight percent in trading the day it announced its fiscal earnings.
The company’s early 2026 won’t go well, either and everybody knows it, including Disney’s CFO.
Photo: Deadline
So, let’s discuss how and why Disney’s gonna have a rough start to 2026.
A Strange Warning
Disney’s Thursday morning started on the wrong note, with CFO Hugh Johnston appearing on CNBC.
Generally, Disney only performs such appearances for big announcements or worrisome news.
Photo: PepsiCo
On this particular day, Johnston didn’t think he was revealing anything alarming about his business.
Wall Street investors would quickly disagree, as the stock plummeted while the CFO was speaking.
Photo: CNBC
Still, I can understand Johnston’s perspective. Disney reported record revenue of $94.4 billion.
That’s $3 billion more than the previous year and a sign that the company’s heading in the right direction.
Photo: Disney
Kind of. Critics quickly noted that Disney’s operating income and free cash flow decreased.
The operating income fell five percent in the quarter to $3.48 billion.
The Walt Disney Company
Johnston would argue that this amount still reflected annual growth of 12 percent or nearly $2 billion for the year.
Similarly, while free cash flow fell 37 percent in the quarter, it grew 18 percent for the year.
Photo: Washington Post
Disney has more than $10 billion in cash on hand. That’s a great deal of liquidity and, thereby, flexibility.
However, investors had already baked in those factors in Disney’s stock price.
Photo: skillastics.com
What alarmed everyone was the warnings at the start of Disney’s earnings report, which you can read here.
Disney listed several unavoidable expenses that will arise during the fiscal first quarter of 2026.
As fate would have it, that’s right freakin’ now, as the quarter started on September 29th.
So, Disney officials already know that they’re getting hammered with unusual expenses this quarter.
Incredibly, those are NOT the ones caused by the current YouTube TV/Google dispute.
Right about now, Johnston wishes that the recent proposal to switch from quarterly to six-month earnings reports had already occurred.
Let’s quickly dive into Disney’s series of unfortunate events.
What’s Hurting Disney Right Now?
As I discussed on Thursday, the YouTube TV squabble is costing Disney about $4.3 million per day.
That doesn’t seem like much, with Morgan Stanley suggesting expected losses of $60 million.
Photo: Morgan Stanley
That statement presumes an agreement is in the offing, though. As I write this, no such deal has been made.
Should Disney continue its standoff with Google for a while, it’ll lose $120-$130 million a month.
Anadolu/GettyImages
Johnston correctly points out that Disney offsets these losses with potential long-term gains.
Data suggests that people are signing up for ESPN the app and the new FuboTV/Hulu + Live TV app.
ESPN
So, this picture isn’t as bleak as it may seem on the surface. Still, Disney isn’t making back all that money immediately.
As such, the current quarter will include revenue shortfalls in the Entertainment and Sports divisions.
Photo: Michael Vargo on LinkedIn
Remarkably, that’s only a small part of Disney’s concern, though, as there are several more expenses.
The Disney Destiny just set sail for the first time, which leads to delivery and docking charges.
Disney Destiny
In a few months, the Disney Adventure will join the fleet as well, so Disney’s getting a double whammy.
The company estimates a budget shortfall of $150 million just from these ships.
Photo: Disney
But wait! It gets worse! October and early November of 2024 were a record-setting time in advertising.
Politicians spent liberally to finance their last-ditch efforts to get elected.
Disney won’t gain that revenue for this quarter, which puts the company at a $140 million disadvantage.
We’re still not done. Disney no longer gets the Star India money since it merged that company.
Photo: x @starindia
During the current quarter, that’s another setback of $73 million compared to 2024.
Disney’s Other (Temporary) Pain Point
Somehow, I haven’t even gotten to the worst part, though. Disney’s recent theatrical slate has issues, too.
Due to tough comparisons with 2024, especially Moana 2, and the struggles of TRON: Ares, the Entertainment division will have a shortfall.
TRON: Ares
Johnston suggests that Disney will finish $400 million short of the same quarter in 2024.
I blame Jared Leto. Really, I do, as I knew TRON: Ares was a bad idea from day one.
TRON: Ares
Still, Disney could surprise if Zootopia 2 excels at the box office. It’ll probably be a wash with Moana 2, though.
I know you’re probably thinking, “What about ‘Avatar: Fire and Ash?’” Well, that’s the thing.
Photo: Disney
Disney won’t gain most of that revenue until the next quarter, as it’ll only be in theaters a few days this quarter.
That’s really the point about every issue Disney’s facing right now other than YouTube TV.
Photo: Variety
The rest of this stuff is just a case of bad timing all the way around.
Once the Disney Destiny and Disney Adventure are up and running, that’s 10,000 more cruise guests.
Disney Destiny
So, Disney Experiences will improve its revenue even more after another spectacular year.
In the short term, the company takes the hit, though, just as its advertising will improve in 12 months.
Magic Kingdom
We’ll have another cycle of political advertising spending that will improve the bottom line.
Unfortunately for Disney, it’s an “every other year” thing, and this is the wrong year.
Spaceship Earth
Similarly, the Star India thing won’t be a factor from now on, as the merger occurred a year ago this week.
These are a series of one-time hits that merge together to create a perfect storm.
Disney’s Gonna Have a Rough Start to 2026
The only long-term concern from any of this is the YouTube TV squabble.
That’s the main reason Johnston appeared on CNBC to provide context.
Photo: YouTube
He wanted to remind investors that Disney’s been a thriving business since he arrived.
The CFO is too affable and humble to brag like that, but the timeline proves otherwise.
Photo: Disney
Disney had never missed with an earnings estimate since Johnston accepted the job.
Once it happened, he wanted to explain why and remind everyone how much stronger the company is.
Photo: Disney
Johnston always knew that the start of his report would scare investors, as it looks bad on paper.
The negative impacts I’ve listed today total $763 million in random factors hurting Disney this quarter.
Photo: Disney
That’s like breaking a toe and wrecking your car on the same day. You’ll get better, and you’ll get another car.
You’ll be wildly inconvenienced in the short term, though, and that’s where Disney’s at this quarter.
The Walt Disney Company
For this reason, I won’t be surprised if the stock continues to drop.
Notably, every major analyst still believes $Dis should be traded at $129-$150, though.
Credit: Disney
So, Disney is probably going to be highly undervalued until next spring.
Photo: MickeyBlog
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