Disney’s stock slide meets Q2 momentum, as management targets 2026 adjusted EPS growth and heavy buybacks

Walt Disney shares have struggled over the past five years, falling about 44% (as of June 3), even as the company has pointed to strengthening fundamentals. In a recent market write-up, investors were framed as waiting to see whether Disney’s improving operating trends can translate into a higher valuation multiple, or whether the company’s capital intensity and slower-growth profile will cap upside.

In its fiscal second-quarter update for the period ended March 28, Disney reported revenue of $25.2 billion, up 7% year over year, alongside income before income taxes of $3.37 billion, up 9%. Diluted EPS was $1.27, down from $1.81 a year earlier, while adjusted EPS rose to $1.57 from $1.45. Management said segment operating income modestly exceeded prior guidance, with stronger-than-expected revenue growth as the primary driver.

The company’s results continued to reflect its “three-pillar” operating model across Entertainment, Sports, and Experiences. Experiences, which includes Disney theme parks and cruises, generated $9.49 billion of revenue in the quarter, up 7% year over year, and $2.62 billion of segment operating income, up 5%. Disney positioned the group as a key outlet for converting its characters and story franchises into physical guest experiences.

In streaming, Disney highlighted performance improvements tied to pricing and product execution across Disney+ and Hulu. On its investor call materials, Disney described ESPN as advancing its direct-to-consumer strategy, noting that revenue generated by “digital subscribers” in Q2 more than offset secular declines in the linear subscriber universe. The company also said it delivered its first double-digit Entertainment SVOD (streaming video-on-demand) operating margin in Q2, and remained on track to deliver at least 10% for full fiscal 2026.

Disney’s ESPN also featured prominently in the quarter. Management said ESPN subscription and affiliate revenues grew 6% versus the prior-year quarter, with an NFL-related transaction contributing 3%. It also pointed to product positioning through “ESPN Unlimited,” which it described as launched last August, and it referenced broader distribution, including the ESPN app and partnerships that can reach audiences beyond traditional cable bundles.

Looking ahead, Disney’s guidance in the Q2 earnings package was designed to address the profitability question that has hung over the stock for years. The company projected fiscal 2026 adjusted EPS growth of approximately 12%, excluding the impact of a “53rd week,” and approximately 16% including the impact. Disney also targeted at least $8 billion in share repurchases during fiscal 2026 and pointed to Q3 total segment operating income of roughly $5.3 billion.

Market commentary has often focused on whether Disney can earn the kind of multiple expansion investors want, not just deliver earnings growth. In that framing, Disney is not presented as a hypergrowth story tied to the AI boom, but rather as a mature media and experiences business seeking incremental improvements that can compound over time. Still, the path to “quietly crushing it” depends on execution in both streaming profitability and consumer spending, and the company’s disclosures do not provide a single, definitive metric that would settle debates about subscriber growth versus pricing, or about how much of streaming’s margin expansion is durable.

What to watch next is whether Disney can sustain margin progress as it continues investing in content and technology, while also following through on capital return. The most immediate datapoints will be the next quarterly earnings release for fiscal 2026, monitoring whether updated guidance keeps the adjusted EPS trajectory on course, and whether repurchases accelerate as planned. Analysts will also likely look for confirmation that the first double-digit Entertainment SVOD operating margin in Q2 can translate into consistently strong full-year performance, especially as ESPN’s direct-to-consumer strategy scales.