Why Disney is accumulating losses

SP500

Key zone: 7,700 - 7,750

Buy: 7,780 (on a strong positive foundation); target 7,900-8,050; StopLoss 7,720

Sell: 7,650 (following a decisive break above 7,700); target 7,500-7,350; StopLoss 7,720

The famous Disney is growing revenue, has made streaming profitable, and is once again generating billions at the box office, yet its shares remain roughly 40% below their level five years ago. The company’s new management is responding with layoffs and trying to turn a collection of strong but unstable assets into a unified profit stream.

A reminder:

Disney is already carrying out its third major wave of layoffs under Josh D’Amaro. In late September, the company cut around 300 employees, primarily in HR and IT. In April, around 1,000 employees in marketing, studios, ESPN, technology, and corporate divisions were laid off, while in July several hundred more positions were eliminated, with Pixar and National Geographic particularly hard hit. And the process is not over yet.

Disney continues to look for opportunities to reduce personnel and SG&A expenses in order to free up capital for investment. At the same time, additional restructuring of television operations is being prepared, which could also result in hundreds of layoffs.

For investors, this is a strong negative signal: this is no longer about one-time cost savings, but about a structural reduction in fixed costs and the reallocation of resources from the traditional media business toward streaming, technology, and key franchises.

Unfortunately, Disney’s main problem is not the lack of growth.

• Fundamental performance looks significantly better than the stock’s dynamics. In fiscal Q3, Disney’s revenue rose 7% y/y to $25.2 billion, while total segment operating income increased 21% to $5.6 billion.
• Experiences remains the main growth driver: revenue from parks and other segment assets increased 10%, while operating income rose 20%. Per-capita spending by visitors at U.S. parks increased 4%. Entertainment SVOD, which includes Disney+ and Hulu, increased revenue by 11%, while subscription revenue rose 15%.
• The content machine is also working. Toy Story 5 surpassed $1 billion in global box office revenue, while the entire Toy Story franchise has generated more than $4 billion at the box office and produces more than $1 billion in annual retail sales.

But the market wants to see not individual successful movies, parks, or services, but sustainable acceleration in profit across the entire group.

Improving operating performance has not yet resulted in a full market revaluation of the company. At the October 1 close, DIS traded at $101.33, losing 3.4% for the day. Over five years, the stock’s total return is approximately −40%.

The reason is the questionable quality of future growth. Traditional television is under structural pressure, sports rights are becoming more expensive, international monetization of Disney+ still needs improvement, while expansion of the parks and cruise businesses requires significant capital expenditures. Even in a strong fiscal Q3, ESPN operating income declined 17%.

Disney’s new model, developed by new CEO D’Amaro, involves using a single IP simultaneously across movies, Disney+, merchandise, games, parks, and cruises. Disney+ is intended to become the “digital hub” of the ecosystem, connecting content with merchandise, games, and physical Experiences. The company plans to launch the first elements of the expanded model in spring 2027.

The organizational structure is already changing to support this concept: beginning in October, Consumer Products’ global licensing and publishing businesses are moving closer to the Entertainment studio division. This should reduce the gap between creating a franchise and subsequently monetizing it.

And What Is the Result?

D’Amaro is trying to eliminate duplicate expenses and make movies, streaming, sports, merchandise, and Experiences operate as a single economic system. If One Disney improves margins and return on invested capital, the current DIS discount could begin to narrow. If the synergy remains primarily a corporate concept, strong brands alone are unlikely to become a sufficient catalyst for a sustained uptrend in the stock.

Disney today is not a business rescue story, but a story of restoring capital efficiency. Cost cutting by itself is not an investment factor. It must translate into higher margins, free cash flow, and EPS.

Let’s see what comes of it.

So we act wisely and avoid unnecessary risks.

Profits to y’all!