ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CONSOLIDATED RESULTS
($ in millions, except per share data)
% Change
Better (Worse)
Revenues:
Services
Products
Total revenues
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)
Cost of products (exclusive of depreciation and amortization)
Selling, general, administrative and other
Depreciation and amortization
Total costs and expenses
Restructuring and impairment charges
Other expense
Interest expense, net
Equity in the income of investees, net
Income before income taxes
Income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to Disney
Diluted earnings per share attributable to Disney
Organization of Information
Management’s Discussion and Analysis provides a narrative on the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:
• Consolidated Results and Non-Segment Items
• Business Segment Results
• Corporate and Unallocated Shared Expenses
• Liquidity and Capital Resources
• Trends and Uncertainties
• Critical Accounting Policies and Estimates
• Entertainment DTC Product Descriptions and Key Definitions
• Supplemental Guarantor Financial Information
In Item 7, we discuss fiscal 2025 and 2024 results and comparisons of fiscal 2025 results to fiscal 2024 results. Discussions of fiscal 2023 results and comparisons of fiscal 2024 results to fiscal 2023 results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024.
Star India
On November 14, 2024, the Company and RIL completed the Star India Transaction (see Note 4 to the Consolidated Financial Statements). The Company recognizes its 37% share of the India joint venture’s results in “Equity in the income of investees.” Star India results through November 14, 2024 were consolidated in the Company’s financial results and reported in the Entertainment and Sports segments.
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CONSOLIDATED RESULTS AND NON-SEGMENT ITEMS
Revenues for fiscal 2025 increased 3%, or $3.1 billion, to $94.4 billion; net income attributable to Disney increased $7.4 billion to income of $12.4 billion compared to $5.0 billion in the prior year; and diluted earnings per share (EPS) from continuing operations attributable to Disney increased to $6.85 compared to $2.72 in the prior year. The net income and EPS increases were due to a lower effective tax rate in the current year compared to the prior year and the comparison to impairments related to the Star India Transaction and goodwill in the prior year. In addition, the increases in net income and EPS were due to higher operating income at Entertainment and Experiences. The lower effective tax rate was due to a non-cash tax benefit recognized in the current year upon a change in Hulu’s U.S. income tax classification (see Note 9 to the Consolidated Financial Statements).
Revenues
Service revenues for fiscal 2025 increased 3%, or $2.7 billion, to $84.6 billion, which included an approximate 3 percentage point decrease from the Star India Transaction. Aside from this impact, service revenues increased due to higher subscription revenue, growth at our parks and experiences businesses and an increase in content sales.
Product revenues for fiscal 2025 increased 3%, or $0.3 billion, to $9.8 billion, driven by growth at our parks and experiences businesses, partially offset by lower physical home entertainment distribution revenue due to a shift to licensing of physical distribution rights to third parties.
Costs and expenses
Cost of services for fiscal 2025 increased $0.2 billion to $52.7 billion, which included an approximate 4 percentage point decrease from the Star India Transaction. Aside from this impact, cost of services increased due to higher programming and production costs and, to a lesser extent, the impact of inflation at our parks and experiences businesses.
Cost of products for fiscal 2025 decreased 2%, or $0.1 billion to $6.1 billion, due to a shift to licensing of physical home entertainment distribution, partially offset by the impact of inflation at our theme parks and resorts.
Selling, general, administrative and other costs for fiscal 2025 increased 5%, or $0.7 billion, to $16.5 billion, which included approximately 2 percentage point decrease from the Star India Transaction. Aside from this impact, selling, general, administrative and other costs increased driven by higher marketing costs.
Depreciation and amortization for fiscal 2025 increased 7%, or $0.3 billion, to $5.3 billion primarily due to higher depreciation at our parks and experiences businesses.
Restructuring and Impairment Charges
($ in millions)
Impairments:
Equity investments (1)
Content (2)
Star India
Goodwill (3)
Retail assets
Severance
Other
(1) Primarily related to A+E (fiscal 2025 and 2024) and Tata Play Limited (fiscal 2025).
(2) Related to strategic changes in our approach to content curation.
(3) Related to general entertainment linear networks.
Other expense
In the prior year, the Company recorded a charge of $65 million related to a legal ruling.
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Interest Expense, net
($ in millions)
% Change
Better (Worse)
Interest expense
Interest income, investment income and other
Interest expense, net
The decrease in interest expense was due to lower average rates and debt balances, partially offset by a decrease in capitalized interest.
The decrease in interest income, investment income and other was driven by a lower benefit from pension and postretirement benefit costs, other than service cost, and the impact of lower average cash and cash equivalent balances and lower average rates.
Equity in the Income of Investees
Equity in the income of investees decreased $280 million to $ 295 million in the current year from $ 575 million in the prior year due to losses from the India joint venture in the current year and lower income from A+E.
Effective Income Tax Rate
($ in millions)
Income before income taxes
Income tax expense
Effective income tax rate
The effective income tax rate was negative 11.9% in the current year compared to a positive effective income tax rate of 23.7% in the prior year. Items impacting the effective income tax rate include the following:
• The current year included a non-cash tax benefit of approximately 26 percentage points due to a change in Hulu’s U.S. income tax classification
• The prior year reflected an unfavorable impact of approximately 6 percentage points from impairments that are not tax deductible
• The current and prior year reflected favorable adjustments related to prior-year tax matters of 10 percentage points and 3 percentage points, respectively
• The current year included a non-cash tax expense of approximately 2 percentage points and the prior year included a non-cash tax benefit of approximately 1 percentage point in connection with the Star India Transaction
Noncontrolling Interests
($ in millions)
% Change
Better (Worse)
Net income attributable to noncontrolling interests
The increase in net income attributable to noncontrolling interests was due to an incremental payment to acquire Hulu, partially offset by the accretion of NBC Universal’s interest in Hulu in the prior year.
Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.
Certain Items Impacting Results in the Year
Results for fiscal 2025 were impacted by the following:
• Hulu Transaction Impacts consisting of a $3,277 million benefit in “Income taxes” and a $462 million charge in “Net income attributable to noncontrolling interests”
• TFCF and Hulu acquisition amortization of $1,576 million
• Favorable resolution of a prior-year tax matter of $1,016 million
• Restructuring and impairment charges of $819 million ($748 million after tax) and a non-cash tax expense of $244 million related to the Star India Transaction
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Results for fiscal 2024 were impacted by the following:
• Restructuring and impairment charges of $3,595 million
• TFCF and Hulu acquisition amortization of $1,677 million
• Other expense of $65 million related to a legal ruling
• Favorable adjustments related to prior year tax matters of $418 million
A summary of the impact of these items on EPS is as follows:
($ in millions, except per share data)
Pre-Tax Income (Loss)
Tax Benefit (Expense) (1)
After-Tax Income (Loss)
EPS Favorable (Adverse) (2)
Year Ended September 27, 2025:
Hulu Transaction Impacts
Resolution of a prior-year tax matter
TFCF and Hulu acquisition amortization (3)
Restructuring and impairment charges
Total
Year Ended September 28, 2024:
Restructuring and impairment charges
TFCF and Hulu acquisition amortization (3)
Other expense
Favorable adjustments related to prior-year tax matters
Total
(1) Tax benefit (expense) is determined using the tax rate applicable to the individual item.
(2) EPS is net of noncontrolling interest, where applicable. Total may not equal the sum of the column due to rounding.
(3) Includes amortization of intangibles related to TFCF equity investees.
BUSINESS SEGMENT RESULTS
The Company evaluates the performance of its operating segments based on segment revenue and segment operating income.
Below is a discussion of the major revenue and expense categories for our business segments. Costs and expenses for each segment consist of operating expenses, selling, general, administrative and other costs, and depreciation and amortization. Selling, general, administrative and other costs include third-party and internal marketing expenses.
Entertainment
The Entertainment segment generates revenue from film, episodic and other content that is produced and distributed across three lines of business:
• Linear Networks, which primarily generates revenue from affiliate fees and advertising
• Direct-to-Consumer, which primarily generates revenue from subscription fees and advertising
• Content Sales/Licensing, which primarily generates revenue from the distribution of films in the theatrical market, sale of film and episodic content in the TV/VOD and home entertainment markets, licensing of our music rights, sales of tickets to stage play performances and licensing of our IP for use in stage plays. Revenues also include an intersegment allocation of revenues from the Experiences segment, which is meant to reflect royalties on consumer products merchandise licensing revenues generated on IP created by the Entertainment segment.
Operating expenses at the Entertainment segment consist of the following:
• Programming and production costs, which include:
• Amortization of capitalized production costs and the costs of licensed programming rights
• Subscriber-based fees for programming the Hulu Live TV service, including fees paid by Hulu to ESPN and the Entertainment linear networks business for the right to air their linear networks on Hulu Live TV
• Production costs related to live programming (primarily news)
• Participations and residual expenses
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• Fees paid to ESPN to program certain sports content on ABC Network and Disney+
• Other operating expenses, which include technology support costs and distribution costs
Amortization of capitalized production costs and costs of licensed programming rights is generally allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation. Certain other costs, such as technology, shared services and certain labor related costs, are allocated based on metrics designed to correlate with consumption.
Sports
The Sports segment primarily generates revenue from affiliate and subscription fees, advertising, pay-per-view fees and sub-licensing of sports rights. Operating expenses consist of programming and production costs and other operating expenses. Programming and production costs include amortization of licensed sports rights and production costs related to live sports and other sports-related programming. Other operating expenses include technology support costs and distribution costs.
Experiences
The Experiences segment primarily generates revenue from the sale of tickets for admissions to theme parks, the sale of food, beverage and merchandise at our theme parks and resorts, charges for room nights at hotels, sales of cruise vacations, sales and rentals of vacation club properties, royalties from licensing our IP for use on consumer goods and the sale of branded merchandise. Revenues are also generated from sponsorships and co-branding opportunities, real estate rent and sales, and royalties earned on Tokyo Disney Resort revenues. Expenses consist of operating labor, infrastructure costs, costs of goods sold and distribution costs, depreciation and other operating expenses. Infrastructure costs include technology support costs, repairs and maintenance, utilities and fuel, property taxes, retail occupancy costs, insurance and transportation. Other operating expenses include costs for such items as supplies, commissions and entertainment offerings.
Eliminations
The following transactions are recognized in segment revenues and eliminated in total Company revenue:
• Fees paid by Hulu to ESPN and the Entertainment linear networks business for the right to air their networks on Hulu Live TV
• Fees paid by ABC Network and Disney+ to ESPN to program certain sports content on ABC Network and Disney+, respectively
BUSINESS SEGMENT RESULTS - 2025 vs. 2024
The following table presents revenues from our operating segments:
($ in millions)
% Change
Better (Worse)
Entertainment
Sports
Experiences
Eliminations
Revenues
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The following table presents income from our operating segments and other components of income before income taxes:
($ in millions)
% Change
Better (Worse)
Entertainment operating income
Sports operating income
Experiences operating income
Corporate and unallocated shared expenses
Equity in the loss of India joint venture
Restructuring and impairment charges
Other expense
Interest expense, net
TFCF and Hulu acquisition amortization
Income before income taxes
Entertainment
Revenue and operating results for the Entertainment segment are as follows:
($ in millions)
% Change
Better (Worse)
Revenues:
Linear Networks
Direct-to-Consumer
Content Sales/Licensing and Other
Segment operating income:
Linear Networks
Direct-to-Consumer
Content Sales/Licensing and Other
Revenues
The increase in Entertainment revenues was due to an increase in subscription fees and higher content sales. These increases were partially offset by decreases in advertising revenue and affiliate fees due to the Star India Transaction.
Operating income
The increase in Entertainment operating income was due to growth at Direct-to-Consumer and, to a lesser extent, Content Sales/Licensing and Other, partially offset by a decrease at Linear Networks.
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Linear Networks
Operating results for Linear Networks are as follows:
($ in millions)
% Change
Better (Worse)
Revenues
Affiliate fees
Advertising
Other
Total revenues
Operating expenses
Selling, general, administrative and other
Depreciation and amortization
Equity in the income of investees
Operating Income
Revenues - Affiliate fees
($ in millions)
% Change
Better (Worse)
Domestic
International
The decrease in domestic affiliate revenue was due to a decline of 9% from fewer subscribers, partially offset by an increase of 7% from higher effective rates.
Lower international affiliate revenue was attributable to decreases of 29% from the Star India Transaction, 9% from lower effective rates and 4% from fewer subscribers.
Revenues - Advertising
($ in millions)
% Change
Better (Worse)
Domestic
International
The decrease in domestic advertising revenue was due to a decline of 8% from fewer impressions attributable to lower average viewership.
Lower international advertising revenue was attributable to a decrease of 55% from the Star India Transaction.
Operating Expenses
($ in millions)
% Change
Better (Worse)
Programming and production costs
Domestic
International
Total programming and production costs
Other operating expenses
The decrease in domestic programming and production costs was driven by lower average cost non-scripted programming, partially offset by higher fees paid to the Sports segment to program sports content. Lower average cost non-scripted programming included the comparison to costs for airing of political news coverage and the Emmy Awards show in the prior year.
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International programming and production costs decreased due to the Star India Transaction.
The decrease in other operating expenses was primarily due to lower technology costs and a decrease from the Star India Transaction.
Selling, general, administrative and other
Selling, general, administrative and other costs decreased $315 million to $2,329 million from $2,644 million, due to the Star India Transaction, lower marketing costs and a favorable Foreign Exchange Impact.
Depreciation and amortization
Depreciation and amortization increased $40 million from $52 million to $92 million due to new assets placed in service.
Equity in the Income of Investees
Income from equity investees decreased $94 million, to $445 million from $539 million, due to lower income from A+E attributable to decreases in affiliate and advertising revenue, partially offset by lower general and administrative and marketing costs.
Operating Income from Linear Networks
Operating income decreased 14%, to $2,955 million from $3,452 million due to lower results at our international business as a result of the Star India Transaction and lower income from equity investees.
Supplemental revenue and operating income
The following table provides supplemental revenue and operating income detail for Linear Networks:
($ in millions)
% Change
Better (Worse)
Supplemental revenue detail
Domestic
International
Supplemental operating income detail
Domestic
International
Equity in the income of investees
Direct-to-Consumer
Operating results for Direct-to-Consumer are as follows:
($ in millions)
% Change
Better (Worse)
Revenues
Subscription fees
Advertising
Other
Total revenues
Operating expenses
Selling, general, administrative and other
Depreciation and amortization
Operating Income
Revenues - Subscription fees
Growth in subscription fees was due to increases of 8% attributable to higher effective rates reflecting increases in pricing and 4% from more subscribers, partially offset by decreases of 1% from an unfavorable movement of the U.S. dollar against major currencies (Foreign Exchange Impact) and 1% from the Star India Transaction.
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Revenues - Advertising
Advertising revenue was comparable to the prior year, as decreases of 9% from lower rates and 8% from the Star India Transaction were largely offset by an increase of 15% from higher impressions.
Revenues - Other
The decrease in other revenue was primarily due to lower recognition of minimum guarantee shortfalls from wholesale distributors and an unfavorable Foreign Exchange Impact.
Key Metrics (1)
Paid subscribers at:
(in millions)
September 27, 2025
September 28, 2024
% Change
Better (Worse)
Disney+
Domestic (U.S. and Canada) (2)
International (3)
Disney+ (3)(4)
Hulu
SVOD Only
Live TV + SVOD
Total Hulu (2)(4)
Average Monthly Revenue Per Paid Subscriber for the fiscal year ended:
% Change
Better (Worse)
Disney+
Domestic (U.S. and Canada)
International (3)
Disney+ (3)
Hulu
SVOD Only
Live TV + SVOD
(1) See discussion on page 55 —Entertainment DTC Product Descriptions and Key Definitions
(2) Includes 43.7 million and 27.1 million subscribers to bundles that have both Disney+ and Hulu as of September 27, 2025 and September 28, 2024, respectively.
(3) The prior year Paid Subscribers and Average Monthly Revenue per Paid Subscriber have been adjusted to include Disney+ subscribers in Southeast Asia. These subscribers were previously reported with Disney+ Hotstar, which is no longer presented as this business was included in the Star India Transaction.
(4) Total may not equal the sum of the column due to rounding.
Domestic Disney+ average monthly revenue per paid subscriber increased from $7.89 to $8.06 due to increases in pricing, partially offset by the impact of subscriber mix shifts.
International Disney+ average monthly revenue per paid subscriber increased from $6.38 to $7.59 due to increases in pricing, partially offset by the impact of subscriber mix shifts.
Hulu SVOD Only average monthly revenue per paid subscriber was comparable to the prior year as increases in pricing were offset by lower advertising revenue and the impact of subscriber mix shifts.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $95.12 to $99.85 due to increases in pricing, partially offset by the impact of subscriber mix shifts and lower advertising revenue.
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Operating Expenses
($ in millions)
% Change
Better (Worse)
Programming and production costs
Hulu
Disney+
Total programming and production costs
Other operating expense
Higher programming and production costs at Hulu were due to higher subscriber-based license fees, which reflected rate increases for Hulu Live TV programming and more subscribers to bundles with third-party offerings.
The decrease in programming and production costs at Disney+ was due to the impact of the Star India Transaction, partially offset by more hours of content available.
Other operating expenses increased due to higher technology and distribution costs.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $84 million, to $4,658 million from $4,574 million, primarily attributable to increases in marketing and labor costs, partially offset by the impact of the Star India Transaction.
Depreciation and amortization
Depreciation and amortization increased $55 million, to $366 million from $311 million, due to increased investment in technology assets.
Operating Income from Direct-to-Consumer
Operating income from Direct-to-Consumer increased $1,184 million, to $1,327 million from $143 million due to increases at Disney+ and Hulu.
Content Sales/Licensing and Other
Operating results for Content Sales/Licensing and Other are as follows:
($ in millions)
% Change
Better (Worse)
Revenues
TV/VOD and home entertainment distribution
Theatrical distribution
Other
Total revenues
Operating expenses
Selling, general, administrative and other
Depreciation and amortization
Equity in the loss of investees
Operating Income
Revenues - TV/VOD and home entertainment distribution
The increase in TV/VOD and home entertainment distribution revenue was primarily due to higher TV/VOD sales of episodic content and an increase in home entertainment distribution revenue. The increase in home entertainment distribution revenue was due to higher electronic distribution revenue, partially offset by a decrease in physical distribution revenue attributable to a shift to licensing physical distribution rights.
Revenues - Theatrical distribution
The increase in theatrical distribution revenue was due to more releases in the current year compared to the prior year. Titles in the current year included Moana 2 , Lilo & Stitch , Mufasa: The Lion King , The Fantastic Four: First Steps , Captain
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America: Brave New World , Thunderbolts* and Snow White compared to Inside Out 2, Deadpool & Wolverine , Kingdom of the Planet of the Apes , Alien: Romulus, Wish and The Marvels in the prior year.
Revenues - Other
Other revenue was comparable to the prior year as lower revenue from stage plays as a result of fewer performances was partially offset by a favorable Foreign Exchange Impact, higher music revenue and increased revenue from Lucasfilm’s special effects business driven by more projects.
Operating expenses
($ in millions)
% Change
Better (Worse)
Programming and production costs
Other operating expenses
The increase in programming and production costs was due to higher production cost amortization attributable to the increases in distribution revenues, partially offset by lower film cost impairments and fewer stage play performances.
The decrease in other operating expenses reflected lower distribution costs and costs of goods sold due to the shift to licensing physical home entertainment distribution rights.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $638 million, to $2,746 million from $2,108 million, primarily due to higher theatrical marketing costs.
Operating Income from Content Sales/Licensing and Other
Operating income increased $64 million, to $392 million from $328 million due to lower film cost impairments and higher TV/VOD and home entertainment distribution results, partially offset by a decrease in theatrical distribution results.
Items Excluded from Segment Operating Income Related to Entertainment
The following table presents supplemental information for items related to Entertainment that are excluded from segment operating income:
($ in millions)
% Change Better (Worse)
TFCF and Hulu acquisition amortization (1)
Restructuring and impairment charges (2)
(1) In fiscal 2025, amortization of step-up on film and television costs was $260 million and amortization of intangible assets was $1,004 million. In fiscal 2024, amortization of step-up on film and television costs was $271 million and amortization of intangible assets was $1,054 million.
(2) Fiscal 2025 includes $635 million for impairments of equity investments and $109 million for content impairments. Fiscal 2024 includes $1,287 million for goodwill impairments related to our general entertainment linear networks, $187 million for content impairments, $158 million for impairment of an equity investment and $38 million of severance.
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Sports
Operating results for the Sports segment are as follows:
($ in millions)
% Change
Better (Worse)
Revenues
Affiliate and subscription fees
Advertising
Other
Total revenues
Operating expenses
Selling, general, administrative and other
Depreciation and amortization
Equity in the income of investees
Operating Income
Revenues - Affiliate and subscription fees
($ in millions)
% Change
Better (Worse)
ESPN
Domestic
International
Star India
Domestic ESPN affiliate and subscription fees were comparable to the prior year as an increase of 7% from higher effective rates was offset by a decrease of 7% from fewer subscribers.
International ESPN affiliate fees reflected higher effective rates, partially offset by decreases from an unfavorable Foreign Exchange Impact and fewer subscribers.
The decrease in Star India affiliate fees was due to the Star India Transaction.
Revenues - Advertising
($ in millions)
% Change
Better (Worse)
ESPN
Domestic
International
Star India
The increase in domestic ESPN advertising revenue was due to an increase of 13% from higher rates. The increase in advertising revenue included the benefit of expanded college football programming including four additional College Football Playoff (CFP) games.
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Revenues - Other
Other revenue increased $121 million, to $1,284 million from $1,163 million, due to higher fees received from the Entertainment segment to program sports content on Disney+ and ABC. Sub-licensing fees were comparable to the prior year as the comparison to fees from Star India sub-licensing of ICC programming in the prior year was offset by fees from sub-licensing CFP programming rights for two games in the current year.
Operating expenses
($ in millions)
% Change
Better (Worse)
Programming and production costs
ESPN
Domestic
International
Star India
Other operating expenses
Domestic ESPN programming and production costs increased primarily due to expanded college football programming rights and contractual rate increases.
The increase in international ESPN programming and production costs was attributable to higher soccer rights costs.
The increase in other operating expense was attributable to higher technology costs.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $33 million, to $1,331 million from $1,298 million, due to higher marketing costs and the write-off of an investment, partially offset by the Star India Transaction. The increase in marketing costs was driven by the August 2025 launch of the ESPN DTC service.
Operating Income from Sports
Segment operating income increased $476 million, to $2,882 million from $2,406 million, due to the Star India Transaction and an improvement at international ESPN, partially offset by a decrease at domestic ESPN.
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Supplemental revenue and operating income
The following table provides supplemental revenue and operating income (loss) detail for the Sports segment:
($ in millions)
% Change
Better (Worse)
Supplemental revenue detail
ESPN
Domestic
International
Star India
Supplemental operating income (loss) detail
ESPN
Domestic
International
Star India
Equity in the income of investees
Items Excluded from Segment Operating Income Related to Sports
The following table presents supplemental information for items related to Sports that are excluded from segment operating income:
($ in millions)
% Change
Better (Worse)
TFCF acquisition amortization (1)
Restructuring and impairment charges
(1) Represents amortization of intangible assets.
Experiences
Operating results for the Experiences segment are as follows:
($ in millions)
% Change
Better (Worse)
Revenues
Theme park admissions
Resorts and vacations
Parks & Experiences merchandise, food and beverage
Merchandise licensing and retail
Parks licensing and other
Total revenues
Operating expenses
Selling, general, administrative and other
Depreciation and amortization
Operating Income
Revenues - Theme park admissions
The increase in theme park admissions revenue was due to an increase of 4% from higher average per capita ticket revenue.
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Revenues - Resorts and vacations
Growth in resorts and vacations revenue was primarily attributable to increases of 5% from additional passenger cruise days, 2% from higher occupied hotel room nights and 1% from increased unit sales at Disney Vacation Club. The increase in passenger cruise days reflected the launch of the Disney Treasure in the first quarter of the current year.
Revenues - Parks & Experiences merchandise, food and beverage
Parks & Experiences merchandise, food and beverage revenue growth was primarily due to increases of 3% from higher average guest spending and 1% from volume growth.
Revenues - Merchandise licensing and retail
Higher merchandise licensing and retail revenue was due to an increase of 3% from merchandise licensing, partially offset by a decrease of 1% from an unfavorable Foreign Exchange Impact.
Revenues - Parks licensing and other
The increase in parks licensing and other revenue was driven by sponsorship and co-branding revenue growth, higher real estate sales and an increase in royalties from Tokyo Disney Resort, partially offset by an unfavorable Foreign Exchange Impact.
Key Metrics
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business :
Domestic
International (1)
Parks
Increase (decrease)
Attendance (2)
Per Capita Guest Spending (3)
Hotels
Occupancy (4)
Available Room Nights (in thousands) (5)
Change in Per Room Guest Spending (6)
(1) Per capita guest spending growth rate and per room guest spending growth rate exclude the impact of changes in foreign currency exchange rates.
(2) Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes complimentary entries but excludes entries by children under the age of three.
(3) Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.
(4) Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.
(5) Available hotel room nights are defined as the total number of room nights that are available at our hotels and at DVC properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service.
(6) Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights.
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Operating expenses
($ in millions)
% Change Better (Worse)
Operating labor
Infrastructure costs
Cost of goods sold and distribution costs
Other operating expenses
The increase in operating labor was due to inflation, new guest offerings and higher volumes. Higher infrastructure costs were primarily attributable to higher technology spending, new guest offerings and an increase in operations support costs, partially offset by cost management initiatives. The increase in other operating expenses was primarily attributable to new guest offerings, higher volumes and increased operations support costs, partially offset by cost management initiatives.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $170 million from $3,944 million to $4,114 million, primarily due to higher marketing costs.
Depreciation and amortization
Depreciation and amortization increased $244 million from $2,579 million to $2,823 million, primarily due to higher depreciation at our domestic parks and experiences driven by an increase at Disney Cruise Line.
Operating Income from Experiences
Segment operating income increased $723 million, from $9,272 million to $9,995 million due to growth at domestic parks and experiences and, to a lesser extent, consumer products and international parks and experiences.
Supplemental revenue and operating income
The following table presents supplemental revenue and operating income detail for the Experiences segment:
($ in millions)
% Change
Better (Worse)
Supplemental revenue detail
Parks & Experiences
Domestic
International
Consumer Products
Supplemental operating income detail
Parks & Experiences
Domestic
International
Consumer Products
Items Excluded from Segment Operating Income Related to Experiences
The following table presents supplemental information for items related to Experiences that are excluded from segment operating income:
($ in millions)
% Change
Better (Worse)
TFCF acquisition amortization
Restructuring and impairment charges (1)
Charge related to a legal ruling
(1) Charges for the prior year were due to an impairment of assets at our retail business.
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CORPORATE AND UNALLOCATED SHARED EXPENSES
Corporate and unallocated shared expenses are as follows:
($ in millions)
% Change
Better (Worse)
Corporate and unallocated shared expenses
The increase in corporate and unallocated shared expenses was primarily due to legal settlements, higher compensation and human resource-related costs, partially offset by a gain on a land sale.
LIQUIDITY AND CAPITAL RESOURCES
The change in cash, cash equivalents and restricted cash is as follows:
($ in millions)
Cash provided by operations
Cash used in investing activities
Cash used in financing activities
Impact of exchange rates on cash, cash equivalents and restricted cash
Change in cash, cash equivalents and restricted cash
Operating Activities
Cash provided by operations increased 30% or $4.1 billion to $18.1 billion in the current year compared to $14.0 billion in the prior year. The increase was due to lower tax payments in the current year compared to the prior year and higher operating cash flows at Entertainment and, to a lesser extent, Experiences. Tax payments in the prior year reflected the payment of fiscal 2023 U.S. federal and California state income taxes that had been deferred pursuant to relief related to 2023 winter storms in California. In addition, payments for fiscal 2025 U.S. federal and California state income tax liabilities were deferred until October 2025 pursuant to relief related to the 2025 wildfires in California. The increase in operating cash flows at Entertainment was primarily due to higher cash receipts, primarily attributable to higher revenue, and to a lesser extent, lower spending on content due to the impact of the Star India Transaction, partially offset by higher operating cash disbursements attributable to higher operating expenses. The increase in operating cash flows at Experiences was due to higher cash receipts attributable to higher revenue, partially offset by higher operating cash disbursements primarily due to higher operating expenses.
Depreciation expense is as follows:
($ in millions)
Entertainment
Sports
Experiences
Domestic
International
Total Experiences
Corporate
Total depreciation expense
Amortization of intangible assets is as follows:
($ in millions)
Entertainment
Experiences
TFCF and Hulu
Total amortization of intangible assets
Produced and licensed content costs
The Entertainment and Sports segments incur costs to produce and license film, episodic, sports and other content. Production costs include spend on content internally produced at our studios such as live-action and animated films and
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episodic series. Production costs also include original content commissioned from third-party studios. Programming costs include content rights licensed from third parties for use on the Company’s sports and general entertainment networks and DTC streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.
The Company’s production and programming activity for fiscal 2025 and 2024 are as follows:
($ in millions)
Beginning balances:
Production and programming assets
Programming liabilities
Spending:
Licensed programming and rights
Produced content
Amortization:
Licensed programming and rights
Produced content
Change in production and programming costs
Content impairment
Produced and licensed content reclassified to assets held for sale
Other non-cash activity
Ending balances:
Production and programming assets
Programming liabilities
The Company currently expects its fiscal 2026 spend on produced and licensed content to be approximately $24 billion including sports rights. See Note 14 to the Consolidated Financial Statements for information regarding the Company’s contractual commitments to acquire sports and broadcast programming.
Commitments and guarantees
The Company has various commitments and guarantees, such as long-term leases, purchase commitments and other executory contracts, that are disclosed in the footnotes to the financial statements. See Notes 14 and 15 to the Consolidated Financial Statements for further information regarding these commitments.
Legal and Tax Matters
As disclosed in Notes 9 and 14 to the Consolidated Financial Statements, the Company has exposure for certain tax and legal matters.
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Investing Activities
Investing activities, which consist principally of investments in parks, resorts and other property and acquisition and divestiture activity, for fiscal 2025 and 2024 are as follows:
($ in millions)
Entertainment
Sports
Experiences
Domestic
International
Total Experiences
Corporate
Total investments in parks, resorts and other property
Cash used in other investing activities, net
Cash used in investing activities
Investments in Parks, Resorts and Other Property
Capital expenditures at Entertainment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.
Capital expenditures at Experiences are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure. The increase in capital expenditures in fiscal 2025 compared to fiscal 2024 was due to higher spending on cruise ship fleet expansion, theme park and resort expansion and new attractions.
Capital expenditures at Corporate primarily reflect investments in facilities, information technology infrastructure and equipment. The decrease in fiscal 2025 compared to fiscal 2024 was due to lower spending on facilities.
The Company currently expects its fiscal 2026 capital expenditures to total approximately $9 billion compared to fiscal 2025 capital expenditures of $8 billion. The projected increase in capital expenditures is primarily due to higher spending at Experiences, attributable to theme park and resort expansion and new attractions, partially offset by lower spending on cruise ship fleet expansion.
Other Investing Activities
Cash used in other investing activities was $1.5 billion in fiscal 2024 reflecting an investment in Epic Games, Inc.
Financing Activities
Financing activities for fiscal 2025 and 2024 are as follows:
($ in millions)
Change in borrowings
Dividends
Repurchases of common stock
Activities related to noncontrolling and redeemable noncontrolling interests (1)
Cash used in other financing activities, net (2)
Cash used in financing activities
(1) Activities related to noncontrolling and redeemable noncontrolling interests in the current year were due to $0.6 billion of dividend payments to noncontrolling interest holders and $0.4 billion related to an incremental amount paid by the Company for Hulu based on the final appraisal of Hulu’s fair value. Activities in the prior year were due to an $8.6 billion payment for Hulu’s redeemable noncontrolling interest and $0.5 billion of dividend payments to noncontrolling interest holders (see Note 4 to the Consolidated Financial Statements for additional information on Hulu).
(2) Primarily consists of equity award activity.
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Borrowings activities and other
During the year ended September 27, 2025, the Company’s borrowing activity was as follows:
($ in millions)
September 28, 2024
Borrowings
Payments
Other
Activity
September 27, 2025
Commercial paper with original maturities less than three months (1)
Commercial paper with original maturities greater than three months
U.S. dollar denominated notes (2)
Asia Theme Parks borrowings (3)
Foreign currency denominated debt and other (4)
(1) Borrowings and reductions of borrowings are reported net.
(2) The other activity is primarily due to the amortization of purchase accounting adjustments and debt issuance fees.
(3) See Note 6 to the Consolidated Financial Statements for information regarding commitments to fund the Asia Theme Parks.
(4) The other activity is attributable to market value adjustments for debt with qualifying hedges.
See Note 8 to the Consolidated Financial Statements for a summary of the Company’s borrowing activities in fiscal 2025 and information regarding the Company’s bank facilities. The Company may use cash balances, operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities and incremental term debt issuances to retire or refinance other borrowings before or as they come due.
See Note 11 to the Consolidated Financial Statements for a summary of dividends and share repurchases in fiscal 2025 and 2024. On November 13, 2025, the Company declared a dividend of $1.50 per share (or approximately $2.6 billion), payable in two semi-annual installments of $0.75 per share on January 15, 2026 and July 22, 2026. The Company is targeting a total of $7 billion in share repurchases in fiscal 2026.
The redeemable noncontrolling interest activity in the current and prior year was attributable to the acquisition of NBCU’s interest in Hulu. In June 2025, the Company paid an incremental amount for Hulu based on a final appraisal of Hulu’s fair value (see Note 4 to the Consolidated Financial Statements).
The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control. We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, contractual obligations, upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects. In addition, the Company could undertake other measures to ensure sufficient liquidity, such as raising additional financing, reducing or not declaring future dividends; reducing or stopping share repurchases; reducing capital spending; reducing film and episodic content investments; or implementing further cost-saving initiatives.
The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios. As of September 27, 2025, Moody’s Ratings’ long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, and S&P Global Ratings’ long- and short-term debt ratings for the Company were A and A-1 (Stable). On September 29, 2025, Fitch Ratings’ affirmed the long- and short-term debt ratings for the Company of A- and F2 (Stable), respectively, withdrew the debt ratings for commercial reasons and will no longer provide ratings for the Company. The Company’s bank facilities contain only one financial covenant, relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On September 27, 2025, the Company met this covenant by a significant margin. The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.
TRENDS AND UNCERTAINTIES
To drive growth at our sports and entertainment businesses, we are, among other things, making strategic investments in our DTC offerings. Although there can be no assurances these investments will be successful, we expect that they will lead to growth in subscription fees and advertising revenues that will more than offset impacts on affiliate fees and advertising revenue from declines in linear network subscribers and the related decrease in average viewership, which we expect will continue.
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In addition, the future effects of evolving macroeconomic, trade and travel conditions, including as a result of evolving international political developments, trade policies and consumer spending dynamics are unknown and, depending on how these conditions develop, could adversely affect demand for and availability of our products and services, increase our costs to provide products and services and have a negative impact on our results of operations.
See also Item 1A - Risk Factors.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements.
Produced and Acquired/Licensed Content Costs
We amortize and test for impairment capitalized film and television production costs based on whether the content is predominantly monetized individually or as a group. See Note 2 to the Consolidated Financial Statements for further discussion.
Production costs that are classified as individual are amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues).
With respect to produced films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical release are generally highly correlated with theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.
With respect to capitalized television production costs that are classified as individual, the most sensitive factor affecting estimates of Ultimate Revenues is program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.
Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.
Production costs classified as individual are tested for impairment at the individual title level by comparing that title’s unamortized costs to the present value of discounted cash flows directly attributable to the title. To the extent the title’s unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess.
Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage, typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgment and is reviewed on a regular basis for changes. Adjustments to projected usage are applied prospectively in the period of the change. Historical viewing patterns are the most significant input into determining the projected usage, and significant judgment is required in using historical viewing patterns to derive projected usage. If projected usage changes we may need to accelerate or slow the recognition of amortization expense.
Cost of content that is predominantly monetized as a group is tested for impairment whenever events or changes in circumstances indicate that the fair value of the group may be less than its unamortized costs by comparing the present value of the discounted cash flows of the group to the aggregate unamortized costs of the group. The group is established by identifying the lowest level for which cash flows are independent of the cash flows of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its estimated fair value. Licensed content is included as part of the group within which it is monetized for purposes of impairment testing.
The amortization of multi-year sports rights is based on projections of revenues for each season relative to projections of total revenues over the contract period (estimated relative value). Projected revenues include advertising revenue and an allocation of affiliate revenue. If the annual contractual payments related to each season approximate each season’s estimated
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relative value, we expense the related contractual payments during the applicable season. If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.
Revenue Recognition
The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer to Note 2 to the Consolidated Financial Statements for our revenue recognition policies.
Pension and Postretirement Medical Plan Actuarial Assumptions
The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.
The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. We increased our discount rate to 5.45% at the end of fiscal 2025 from 5.06 % at the end of fiscal 2024 to reflect market interest rate conditions at our fiscal 2025 year-end measurement date. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves. A one percentage point decrease in the assumed discount rate would increase total benefit expense for fiscal 2026 by approximately $0.1 billion and would increase the projected benefit obligation at September 27, 2025 by approximately $2.1 billion. A one percentage point increase in the assumed discount rate would have a negligible impact on total benefit expense and decrease the projected benefit obligation by approximately $1.9 billion.
To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Our expected return on plan assets is 7.25%. A lower expected rate of return on plan assets will increase pension and postretirement medical expense. A one percentage point change in the long-term asset return assumption would impact fiscal 2026 annual expense by approximately $ 177 million.
Goodwill, Other Intangible Assets, Long-Lived Assets and Investments
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.
The quantitative assessment compares the fair value of each reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.
The impairment test for goodwill requires judgment related to the identification of reporting units, determining whether reporting units should be aggregated, the assignment of assets and liabilities including goodwill to reporting units, and the determination of fair value of the reporting units.
When performing a quantitative assessment, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate to determine the fair value of our reporting units. The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value. Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections. Discount rates are determined based on the inherent risks of the underlying operations.
Significant judgments and assumptions in the discounted cash flow model used to determine fair value relate to future revenues and certain operating expenses, operating margins, terminal growth rates and discount rates. We believe our estimates are consistent with how a marketplace participant would value our businesses. Changes to these assumptions and shifts in market trends or macroeconomic events could impact test results in the future.
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In fiscal 2025, the Company performed a qualitative assessment of goodwill for impairment. Based on this assessment, we concluded that it was more likely than not that the estimated fair values of our reporting units were higher than their carrying values and that the performance of a quantitative impairment test was not required.
As discussed in Note 18 to the Consolidated Financial Statements, in fiscal 2024, the Company recorded non-cash goodwill impairment charges of $1.3 billion related to our entertainment linear networks reporting unit.
To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment is recognized for the difference. Determining whether a long-lived asset is requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.
As discussed in Note 4 to the Consolidated Financial Statements, the Company recorded non-cash impairment charges of $0.1 billion and $1.5 billion related to the Star India Transaction in fiscal 2025 and 2024, respectively, to reflect Star India at its estimated fair value less costs to sell.
The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.
The Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $0.8 billion and $0.7 billion in fiscal 2025 and 2024, respectively. The fiscal 2025 charges related to impairments of equity investments and content assets. The fiscal 2024 charges related to impairments of retail assets, content assets and equity investments. See Note 18 to the Consolidated Financial Statements for additional information.
Allowance for Credit Losses
We evaluate our allowance for credit losses and estimate collectability of accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods. See Note 2 to the Consolidated Financial Statements for additional discussion.
Contingencies and Litigation
We are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our
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assumptions regarding other contingent matters. See Note 14 to the Consolidated Financial Statements for more information on litigation exposure.
Income Tax
As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities. See Note 9 to the Consolidated Financial Statements for additional discussion.
New Accounting Pronouncements
See Note 19 to the Consolidated Financial Statements for information regarding new accounting pronouncements.
ENTERTAINMENT DTC PRODUCT DESCRIPTIONS AND KEY DEFINITIONS
Entertainment DTC Product Offerings
In the U.S., Disney+ and Hulu SVOD Only are each offered as a standalone service or as part of various bundled offerings, which may include one of the ESPN DTC plans. Hulu Live TV + SVOD includes Disney+ and ESPN Select. Disney+ is available in more than 150 countries and territories outside the U.S. Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.
Paid Subscribers for Entertainment DTC services
Paid subscribers for Entertainment DTC services reflect subscribers for which we recognized subscription revenue. Certain product offerings provide the option for an extra member to be added to an account (extra member add-on). These extra members are not counted as paid subscribers. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to bundled offerings in the U.S. are counted as a paid subscriber for each of the Company's services included in the bundled offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD and Disney+ services. Subscribers include those who receive an entitlement to a service through wholesale arrangements, including those for which the service is available to each subscriber of an existing content distribution tier. When we aggregate the total number of paid subscribers across our Entertainment DTC streaming services, we refer to them as paid subscriptions.
International Disney+
International Disney+ includes the Disney+ service outside the U.S. and Canada.
Average Monthly Revenue Per Paid Subscriber for Entertainment DTC services
Hulu average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses), premium and feature add-on revenue and extra member add-on revenue. Advertising revenue generated by content on one DTC streaming service that is accessed through another DTC streaming service by subscribers to both streaming services is allocated between both streaming services. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN Select bundled offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
On March 20, 2019, as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November
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26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).
Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at September 27, 2025 was as follows:
TWDC
Legacy Disney
($ in millions)
Par Value
Carrying Value
Par Value
Carrying Value
Registered debt with unconditional guarantee
The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.
Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.
Set forth below are summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor. This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S. GAAP.
Results of operations ($ in millions)
Revenues
Costs and expenses
Net income (loss)
Net income (loss) attributable to TWDC shareholders
Balance Sheet ($ in millions)
September 27, 2025
September 28, 2024
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities (excluding intercompany to non-Guarantors)
Intercompany payables to non-Guarantors
