We previewed Disney's Q2 print yesterday under a single framing question: would streaming margins finally clear the 10% threshold the company has spent eighteen months promising the buy side? On Wednesday morning, the answer was yes, and by a comfortable margin. Disney's fiscal second-quarter results, released ahead of the open, showed Disney+ and Hulu combined revenue up 13% to $5.49 billion and operating income up 88% year-over-year to $582 million — for an operating margin of 10.6% and the first quarter the entertainment streaming business has cleared double digits. CEO Josh D'Amaro, in his first quarterly print since taking over from Iger, told investors the company remains on track to hit at least 10% for full-year fiscal 2026.
The total numbers cleared the bar comfortably. Revenue rose 7% to $25.17 billion, beating the Street's $24.78 billion. Adjusted EPS came in at $1.57, up 8% year-over-year and ahead of the $1.50 consensus, according to CNBC. GAAP net income fell 31% to $2.25 billion, but the dive there is a tax-rate story rather than an operating-business story; the underlying segments performed.
The Experiences segment — theme parks, cruises, consumer products — delivered fiscal Q2 records. Revenue hit $9.5 billion, up 7%. Operating income reached $2.6 billion, up 5%. Both are the strongest second-quarter prints in the segment's history. But under the headline, the data is more nuanced and more consequential for retailers selling licensed product, vacation packages, and travel-adjacent goods. Domestic park attendance declined 1% in the quarter, and Disney attributed the slip to "continued softness in international visitation" at U.S. parks. Per-guest spending rose enough to push revenue up despite that drop, but a year ago Disney was solving for "how do we keep packing the gates?" Now it's solving for "how do we keep extracting more from each guest who walks through them?"
That's the consumer-products read-through worth flagging. Disney's licensing business — everything from Lego sets at Walmart to Mickey-branded apparel at Target to character merchandise inside Disney Stores and at theme-park retail — is leveraged to two variables: park footfall and content velocity. Footfall is softening. Content velocity is the bet D'Amaro has to land. Two of the three big 2026 theatrical releases haven't hit yet. The streaming bundles that drive subscriber growth into late summer are tied to live-sports rights renewals that Disney is in the middle of negotiating.
ESPN is where the Q3 caution came from. Disney guided ESPN's fiscal Q3 operating income to fall 14% year-over-year on a double-digit increase in programming expenses, including the timing of new rights agreements. ESPN's direct-to-consumer app, which launched last August, continues to outpace internal projections — the digital subscriber revenue more than offsets traditional cable bundle declines for the first time in any reporting period — but the rights-cost step-up is real and Wall Street will spend Wednesday's call drilling into it.
Forward guidance for the June quarter is bullish. Total segment operating income is expected at approximately $5.3 billion, which would mark a 16% year-over-year increase. Investors had been bracing for a parks-led deceleration after Universal opened Epic Universe last spring; Disney is essentially telling the market that competitive park pressure hasn't shown up in its numbers yet.
For the retail industry watching this print specifically — and Mike Santos has been arguing for months that Disney's earnings are now a leading indicator for the discretionary consumer-products complex — there are two takeaways. First, the high-end consumer Disney serves is still showing up, paying more, and absorbing price. Per-guest spending growth at the parks is a clean signal that the upper-tier consumer is intact, which lines up with Bank of America's April Consumer Checkpoint showing card spending growth concentrated in higher-income households. Second, the volume side of the discretionary consumer is softer. The 1% domestic park attendance decline is small. But it is a decline. And in a quarter where Disney is also flagging "continued softness in international visitation," the pattern is consistent with the broader retail traffic data: fewer trips, larger baskets, more expensive tickets. The math works for now. It works less well in a recession.
D'Amaro's first earnings call lands at 8:30 a.m. ET. The headline he'll be selling: streaming is now profitable enough to fund the parks reinvestment. The question he'll be answering: whether the parks reinvestment is still a growth story or is now a moat-defense story.