The Walt Disney Company (NYSE: DIS) delivered a Q3 that was stronger than the headline numbers suggest. Adjusted EPS of $2.06 beat the $1.86 consensus by nearly 11% and rose 28% from $1.61 a year ago. Revenue came in at $25.2 billion, up 7% from $23.7 billion, though slightly below the $25.4 billion estimate. The beat was driven by a 21% jump in total segment operating income to $5.6 billion, with the Experiences and Entertainment segments carrying the load.
GAAP EPS of $1.51 was down 48% from $2.92. That comparison is distorted by an $812 million impairment on Disney's 50% stake in A+E Global Media, taken in the current quarter, versus a $3.3 billion non-cash tax benefit in the prior-year period from the Hulu transaction. Excluding those items, the underlying business is accelerating.
Experiences segment revenue grew 10% to $9.97 billion, with domestic parks leading at 11% growth. Operating income for the segment rose 20% to $3.0 billion, though roughly four percentage points of that growth came from a one-time $100 million tariff refund. The core operating story is still strong: domestic parks per capita spending rose 4%, attendance grew 3%, and the Disney Cruise Line expansion added roughly 50% more stateroom capacity year-over-year. International parks were a drag, with operating income down 13%, and management expects continued softness in Asia during Q4.
Entertainment segment operating income surged 64% to $1.68 billion, driven by a 12% increase in subscription and affiliate fees. The SVOD business within Entertainment posted operating income of $712 million, more than double the $329 million a year ago, as subscription revenue grew 15% on both rate and volume. Advertising revenue was a mixed bag: Entertainment SVOD ad revenue rose just 3%, held back by a softer demand environment, while linear network ad revenue fell 1%. The company reiterated its expectation for double-digit SVOD operating margins for the full year, excluding the 53rd week.
Sports segment operating income fell 17% to $858 million, steeper than the 14% decline management had guided. The culprit was a combination of four-game sweeps in early NBA playoff rounds, which compressed the number of games aired, and a network carriage dispute. Programming and production costs rose 10% on contractual rate increases and new rights costs, partially offset by the absence of UFC rights that expired in December 2025. The NBA contract renewal also shifted cost recognition from the first half into Q3, a timing effect that should normalize in Q4.
Capital allocation was a major focus. Disney raised its full-year share repurchase target to at least $9 billion, up from prior guidance, aided by the expected $1.2 billion in proceeds from the sale of its A+E stake. The company has already spent $7.2 billion on buybacks in the first nine months, a pace that signals management's conviction that shares are undervalued. The buyback is aggressive given that free cash flow for the nine-month period was $5.7 billion, down 24% from $7.5 billion a year ago, though Q3 free cash flow alone more than doubled to $3.1 billion.
Guidance was largely reiterated. Management still expects full-year adjusted EPS growth of approximately 12% excluding the 53rd week, and 16% including it. Q4 total segment operating income is expected at $4.9 billion, which includes roughly $600 million from the 53rd week. The company noted that Experiences segment operating income should come in at the high end of prior high-single-digit growth guidance for the year, while Sports is still expected to grow mid-single digits. The one cautionary note: Q4 Entertainment results will reflect Moana's box office underperformance and a softer advertising environment.
The forward read from this print is that Disney's core profit engines are firing on multiple cylinders. Experiences is benefiting from cruise expansion and resilient domestic demand, while streaming is finally delivering meaningful operating leverage. The Sports segment's Q3 weakness looks more like a scheduling and dispute-driven blip than a structural issue, given record viewership for the NBA and NHL playoffs on ESPN networks. The real question for the back half is whether the advertising headwinds in SVOD and linear persist, and whether the buyback pace can be sustained without crimping investment capacity.