Disney Isn't Thinking In Basis Points Anymore — It Wants Margins In 'Chunks'

Core Insights - The CEO of Walt Disney Co, Bob Iger, emphasized the company's focus on streaming, sports, and studio momentum during the third quarter earnings call, while CFO Hugh Johnston highlighted a shift in strategy towards significant margin gains rather than incremental efficiencies [1][3][4]. Financial Performance and Strategy - Disney's Direct-to-Consumer (DTC) business is projected to grow at double-digit rates, with expected operating leverage driving profitability rather than cost-cutting measures [3][4]. - The company is moving away from relying on financial engineering for margin improvement, indicating a more sustainable growth strategy based on revenue growth, product upgrades, and bundle economics [4][5]. Long-term Outlook - Johnston indicated that margin expansion is expected to continue beyond fiscal 2026, positioning Disney's DTC segment as a significant growth driver for the future [5]. - The company reported an 80% adoption rate of the Trio bundle and noted improvements in advertising CPMs and the performance of the ESPN app, which supports their confidence in platform scale [5]. Investor Implications - The shift in strategy suggests that margin expansion will occur in larger increments rather than gradually, which could lead to a more favorable outlook for Disney's stock performance [6]. - If the company achieves even a portion of the anticipated margin gains, it could signify a new chapter for Disney, characterized by operating leverage rather than previous challenges [6].