Disney added $1.6B of revenue in three months. It also saw net income shrink by $2.7B, a scale comparison that underscores the split between revenue and net income.
Revenue rose 6.8% to $25.2B in the three months ended June 27, while operating income climbed 21.4% to $5.6B. The operating margin reached 22.0%, up from 19.3% a year earlier.
Then the numbers take a sharp turn. Net income fell 49.9% to $2.6B, pulling net margin down to 10.4% from 22.2%. Diluted EPS fell 48.3% to $1.51, despite a 3.4% decline in diluted shares.
The operating improvement was not free of extra costs. Disney said new guest offerings, higher volumes, and inflation pushed other operating expense higher. Selling, general, and administrative costs also rose by $119M, primarily because of new guest offerings and inflation.
"Higher other operating expense was primarily due to new guest offerings, volume growth and inflation."
Disney, Form 10-Q, August 5, 2026
That is the basic operating trade: more revenue and a wider operating margin, alongside a larger expense base. Disney doesn't say in the supplied filing digest why the improvement at the operating line did not carry through to net income.
One disclosed factor did help the operating margin: lower cost of goods sold and distribution costs, partly because of tariff refunds. The refund is a concrete contributor to the margin comparison, rather than a general claim that every part of the business suddenly became more profitable.
"The decrease in cost of goods sold and distribution costs was due to tariff refunds, partially offset by volume growth and inflation."
Disney, Form 10-Q, August 5, 2026
The cash numbers add another layer. Cash ended at $5.2B, down 3.4% from the comparable period, while inventory was unchanged at $2.1B. Capital spending rose 11.0% year over year, and free-cash-flow margin declined by 2.9 percentage points.
So Disney's latest three-month period shows a business keeping more of each revenue dollar at the operating line, while net margin and free-cash-flow margin declined. The stock closed at $98.16 on August 4, unchanged on the day, with no supplied evidence tying that price to the report.
The company's annual results provide some longer perspective: revenue reached $94.4B in fiscal 2025, while operating margin reached 18.6%. The latest 22.0% quarterly operating margin is above that annual figure, but the current period also includes the disclosed tariff refund and higher spending on guest offerings.
Disney's next quarterly report will clarify whether net income and free-cash-flow margin moved closer to the operating result after this period's tariff refund and investment load. Disney made more money operationally, but less money overall.
Source: The Walt Disney Company's Form 10-Q filed August 5, 2026, for the three months ended June 27, 2026.