Good morning. It's my pleasure to welcome everyone to The Walt Disney Company's Third Quarter 2025 Earnings Call. Our press release, Form 10-Q and management's posted prepared remarks were issued earlier this morning and are available on our website at www.disney.com/investors. Today's call is being webcast, and a replay and transcript will be made available on our website after the call. Before we begin, please take note of our cautionary statement regarding forward-looking statements on our IR website. Today's call may include forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including regarding the company's future business plans, prospects and financial performance are not historical in nature and are based on management's assumptions regarding the future and are subject to risks and uncertainties, including, among other factors, economic, geopolitical, operating and industry conditions, competition, execution risks, the market for advertising, our future financial performance and legal and regulatory developments. Refer to our IR website, the press release issued today and the risks and uncertainties described in our Form 10-K, Form 10-Q and other filings with the SEC for more information concerning factors and risks that could cause results to differ from those in the forward-looking statements. A reconciliation of certain non-GAAP measures referred to on this call to the most comparable GAAP measures can be found on our IR website. Joining me this morning are Bob Iger, Disney's Chief Executive Officer; and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. Following introductory remarks from Bob, we will be happy to take your questions. So with that, I will now turn the call over to Bob.

Thank you, Carlos, and good morning, everyone. Before we take your questions, I'd like to share some updates related to our strategic priorities, including a few exciting announcements. At a time of great change for our industry when a number of companies are contracting, we are operating from a position of strength and building across our company with a continued focus on quality and innovation. We are building on the creative success at our film studios, resulting in the continued emergence of popular new franchises at a level that is unparalleled in the industry. We are building on Disney's value proposition in streaming by combining Hulu into Disney+ to create a unified app experience featuring branded and general entertainment, news and sports, resulting in a one-of-a-kind entertainment destination for subscribers. We are building ESPN into the preeminent digital sports platform with our highly anticipated direct-to-consumer sports offering launching on August 21 and our just announced plans with the NFL that will expand ESPN's programming and content offerings for fans. We're building on our best-in-class Parks and Experiences businesses with more expansions underway around the world than at any other time in our history. I'd like to dive deeper into the steps we're taking to drive growth for our company, beginning with our film studios. Our renewed momentum continued in Q3, adding to our popular brands and franchises and further demonstrating their ability to generate ongoing long-term value across our businesses. The live-action Lilo & Stitch recently crossed the $1 billion mark at the worldwide box office, making it Hollywood's first film to reach that milestone this year and Disney's fourth billion-dollar film in just over a year. Lilo & Stitch is on track to become the company's second largest consumer products merchandise franchise this year behind only Mickey Mouse with more than 70% revenue growth compared to last year. Meanwhile, Marvel's The Fantastic Four: First Steps opened to rave reviews 2 weeks ago, successfully launching this important franchise into the Marvel Cinematic Universe. And later in the calendar year, we will release more highly anticipated titles, including Zootopia 2 and Avatar: Fire and Ash. Turning to our streaming business. Today, we are announcing a major step forward in strengthening our streaming offering by fully integrating Hulu into Disney+. This will create an impressive package of entertainment pairing the highest caliber brands and franchises, great general entertainment, kids programming, news and industry-leading live sports content, all in a single app. By creating a differentiated streaming offering, we will be providing subscribers tremendous choice, convenience, quality and enhanced personalization, while at the same time, continuing to grow profitability and margins in our entertainment streaming business through expected higher engagement, lower churn, operational efficiencies and greater advertising revenue potential. As we detailed in our shareholder letter, Hulu will now become our global general entertainment brand. And in the fall, it will replace the Star tile on Disney+ internationally. Over the coming months, we will be implementing improvements within the Disney+ app, including exciting new features and a more personalized homepage, all of which will culminate with the unified Disney+ and Hulu streaming app experience that will be available to consumers next year. The other key component of our streaming strategy is sports. And on August 21, we will launch ESPN's direct-to-consumer offering, making ESPN's full suite of networks and services directly available to fans for the first time. The enhanced ESPN app will be a sports fan's dream with key new features planned for launch such as multiview, enhanced personalization, integration of stats, betting, fantasy sports and commerce and a personalized sports center. And fans with subscriptions to the Disney+, Hulu and ESPN bundle will be able to watch ESPN content directly inside Disney+. In addition, yesterday, ESPN and the NFL announced plans for ESPN to acquire NFL Network and certain other media assets owned and controlled by the NFL. In exchange, the NFL will receive a 10% equity stake in ESPN. This announcement paves the way for the world's leading sports media brand and America's most popular sport to deliver an even more compelling experience for NFL fans in a way that only ESPN and Disney can. Separately, ESPN and the NFL reached an agreement, which includes expanded NFL highlight rights within multiple fan engagement platforms and more interactive features for ESPN's DTC offering and the ESPN app, including betting and fantasy. ESPN will also gain the ability to sell and bundle NFL+ Premium, which includes NFL RedZone to ESPN DTC subscribers, along with rights to additional nonexclusive preseason NFL games for its DTC offering, both starting in the 2025 season. And an additional agreement extends ESPN's NFL Draft rights with the ability to stream ESPN and ABC's draft coverage on ESPN DTC, Hulu and Disney+. We're also excited to announce that ESPN will be the exclusive home for WWE Premium Live Events, further expanding ESPN's rights portfolio, and we look forward to sharing more soon. Looking to our Experiences segment, expansion projects are underway across every one of our theme parks globally from a new World of Frozen land opening at Disneyland Paris in 2026 to the Villains and Cars-themed areas at Magic Kingdom to a Monsters, Inc. area at Disney's Hollywood Studios to an Avatar-themed destination at Disney California Adventure in addition to a new theme park coming to Abu Dhabi. And Disney Cruise Line continues to grow as we prepare for the launch of 2 new ships later this year, the Disney Destiny and the Disney Adventure, our largest ship ever and the first to be docked in Asia, bringing our fleet to a total of 8 cruise ships operating around the globe. Taken in their totality, our efforts across the entire company reinforce that Disney operates in a league of its own with a robust portfolio of growth businesses that work seamlessly together to generate value, supported by a deep library of beloved IP and enabled with cutting-edge technology. With ambitious plans ahead for all of our businesses, we're not done building, and we remain optimistic about the company's trajectory. And with that, Hugh and I would be happy to take your questions.

Thanks, Bob. As we transition to Q&A, we ask that you please try to limit yourselves to one question in order to help us get to as many questions today as possible. And with that, operator, we are ready for the first question.

Our first question today comes from Ben Swinburne with Morgan Stanley.

A lot of news to digest this morning. Bob, I guess I'd love to hear a little more on the NFL relationship. Clearly, strategically aligning with that league is good for ESPN. I think that's pretty obvious. But you gave up 10% of the network from a value point of view. How does this agreement and the content you're getting help Jimmy grow that business faster? Can you talk a little bit about how you see this playing out in terms of revenue growth, subscriber growth and the benefits you think it means to the business? And I just wanted to check with Hugh, is the '26 guidance that you've given in the past still intact, so double-digit EPS growth and low single-digit growth OI at sports, given all the stuff we learned today?

Ben, there are several aspects of these deals, and I mention deals in the plural because there are two distinct agreements—one for licensing content and another to facilitate the asset exchange. Firstly, the outcome of these agreements will enable ESPN to showcase more NFL games than ever before, with a total of 28 windows for NFL games, up from 22. This is significantly important not just for ESPN, but for the audience as well. We are providing NFL fans more chances to watch games than they have ever had. With the acquisition of the NFL Network, we will not only continue to distribute it through traditional means, but it will also be fully integrated into the ESPN direct-to-consumer app. The seven games featured on the NFL Network will be included in ESPN's direct-to-consumer offerings. This is where the major value will emerge. Additionally, there are several other features and functionalities that will enhance the user experience and deepen fan engagement on the ESPN app. These improvements include seamless integration with fantasy and betting, along with our fantasy businesses, access to stats, the ability to personalize SportsCenter with NFL highlights, and a commerce opportunity to purchase NFL merchandise through the ESPN app. All of these elements collectively provide ESPN the chance to develop a more compelling app. From an economic standpoint, even with the asset exchange and the dividend payment to the NFL from ESPN's earnings, this will be accretive in the first year after closure, which is noteworthy. The revenue from distributing the NFL Network and other NFL assets will clearly boost our revenue and operating income for ESPN. We also expect a potentially lower churn rate for the ESPN app once we launch and include the NFL games. Moreover, there is additional advertising value. There are numerous aspects to this, and it is incredibly exciting. I believe this marks one of the most significant steps ESPN has taken since moving from a half season to a full season of the NFL back in 1987.

Yes. Ben, it's Hugh. Just as a reminder, we try to stay pretty disciplined about doing guidance for the following year on the fourth quarter call. The one thing I would say is given we have the NFL deal and the WWE deal, if we had something of substance in terms of a change to that, we'd be sharing that with you right now. The fact that we're not sharing with that should tell you that we don't see it as materially different. And as Bob noted, we feel great about the NFL deal. It likely won't close until the end of next calendar year, but it will be about $0.05 accretive before purchase accounting. So we certainly feel good about the financials of the deal.

Our next question comes from Robert Fishman at MoffettNathanson.

Bob, can you talk more about how you can accelerate DTC growth by fully integrating Hulu into Disney+ and the related subscriber and advertising revenue opportunities? Just curious also, what does that mean for the future of Hulu as a stand-alone app? And then for Hugh, if I can, just again, back to the guidance, the strong DTC profitability and raised full year guidance that we saw there, any updated thinking to your double-digit margin target there on DTC, especially with the opportunity to take out costs at Hulu now?

I think the way to look at the combination is to start with the consumer. You're going to end up with a far better consumer experience when those apps are combined by combining all of the program assets of both apps, both card apps and obviously, with an improved consumer experience comes the ability to lower churn, which is obviously something that we're very, very focused on and committed to doing. We obviously will deliver efficiencies when these are together. They'll be on one tech stack as, for instance, one tech platform. We already sell the advertising together, but this will give our sales organization a chance to package them far more effectively than they have before. I imagine down the road, it may give us some price elasticity as well that we haven't had before. And it also provides us with a tremendous bundling experience because when you have the one app that has a significant amount of all of the Disney and the other Disney-branded programming with the general entertainment programming bundled, for instance, with the ESPN direct-to-consumer app, I think you end up with a proposition from not only a consumer perspective, but also from our perspective that's far better than what we've had before.

Yes. And Robert, no update on the guidance versus what we've talked about in the past. As I said, we'll talk about '26 guidance on the Q4 call, but no update on DTC at this point.

Our next question comes from Michael Morris at Guggenheim.

So, I know you don't want to talk about '26 yet, but I have to ask, on the Experiences side, your guide for the fourth quarter implies that you'll be exiting the year at a high in terms of operating income growth. So as we look to fiscal '26, can you give us any preview on how to think about any puts or takes with respect to the rate of growth next year that might be informed by the fourth quarter guide? And then secondly, on the stand-alone ESPN app, I think there's a perception and a fear that when you launch an app like this, it's sort of all or nothing with respect to how people sign up. But clearly, you're going to make it available to your pay TV partners as well. So I'm curious if you can talk about your expectations for engagement with the app from people who come from outside the ecosystem like cord cutters versus those inside and how it benefits you to have people who pay for pay TV to also engage with the app.

Let me discuss the plans for 2026. I know you might be surprised, but I’m going to hold off on that conversation until the Q4 call. I do want to mention that we are launching a couple of ships at the end of this year and into next year, which means we will incur launch costs early in the year that will affect our business. As for the engagement with our deals and the ESPN app, we believe it will all be beneficial. Our objective with ESPN is to connect with sports fans in the way they prefer, whether that's through the ESPN app, the Disney+ Hulu app, or cable. We aim to engage them in their preferred environment.

And let me just add to that. If you don't mind, we're asked a lot about linear versus streaming. We're at a point, given the way we're operating our businesses where we don't really look at being in the linear business and the streaming business, we're in the television business. And what we're doing is we're giving our customers or our viewers a chance to watch our programming really, as Hugh just said, wherever they want. If you're watching ABC primetime shows on the linear channel for great through a multi-television provider, fantastic. Or if you want to go to streaming and watch it on the Disney+ and Hulu app, that's fine as well. The same is true for National Geographic, for FX, for the Disney Channel. And that will also be true for ESPN. Now I will say that the features and functionality of the ESPN app will have more on them or in the app than obviously any linear channel can provide. It will really be a sports fan's dream in terms of everything they'll be able to do and watch on that channel. There will also be a far greater volume of sports covered on the ESPN app than is covered on their linear channels. But we are, generally speaking, as a company now operating these businesses completely as one, and that gives us an opportunity to not only run them more efficiently, but to aggregate subscriber fees and advertising revenue across a very, very broad range of television distribution platforms.

And our next question comes from Steven Cahall with Wells Fargo.

So first on Experiences, I think fiscal year-to-date OI is up about 7%, and you raised the guidance to 8%. Hugh, I think on CNBC this morning, you were talking about the strong domestic per caps, which accelerated nicely in the quarter. So could you give us a little color as to what you're seeing in both domestic parks and cruises that's driving some of that acceleration into the fiscal fourth quarter? It sounds like things there are pretty good, but there's always a little bit of economic uncertainty. And then a different fiscal '26 question that maybe you can address. So you have some new sports rights coming on. How do we think about overall cash content spend next year? My guess is sports are going to be going up with things like WWE. And then, of course, content is the lifeblood of the company. So any good way to think about content spend as we look out for the next 12 months or so?

Yes. A couple of things. In terms of Experiences, obviously, we really have a terrific portfolio of Experiences businesses. As I mentioned this morning, Walt Disney World just had a record Q3 revenue number as we emerge from last quarter. So we certainly feel great about that. In addition to that, the Disneyland Paris business, we expect to do very well. As a reminder, we have some easier overlaps due to the Olympics last year. But in addition to those laps, the business is performing strongly. China, as we've noted on past calls, is a little bit challenged, not so much from an attendance perspective, but from a per caps perspective as there's some stress with the China consumer. And then in addition to that, the cruise ships are doing extremely well right now. Forward bookings look great, and we're running at very high occupancies in terms of the cruise ships. In terms of thinking about bookings for Experiences for the fourth quarter, right now, they're up about 6%. So we certainly feel positively about that as well. As regards to cash content spend for '26, I know you're going to be shocked at this, but I'm going to defer on talking about that until the Q4 call.

Our next question comes from Jessica Ehrlich with Bank of America.

One follow-up on Experiences and then maybe move on to content. So on Experiences, I know everyone is trying to get some guidance for next year, but you do have a ship launching in Singapore, a large ship. Can you talk about how you see the impact on that moving to another region, another side of the world and how you think about the impact of that ship on pretty much all of Disney's businesses? And then on content, you've given positive commentary, but the guide indicates very tough fourth quarter. Can you talk a little bit about the ins and outs of what you see in content in the year ahead?

Regarding the ship in Singapore, it is the largest ship we have ever constructed. To provide some context, our current large ships accommodate about 4,000 passengers each, while this new ship will carry approximately 7,000 passengers. In previous calls, we mentioned that the sales for this ship were extremely strong when we entered the market, and it sold out rapidly during the first two quarters of operation. This ship offers us a unique chance to showcase the Disney brand in a region with substantial affinity for it, creating significant opportunities. It serves as a floating ambassador for the Disney brand, incorporating our intellectual property into the entire experience. I believe this will be a fantastic opportunity for us, especially in Asia, and particularly in Southeast Asia.

Jessica, yes, and regarding your question on content, I assume you're asking generally about CSLO and entertainment in Q4. The thing I would remind you of is we will be overlapping Inside Out 2 from last year, which is obviously a tough comp. But all of that is considered in the guide that we gave you of $585 million for the overall company for the year.

Our next question comes from David Karnovsky with JPMorgan.

I wanted to follow up on your comments regarding theatrical franchises. Disney has had great success recently with sequels and reboots. I'm interested, though, in how you think about launching new IP into today's exhibition market. Is it a fair comment that that's a tougher proposition than in the past? And then separately for Hugh, it might be early, but can you discuss or even quantify potential tax benefits at Disney from the Big Beautiful Bill and return of 100% bonus depreciation?

Thank you, David. We continue to be focused on creating new IP. Obviously, that's of great value to us long term. But we also know that the popularity of our older IP remains significant and the opportunities to either produce sequels or to basically bring them forward in a more modern way as we've done or convert what was previously animation to live action like we're doing with Moana in 2026. It's just a great opportunity for the company and supports our franchise. So I wouldn't say that we've got a priority one way or the other. Our priority is to put out great movies that ultimately resonate with consumers. And the more we can find and develop original property, the better, of course. We are developing original property under the 20th Century Fox banner and under the Searchlight banner. And look, you could even argue that Marvel continues to mine its library of characters for original property, even though, for instance, there have been Fantastic Four movies before. We kind of consider the one that we did an original property in many respects because we're introducing those characters to people who were not familiar with them at all.

Yes, I got that. And regarding tax, I assume you're asking about the impact of OB3. Basically, from a book tax perspective, it won't have any material impact on the company. From a cash perspective, it will be a positive to us. And again, we'll talk about that more on the Q4 call, but we do expect a positive cash tax impact, which obviously benefits us from a cash flow perspective.

Our next question comes from John Hodulik with UBS.

Maybe just following up on the ESPN launch. Given the attractive pricing for the service from an ESPN DTC bundle standpoint, can the launch of the ESPN platform accelerate growth on the D2C side, either from a subscriber standpoint or from an engagement standpoint?

The answer is definitely yes. While we won't provide an exact figure, for $29.99, consumers can access Disney+, Hulu, and ESPN, which is an incredible deal. We hope this will help us grow our subscriber base. Additionally, with ESPN and its programming included in the bundle with Hulu and Disney+, we anticipate that engagement will increase as well, which is a key factor in reducing churn. We're very excited about these opportunities. Furthermore, with the NFL deal, we can offer the NFL+ Premium service, which includes RedZone, as part of the Disney+, Hulu, and ESPN bundle, presenting another chance to lower churn and boost engagement across the apps we will be selling.

And our next question comes from Kutgun Maral with Evercore ISI.

I have a follow-up about the Cruise Line, specifically not just the Disney Adventure but also the broader business where you've outlined a significant transformation with the fleet expected to double in the coming years. It seems we are approaching a major turning point, especially with the launch of the Treasure last December and both the Destiny and Adventure set to debut later this year. As we try to better grasp the financial implications, could you help clarify the opportunities that lie ahead? I'm not seeking 2026 guidance, and I realize it may be too early to provide specifics since there are still uncertainties regarding pricing, potential cannibalization, and margins. I'm unsure if we should evaluate the current ship economics individually or perhaps look at state rooms and apply that to what you have planned. However, even with cautious assumptions, the potential contributions to operating income seem quite substantial. I would appreciate any insights you could provide.

Hugh, I'll let you handle the economic side of that question. Let me just point out a few, I think, salient points regarding the expansion of the cruise ship line. First of all, we've discovered that many of the people who sail on our current ships have such a great experience that they are the first to want to sail on our new ships. So interestingly enough, what we're getting is, in effect, repeat visitation onto new ships. And when we're building a bigger base of consumers, it's also one of the best experiences that we offer across our Experiences business. So that's one way to look at it. The other way to look at it, which I referenced with regard to Singapore, is that there are many destinations in the world that we haven't visited. And this gives us an opportunity to not only bring our brand to those destinations, but to attract customers from those regions who may want to sail in their region. And so by expanding, we feel we expand the business in terms of our access to people around the world. And we also give people who have sailed on our current ships an opportunity to sail again, but with a different experience because they're on a new ship.

Right. And from a financial perspective, the best way to think about it, I think, really is in the multiyear guidance that we gave you back last fall for the Experiences business. Obviously, we don't break out cruise ships, but we did contemplate all of the builds that we had coming on as a part of providing that guidance. The thing I can tell you in addition to that is, and as Bob noted, our cruise ships continue to be incredibly well received. As we sit here today, we're already basically half booked out for all of next year, and the newer ships are even higher in that regard. So we feel terrific from the perspective consumer receptivity to our new offerings.

Our next question today comes from Peter Supino with Wolfe Research.

I wondered if you could comment on engagement trends regarding your existing subscribers on Disney+ and Hulu, and how your current DTC strategies could contribute to those trends? And then a related longer-term question, not a 2026 guidance question. Your DTC segment reported 6% operating margins. As DTC surpasses your 10% margin objective, is there an opportunity to accelerate DTC content spending for the sake of market share over the long run?

I'll address the first part of your question and possibly the second as well. When we provided users with a more integrated experience between Disney+ and Hulu, we noticed an increase in engagement. We anticipate that with the full integration, engagement will rise even further. Additionally, we've made several technological enhancements aimed at boosting engagement. We're encouraged by the initial results, but recognize that there's still more work to be done. For example, we're focusing on improving our recommendation engine and conducting extensive experiments to understand what resonates best with consumers. This includes refining the homepage and the user interface of the app. We've also introduced streaming options, such as a dedicated stream for The Simpsons which offers over 30 seasons, contributing to higher engagement. There's also an ABC news stream available, providing continuous news content. Our strategy involves combining platforms to enhance engagement as well as leveraging our technological advancements to achieve the same goal. Regarding content spending, we do not plan to significantly increase our domestic content expenses. Our focus will be on expanding our international markets. For instance, we will rebrand general entertainment content from Star to Hulu globally. The technological improvements will support engagement in markets that need development. Additionally, we may selectively invest in international markets with strong potential for subscriber growth, advertising revenue, and overall profitability.

Yes. I would like to add to Bob's comments that our objective with this business is to maximize operating income over time through a growth-oriented strategy rather than solely through cost management, although we will manage costs effectively. We see a significant opportunity for growth in the U.S. through increased engagement. Internationally, there is a substantial opportunity for penetration. As we enhance engagement and reduce churn in the U.S., this creates opportunities for marketing expenditures, some of which can be reinvested into international content. Our approach will be targeted, focusing on specific markets rather than a broad strategy. Consequently, we do not plan to settle for a 10% margin; we believe there are ample margin opportunities once we reach double digits, and we will achieve this through a growth-oriented strategy rather than by cutting costs.

Our next question today comes from Mike Ng with Goldman Sachs.

I just have one on domestic theme park trends. The per caps in the quarter were up 8% year-over-year. I think that was the best growth in over 2 years. I was just wondering if you could talk about whether the per cap growth was impacted by the mix of attendance between local, out-of-state, international? And were there any divergent attendance trends between those cohorts of domestic park patrons just given the noise around competitive park openings and international visitation to the United States?

Yes. Mike, in terms of the mix of visitors, that's obviously one of the factors that plays into per caps. That said, the ones that you mentioned specifically, international, nothing material going on there. It's always going to be a mix of sort of local versus visitors from elsewhere. And there isn't a particularly material trend that's worth trying to model or worth trying to note. Overall, we feel good certainly about the per caps. But frankly, we feel good about the attendance as well. In light of the fact that there's a competitive offering in the marketplace, the fact that attendance came in as well as it did is something that we feel terrific about. So overall, as we've talked about in the past, the intent is to grow through both increased attendance and increased per caps in a balanced way, and I expect that's what we're going to continue to do.

And our final question today comes from Kannan Venkateshwar with Barclays.

Bob, with respect to the sports offering, in terms of your go-to-market strategy, what we see right now, how close is that to the potential end state? And is there an opportunity maybe to tier the product now that you have products like RedZone, for instance, as a pay-per-view offering or a separate tier or even bundling with others like FOX launching their own sports offering, for instance, is that an opportunity for you to bundle other sports offerings in the market and consolidate streaming more broadly?

Yes. We believe there could be chances for us to combine our sports offerings with those of other companies. We have had some discussions about this, although there is nothing specific to report at this time. We are focused not only on increasing engagement and attracting more subscribers, but also on improving the experience for consumers. Making it easier for fans to access multiple sports in a single place is important, as I know from personal experience that it can be challenging to locate which platform is showing various sports. We are committed to helping consumers in this area.

Okay. Thanks, everyone, for the questions. We want to thank you again for joining us this morning and wish everyone a good rest of the day.

Thank you. This concludes the conference call. You may now disconnect your lines.