Walt Disney Co: Form 10-Q for the period ended Mar 28, 2026

ORGANIZATION OF INFORMATION

Management’s Discussion and Analysis provides a narrative of the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:

• Consolidated Results
• Current Quarter Results Compared to Prior-Year Quarter
• Current Six-Month Period Results Compared to Prior-Year Six-Month Period
• Seasonality
• Business Segment Results
• Corporate and Unallocated Shared Expenses
• Financial Condition
• Market Risk
• Commitments and Contingencies
• Other Matters
• Supplemental Guarantor Financial Information

CONSOLIDATED RESULTS

(in millions, except per share data)

CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER

Revenues for the quarter increased 7%, or $1.5 billion, to $25.2 billion; net income attributable to Disney decreased to $2.2 billion compared to $3.3 billion in the prior-year quarter; and diluted earnings per share (EPS) attributable to Disney decreased to $1.27 compared to $1.81 in the prior-year quarter. The net income and EPS decreases were due to the recognition of a tax benefit in the prior-year quarter related to the resolution of a tax matter.

Revenues

Service revenues for the quarter increased 7%, or $1.4 billion, to $22.7 billion, which included an approximate 2 percentage point increase from the Fubo Transaction and, to a lesser extent, NFL Transaction. Aside from this impact, service revenues increased due to higher subscription and affiliate fees, growth at our parks and experiences businesses and, to a lesser extent, an increase in content sales.

Product revenues for the quarter increased 5%, or $0.1 billion, to $2.5 billion due to growth at our parks and experiences businesses.

Costs and expenses

Cost of services for the quarter increased 8%, or $1.0 billion, to $14.4 billion, which included an approximate 3 percentage point increase from the Fubo Transaction and, to a lesser extent, NFL Transaction. Aside from this impact, cost of services increased due to higher programming and production costs and, to a lesser extent, the impact of inflation and increased volumes at our parks and experiences businesses.

Selling, general, administrative and other costs increased 2%, or $0.1 billion, to $4.1 billion due to higher marketing costs.

Depreciation and amortization increased 6%, or $0.1 billion, to $1.4 billion driven by higher depreciation at Experiences and Entertainment, partially offset by lower amortization of intangible assets.

Restructuring and impairment charges

Charges in the current quarter were $147 million for an impairment of our investment in A+E Global Media (A+E) and $92 million for severance. Charges in the prior-year quarter were $109 million for content impairments.

After the current quarter impairment in A+E, our investment has a carrying value of approximately $2 billion. If the estimated fair value of our investment declines, for example by a decrease in forecasted cash flows or a transaction at an amount that is less than the carrying amount, we would be required to record an impairment charge in earnings, which could be material.

Interest expense, net

Interest expense, net is as follows:

(in millions)

The increase in interest income, investment income and other was due to a net gain on investments in the current quarter compared to a net loss on investments in the prior-year quarter, and a favorable comparison related to pension and postretirement benefit costs, other than service cost.

Equity in the Income of Investees

Income from equity investees increased $21 million, to $57 million from $36 million, due to a lower loss from the India joint venture.

Income Taxes

The effective income tax rate was positive 26.8% in the current quarter compared to a negative effective income tax rate of 10.2% in the prior-year quarter. Significant items impacting the change in the effective income tax rate included the following:

• The current quarter included a non-cash tax charge of approximately 3 percentage points in connection with the NFL Transaction
• The prior-year quarter included a favorable impact of approximately 33 percentage points from the resolution of a tax matter

Noncontrolling Interests

(in millions)

The increase in net income attributable to noncontrolling interests was primarily due to the NFL Transaction and, to a lesser extent, higher results at Shanghai Disney Resort.

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

Certain Items Impacting Results in the Quarter

Results for the quarter ended March 28, 2026 were impacted by the following:

• Acquisition Amortization of $313 million
• Restructuring and impairment charges of $239 million
• A non-cash tax charge of $115 million resulting from the NFL Transaction

Results for the quarter ended March 29, 2025 were impacted by the following:

• Resolution of a prior-year tax matter of $1,016 million
• Acquisition Amortization of $396 million
• Restructuring and impairment charges of $109 million

A summary of the impact of these items on EPS is as follows:

(in millions, except per share data)

(1) Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.

(2) EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.

CURRENT SIX-MONTH PERIOD RESULTS COMPARED TO PRIOR-YEAR SIX-MONTH PERIOD

Revenues for the current period increased $2.8 billion, to $51.1 billion; net income attributable to Disney decreased $1.2 billion, to $4.6 billion; and EPS decreased to $2.61 from $3.21 in the prior-year period. The net income and EPS decreases were due to the recognition of a tax benefit in the prior-year period related to the resolution of a tax matter and, to a lesser extent, lower operating income at Entertainment. These decreases were partially offset by higher operating income at Experiences.

Revenues

Service revenues for the current period increased 6%, or $2.6 billion to $45.9 billion, which included an approximate 1 percentage point net favorable impact from the Fubo, NFL and Star India Transactions. Aside from this impact, service revenues increased due to growth at our parks and experiences businesses, higher subscription and affiliate fees and, to a lesser extent, an increase in content sales.

Product revenues for the current period increased 5%, or $0.3 billion, to $5.3 billion, due to growth at our parks and experiences businesses.

Costs and expenses

Cost of services for the current period increased 8%, or $2.3 billion, to $29.4 billion, which included an approximate 2 percentage point net favorable impact from the Fubo, NFL and Star India Transactions. Aside from this impact, cost of services increased due to higher programming and production costs and, to a lesser extent, the impact of inflation and increased volumes at our parks and experiences businesses.

Selling, general, administrative and other costs increased 4%, or $0.3 billion, to $8.2 billion due to higher marketing costs, partially offset by the comparison to a legal settlement in the prior-year period.

Depreciation and amortization increased 5%, or $0.1 billion, to $2.7 billion, driven by higher depreciation at Experiences and Entertainment, partially offset by lower amortization of intangible assets.

Restructuring and impairment charges

Charges in the current period were $147 million for an impairment of our investment in A+E and $92 million for severance. Charges in the prior-year period were $143 million for impairment of goodwill in connection with the Star India Transaction and $109 million for content impairments.

Interest expense, net

Interest expense, net is as follows:

(in millions)

The decrease in interest expense was primarily due to lower average rates.

The increase in interest income, investment income and other was due to a favorable comparison of pension and postretirement benefit costs, other than service cost, and a net gain on investments in the current period compared to a net loss on investments in the prior-year period.

Equity in the Income of Investees

Income from equity investees increased $22 million, to $150 million from $128 million, due to a lower loss from the India joint venture, partially offset by a decrease in income from A+E.

Income Taxes

The effective income tax rate was 29.9% in the current period compared to 10.4% in the prior-year period. Significant items impacting the change in the effective income tax rate included the following:

• The current period included non-cash tax charges of approximately 6 percentage points in connection with the Fubo and NFL Transactions and an unfavorable impact of approximately 2 percentage points from adjustments related to prior years
• The prior-year period included a favorable impact of approximately 16 percentage points from adjustments related to prior years and a non-cash tax charge of approximately 4 percentage points in connection with the Star India Transaction

Noncontrolling Interests

(in millions)

The increase in net income attributable to noncontrolling interests was primarily due to the NFL Transaction and higher results at Shanghai Disney Resort.

Certain Items Impacting Results in the Six Month Period

Results for the six months ended March 28, 2026 were impacted by the following:

• Acquisition Amortization of $613 million
• Non-cash tax charges resulting from the Fubo and NFL Transactions of $307 million and $115 million, respectively
• Restructuring and impairment charges of $239 million

Results for the six months ended March 29, 2025 were impacted by the following:

• Acquisition Amortization of $793 million
• Restructuring and impairment charges of $252 million and a non-cash tax charge of $244 million
• Resolution of a prior-year tax matter of $1,016 million

A summary of the impact of these items on EPS is as follows:

(in millions, except per share data)

(1) Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.

(2) EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.

SEASONALITY

The Company’s businesses are subject to the effects of seasonality. Consequently, the operating results for the six months ended March 28, 2026 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

Entertainment revenues are subject to seasonal and other cyclical advertising patterns, changes in viewership and subscriber levels, timing and performance of theatrical releases, and the timing of and demand for film and television programs. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months and domestic advertising revenue is typically higher during election cycles. Subscription and affiliate fees vary with the subscriber trends of multi-channel video programming distributors (i.e. cable, satellite telecommunications and digital over-the-top service providers) and our streaming services. Theatrical release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

Sports revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, and the availability of and demand for sports programming. Advertising revenues generated from sports programming and the recognition of sports rights cost amortization are also impacted by the timing of sports seasons and events, which timing may vary throughout the year or may take place periodically (e.g. biannually, quadrennially).

Experiences revenues fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities, the opening of new guest offerings and pricing and promotional offers. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character anniversaries and lower in the periods preceding or following such celebrations. Consumer products revenue fluctuates with consumer purchasing behavior, which generally results in higher revenues during the Company’s first and fourth fiscal quarters. In addition, licensing revenues fluctuate with the timing and performance of theatrical and game releases and direct-to-consumer content.

BUSINESS SEGMENT RESULTS

The Company evaluates the performance of its operating businesses based on segment revenue and segment operating income.

The following table presents revenues from our operating segments:

(in millions)

(1) Reflects fees paid by (a) the entertainment vMVPD services to the sports and entertainment linear networks for the right to air the networks on the Hulu Live TV and Fubo services and (b) the Entertainment segment to the Sports segment to program certain sports content on ABC Network and Disney+.

The following table presents income from our operating segments and other components of income before income taxes:

(in millions)

36

Depreciation expense is as follows:

(in millions)

Amortization of intangible assets is as follows:

(in millions)

BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter

Entertainment

Operating results for Entertainment are as follows:

(in millions)

Revenues - Subscription and affiliate fees

Growth in subscription and affiliate fees was due to increases of 5% from the Fubo Transaction, 5% from higher effective rates, 2% from a favorable foreign exchange impact and 2% from more subscribers.

Revenues - Advertising

The increase in advertising revenue was primarily attributable to an increase of 8% from higher impressions, partially offset by a decrease of 6% from lower rates.

Revenues - Content sales

Higher content sales revenue was due to increases of 8% from theatrical distribution and 4% from a favorable foreign exchange impact, partially offset by a decrease of 2% from TV/VOD and home entertainment distribution. The increase in theatrical distribution was attributable to the ongoing performance of Avatar: Fire and Ash and Zootopia 2 and the release of Hoppers in the current quarter compared to the ongoing performance of Mufasa: The Lion King and Moana 2 and the release of Captain America: Brave New World in the prior-year quarter.

Revenues - Other

The decrease in other revenue was attributable to the impact of our foreign exchange hedging program.

Operating expenses

(in millions)

The increase in programming and production costs was due to increases of 5% from the Fubo Transaction, 5% from streaming services and 3% from theatrical distribution.

The increase in other operating expenses was primarily attributable to higher technology and distribution costs.

Depreciation and amortization

Depreciation and amortization increased $48 million, to $251 million from $203 million, due to a new facility and investments in technology assets.

Equity in the Income of Investees

Income from equity investees decreased $16 million, to $108 million from $124 million, due to lower income from A+E attributable to decreases in advertising and affiliate revenues, partially offset by an increase in program sales income.

Operating Income from Entertainment

Segment operating income increased $78 million, to $1,336 million from $1,258 million, due to an increase in subscription and affiliate fees, partially offset by higher programming and production costs.

Items Excluded from Segment Operating Income Related to Entertainment

The following table presents supplemental information for items related to the Entertainment segment that are excluded from segment operating income:

(in millions)

(1) In the current quarter, amortization of intangible assets was $225 million and amortization of step-up on film and television costs was $64 million. In the prior-year quarter, amortization of intangible assets was $251 million and amortization of step-up on film and television costs was $66 million.

(2) Charges in the current quarter were $147 million for an impairment of an equity investment and $69 million for severance. Charges in the prior-year quarter were due to content impairments.

Sports

Operating results for Sports are as follows:

(in millions)

Revenues - Subscription and affiliate fees

Growth in subscription and affiliate fees reflected increases of 6% from higher effective rates and 3% from the NFL Transaction, partially offset by a decrease of 3% from fewer subscribers.

Revenues - Advertising

Lower advertising revenue was due to a decrease of 4% attributable to fewer impressions.

Revenues - Other

The decrease in other revenue was primarily due to the comparison to Ultimate Fighting Championship (UFC) pay-per-view revenue in the prior-year quarter.

Operating expenses

(in millions)

Programming and production costs increased in the current quarter compared to the prior-year quarter due to contractual rate increases, costs for new sports rights and an impact from the timing of rights costs recognition as a result of contract renewals. These increases were partially offset by the absence of certain rights costs compared to the prior-year quarter, primarily for UFC content. The contract renewals resulted in an increase in college sports rights costs and a decrease in NBA rights costs in the current quarter compared to the prior-year quarter. College sports rights costs shifted from the prior-year fourth quarter and the first quarter to the current quarter and NBA rights costs shifted from the first half of the current year to the third quarter.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $10 million, to $337 million from $347 million, due to the benefit from a comparison to the write-off of an investment in the prior-year quarter, partially offset by higher sales and marketing costs.

Depreciation and amortization

Depreciation and amortization increased $17 million, to $28 million from $11 million, due to investments in technology assets.

Operating Income from Sports

Segment operating income decreased $35 million, to $652 million from $687 million, as an increase in revenues was more than offset by higher programming and production costs.

Items Excluded from Segment Operating Income Related to Sports

The following table presents supplemental information for items related to the Sports segment that are excluded from segment operating income:

(in millions)

(1) Represents amortization of intangible assets.

Experiences

Operating results for the Experiences segment are as follows:

(in millions)

Revenues - Theme park admissions

Theme park admissions revenue growth was due to increases of 4% from higher average per capita ticket revenue and 1% from a favorable foreign exchange impact.

Revenues - Resorts and vacations

Higher resorts and vacations revenue was attributable to increases of 7% from additional passenger cruise days, reflecting the launches of the Disney Destiny in November 2025 and the Disney Adventure in March 2026, and 2% from an increase in average daily hotel room rates.

Revenues - Parks & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 2% from higher average guest spending, 2% from a favorable foreign exchange impact and 1% from volume growth.

Revenues - Merchandise licensing and retail

Higher merchandise licensing and retail revenue was due to increases of 1% from merchandise licensing and 1% from retail.

Revenues - Parks licensing and other

The increase in parks licensing and other revenue was primarily due to an increase in co-branding revenue, the recognition of incentives received in the current quarter and higher sponsorship revenue.

Key Metrics

In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business:

(1) Per capita guest spending growth rate and per room guest spending growth rate exclude the impact of changes in foreign exchange rates.

(2) Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes complimentary entries but excludes entries by children under the age of three.

(3) Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.

(4) Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.

(5) Available hotel room nights is defined as the total number of room nights that are available at our hotels and at Disney Vacation Club (DVC) properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service.

(6) Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights.

Operating expenses

(in millions)

Higher operating labor was due to inflation, new guest offerings and an unfavorable foreign exchange impact. The increase in cost of goods sold and distribution costs was attributable to volume growth. Higher other operating expense was primarily due to new guest offerings and an unfavorable foreign exchange impact.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $91 million, to $1,115 million from $1,024 million, primarily due to new guest offerings and inflation.

Depreciation and amortization

Depreciation and amortization increased $83 million, to $788 million from $705 million, primarily due to higher depreciation at Disney Cruise Line and at our international parks and experiences attributable to an increase at Disneyland Paris.

Operating Income from Experiences

Segment operating income increased $124 million, to $2,615 million from $2,491 million, primarily due to growth at domestic parks and experiences.

Supplemental revenue and operating income

The following table presents supplemental revenue and operating income detail for the Experiences segment:

(in millions)

Items Excluded from Segment Operating Income Related to Experiences

The following table presents supplemental information for items related to the Experiences segment that are excluded from segment operating income:

(in millions)

42

BUSINESS SEGMENT RESULTS - Current Period Six-Month Results Compared to the Prior-Year Six-Month Period

Entertainment

Operating results for Entertainment are as follows:

(in millions)

Revenues - Subscription and affiliate fees

Growth in subscription and affiliate fees was due to increases of 5% from higher effective rates, 5% from the Fubo Transaction, 1% from more subscribers and 1% from a favorable foreign exchange impact.

Revenues - Advertising

The decline in advertising revenue was due to decreases of 4% from lower rates and 3% from the Star India Transaction, partially offset by increases of 4% from higher impressions and 1% from the Fubo Transaction. Rates and impressions included an impact from less political advertising.

Revenues - Content sales

Higher content sales revenue was due to an increase of 16% from theatrical distribution attributable to the performance of Zootopia 2, Avatar: Fire and Ash and Hoppers in the current period compared to Moana 2, Mufasa: The Lion King and Captain America: Brave New World in the prior-year period.

Revenues - Other

The decrease in other revenue was attributable to the impact of our foreign exchange hedging program.

Operating expenses

(in millions)

The increase in programming and production costs was due to increases of 7% from theatrical distribution, 4% from the Fubo Transaction and 2% from our streaming services.

The increase in other operating expenses was primarily due to higher technology and distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $369 million, to $4,956 million from $4,587 million, due to higher marketing costs at theatrical distribution and our streaming services.

Depreciation and amortization

Depreciation and amortization increased $88 million, to $469 million from $381 million, due to a new facility and investments in technology assets.

Equity in the Income of Investees

Income from equity investees decreased $16 million, to $226 million from $242 million, due to lower income from A+E attributable to decreases in advertising and affiliate revenues, partially offset by an increase in program sales income.

Operating Income from Entertainment

Segment operating income decreased $525 million, to $2,436 million from $2,961 million, driven by increases in programming and production costs and marketing costs, partially offset by an increase in subscription and affiliate fees and higher content sales revenue.

Items Excluded from Segment Operating Income Related to Entertainment

The following table presents supplemental information for items related to the Entertainment segment that are excluded from segment operating income:

(in millions)

(1) In the current period, amortization of intangible assets was $459 million and amortization of step-up on film and television costs was $128 million. In the prior-year period, amortization of intangible assets was $502 million and amortization of step-up on film and television costs was $133 million.

(2) Charges in the current period were $147 million for an impairment of an equity investment and $69 million for severance. Charges in the prior-year period were due to content impairments.

Sports

Operating results for Sports are as follows:

(in millions)

Revenues - Subscription and affiliate fees

Growth in subscription and affiliate fees reflected increases of 6% from higher effective rates and 1% from the NFL Transaction, partially offset by decreases of 4% from fewer subscribers and 1% from the temporary suspension of carriage with an affiliate in the current period.

Revenues - Advertising

Advertising revenue growth was due to an increase of 4% from higher rates.

Revenues - Other

The decrease in other revenue was due to a decrease in UFC pay-per-view revenue resulting from the expiration of UFC rights in December 2025.

Operating expenses

(in millions)

Programming and production costs increased in the current period compared to the prior-year period primarily due to contractual rate increases and costs for new sports rights. These increases were partially offset by the absence of certain rights costs, primarily for UFC content, and the timing of rights costs recognition as a result of contract renewals. The renewals resulted in a decrease in NBA rights costs and an increase in college sports rights costs in the current period compared to the prior-year period. NBA rights costs shifted from the current period to the third quarter and college sports rights costs shifted from the prior-year fourth quarter to the current period.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $12 million, to $645 million from $657 million, due to the benefit from a comparison to the write-off of an investment in the prior-year period, offset by higher sales and marketing costs.

Depreciation and amortization

Depreciation and amortization increased $31 million, to $52 million from $21 million, due to investments in technology assets.

Operating Income from Sports

Segment operating income decreased $91 million, to $843 million from $934 million, as an increase in revenues was more than offset by higher programming and production costs.

Items Excluded from Segment Operating Income Related to Sports

The following table presents supplemental information for items related to the Sports segment that are excluded from segment operating income:

(in millions)

(1) Represents amortization of intangible assets.

Experiences

Operating results for the Experiences segment are as follows:

(in millions)

Revenues - Theme park admissions

Theme park admissions revenue growth was due to increases of 4% from higher average per capita ticket revenue, 1% from increased attendance at our international and domestic parks and 1% from a favorable foreign exchange impact. Attendance growth at our domestic parks benefited from the comparison to the adverse impact of Hurricane Milton in the prior-year period.

Revenues - Resorts and vacations

Higher resorts and vacations revenue was due to increases of 7% from additional passenger cruise days and 2% from an increase in average daily hotel room rates. The increase in passenger cruise days reflected the launches of the Disney Treasure in December 2024, the Disney Destiny in November 2025 and the Disney Adventure in March 2026.

Revenues - Parks & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth was attributable to increases of 3% from higher average guest spending, 2% from volume growth and 1% from a favorable foreign exchange impact.

Revenues - Merchandise licensing and retail

Higher merchandise licensing and retail revenue was due to an increase of 2% from merchandise licensing.

Revenues - Parks licensing and other

The increase in parks licensing and other revenue was primarily due to an increase in co-branding revenue and higher sponsorship revenue.

Key metrics

Operating expenses

(in millions)

The increase in operating labor was due to inflation, an unfavorable foreign exchange impact and new guest offerings. Higher infrastructure costs were attributable to new guest offerings. The increase in cost of goods sold and distribution costs was due to higher volumes. Other operating expense increased primarily due to new guest offerings, higher volumes and an unfavorable foreign exchange impact.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $105 million, to $2,077 million from $1,972 million, primarily due to new guest offerings and inflation.

Depreciation and amortization

Depreciation and amortization increased $163 million, to $1,547 million from $1,384 million, primarily due to higher depreciation at Disney Cruise Line and at our international parks and experiences attributable to an increase at Disneyland Paris.

Operating Income from Experiences

Segment operating income increased $323 million, to $5,924 million from $5,601 million, primarily due to growth at domestic parks and experiences.

Supplemental revenue and operating income

The following table presents supplemental revenue and operating income detail for the Experiences segment:

(in millions)

Items Excluded from Segment Operating Income Related to Experiences

The following table presents supplemental information for items related to the Experiences segment that are excluded from segment operating income:

(in millions)

CORPORATE AND UNALLOCATED SHARED EXPENSES

(in millions)

Corporate and unallocated shared expenses for the six-month period decreased $171 million, from $855 million to $684 million, driven by the comparison to a legal settlement in the prior-year period.

FINANCIAL CONDITION

The change in cash and cash equivalents is as follows:

(in millions)

48

Operating Activities

Cash provided by operations decreased from $10.0 billion in the prior-year period to $7.6 billion for the current period due to higher income tax payments and, to a lesser extent, an increase in spending on content at Entertainment and Sports, partially offset by higher operating cash flows at Experiences. The current period included payment of U.S. federal and California state income tax liabilities for fiscal 2025 and a portion of fiscal 2024, which were deferred pursuant to relief related to 2025 wildfires in California. The increase in operating cash flows at Experiences was due to higher operating cash receipts attributable to higher revenue, partially offset by higher operating cash disbursements attributable to higher operating expenses.

Produced and licensed programming costs

The Entertainment and Sports segments incur costs to produce and license film, episodic, sports and other content. Production costs include spend on content internally produced at our studios such as live-action and animated films and episodic series. Production costs also include original content commissioned from third-party studios. Programming costs include content rights licensed from third parties for use on the Company’s sports and general entertainment networks and streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.

The Company’s film and television production and programming activity for the six months ended March 28, 2026 and March 29, 2025 are as follows:

(in millions)

The Company currently expects its fiscal 2026 spend on produced and licensed content, including sports rights, to be approximately $24 billion compared to fiscal 2025 spend on produced and licensed content, including sports rights, of $23 billion.

Investing Activities

Investing activities consist principally of investments in parks, resorts and other property and acquisition and divestiture activity. The Company’s investing activities for the six months ended March 28, 2026 and March 29, 2025 are as follows:

(in millions)

Capital expenditures at the Entertainment segment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.

Capital expenditures at the Experiences segment are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and technology. The increase in the current period compared to the prior-year period was due to higher spend on cruise ship fleet expansion and new theme park attractions.

Capital expenditures at Corporate primarily reflect investments in corporate facilities, technology and equipment. The decrease in the current period compared to the prior-year period was due to lower spend on facilities.

The Company currently expects its fiscal 2026 capital expenditures to be approximately $9 billion compared to fiscal 2025 capital expenditures of $8 billion. The projected increase in capital expenditures is primarily due to higher spending at Experiences, attributable to theme park and resort expansion and new attractions, partially offset by lower spending on cruise ship fleet expansion.

The increase in cash used in other investing activities is primarily due to the acquisition of equity interests in different investments, partially offset by cash assumed as part of the acquisition of Fubo.

Financing Activities

Financing activities for the six months ended March 28, 2026 and March 29, 2025 are as follows:

(in millions)

(1) Primarily consists of equity award activity.

See Note 5 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the six months ended March 28, 2026 and information regarding the Company’s bank facilities. The Company may use cash balances, operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities and incremental term debt issuances to retire or refinance other borrowings before or as they come due.

See Note 10 to the Condensed Consolidated Financial Statements for a summary of dividends and share repurchases. The Company is targeting $8 billion in share repurchases in fiscal 2026.

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control. We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, contractual obligations, upcoming debt maturities, as well as future capital expenditures related to the expansion of existing businesses and development of new projects. In addition, the Company could undertake other measures to ensure sufficient liquidity, such as raising additional financing, reducing or not declaring future dividends; reducing or stopping share repurchases; reducing capital spending; reducing film and episodic content investments; or implementing further cost-saving initiatives.

The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios. As of March 28, 2026, Moody’s Ratings’ long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, and S&P Global Ratings’ long- and short-term debt ratings for the Company were A and A-1 (Stable), respectively. The Company’s bank facilities contain only one financial covenant, relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On March 28, 2026, the Company met this covenant by a significant margin. The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks and Fubo, from any representations, covenants or events of default.

MARKET RISK

The Company is exposed to the impact of interest rate changes, foreign currency fluctuations, commodity fluctuations and changes in the market values of its investments.

Policies and Procedures

In the normal course of business, we employ established policies and procedures to manage the Company’s exposure to changes in interest rates, foreign currencies and commodities using a variety of financial instruments.

Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate volatility on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to the Company’s portfolio of borrowings. By policy, the Company targets fixed-rate debt as a percentage of its net debt between minimum and maximum percentages.

Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flows in order to allow management to focus on core business issues and challenges. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the U.S. dollar equivalent value of its existing foreign currency assets, liabilities, commitments and forecasted foreign currency revenues and expenses. The Company utilizes option strategies and forward contracts that provide for the purchase or sale of foreign currencies to hedge probable, but not firmly committed, transactions. The Company also uses forward and option contracts to hedge foreign currency assets and liabilities. The principal foreign currencies hedged are the euro, British pound, Japanese yen, Chinese yuan and Canadian dollar. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings to U.S. dollar denominated borrowings. By policy, the Company maintains hedge coverage between minimum and maximum percentages of its forecasted foreign exchange exposures generally for periods not to exceed four years. The gains and losses on these contracts are intended to offset changes in the U.S. dollar equivalent value of the related exposures. The economic or political conditions in a country have reduced and in the future could reduce our ability to hedge exposure to currency fluctuations in the country or our ability to repatriate revenue from the country.

Our objectives in managing exposure to commodity fluctuations are to use commodity derivatives to reduce volatility of earnings and cash flows arising from commodity price changes. The amounts hedged using commodity swap contracts are based on forecasted levels of consumption of certain commodities, such as fuel, oil and gasoline.

Our objectives in managing exposures to market-based fluctuations in certain retirement liabilities are to use total return swap contracts to reduce the volatility of earnings arising from changes in these retirement liabilities. The amounts hedged using total return swap contracts are based on estimated liability balances.

It is the Company’s policy to enter into foreign currency and interest rate derivative transactions and other financial instruments only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into these transactions or any other hedging transactions for speculative purposes.

COMMITMENTS AND CONTINGENCIES

Legal Matters

As disclosed in Note 12 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters.

Tax Matters

As disclosed in Note 9 to the Consolidated Financial Statements in the 2025 Annual Report on Form 10-K, the Company has exposure for certain tax matters.

Contractual Commitments

See Note 14 to the Consolidated Financial Statements in the 2025 Annual Report on Form 10-K and Note 12 to the Condensed Consolidated Financial Statements.

OTHER MATTERS

Accounting Policies and Estimates

For a discussion of each of our critical accounting estimates, including information and analysis of estimates and assumptions involved in their application, see “Critical Accounting Policies and Estimates” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report on Form 10-K.

New Accounting Pronouncements

See Note 16 to the Condensed Consolidated Financial Statements for information regarding new accounting pronouncements.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

On March 20, 2019 as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).

Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at March 28, 2026 was as follows:

(in millions)

The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.

Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.

Set forth below is summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor. This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with GAAP.

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See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Note 14 to the Condensed Consolidated Financial Statements and in Note 17 to Consolidated Financial Statements in Part II, Item 8 of the 2025 Annual Report on Form 10-K.

Evaluation of Disclosure Controls and Procedures – We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of March 28, 2026, the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective.

Changes in Internal Controls – There have been no changes in our internal control over financial reporting during the second quarter of fiscal 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the factors discussed in our 2025 Annual Report on Form 10-K under Item 1A, “Risk Factors” as updated below. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to all events that have occurred in the past or their likelihood of occurring in the future.

RISKS RELATED TO OUR BUSINESSES AND INDUSTRY

We face risks related to the renewal of long-term programming or distribution contracts on sufficiently favorable terms.

We enter into long-term contracts for both the acquisition and the distribution of media programming and products, including contracts for the acquisition of programming rights for sporting events and other programs, and contracts for the distribution of our programming to content distributors. As these contracts expire, we renew or renegotiate the contracts, which from time to time has led to service blackouts when distribution contracts expired before renewal terms were agreed. We may lose programming rights or distribution rights if we are unable to renew these contracts on acceptable terms. Renewal negotiations with certain MVPDs for distribution contracts scheduled to expire in fiscal 2026 could lead to temporary or longer-term service blackouts, negatively impacting our results of operations. For example, in the first quarter of fiscal 2026, the Company’s channels were temporarily removed from YouTube TV following the expiration of the parties’ distribution contract without agreement on renewal terms. Further, our portfolio of acquired programming rights, such as sporting events, and the distributors of our programming and the portfolio of programming rights our distributors acquire have changed and will continue to change over time. Even if these contracts are renewed, the cost of obtaining certain programming rights has increased and may continue to increase (or increase at faster rates than our historical experience) and programming distributors demand terms (including with respect to the pricing for, and the nature and amount of, programming distributed) that reduce our revenue from distribution of programs or increase revenue at slower rates than our historical experience. For example, the terms of certain renewals of carriage agreements have included fewer of our linear networks or the opportunity to offer multiple genre-specific bundle options of fewer than all our linear networks while providing for certain of our direct-to-consumer (DTC) streaming services to be made available to the distributor’s subscribers. Moreover, our ability to renew these contracts on favorable terms is affected by a number of factors, such as consolidation in the market for program distribution and the entrance of new participants in the market for distribution of content on digital platforms. With respect to the acquisition of programming rights, particularly sports programming rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, subscription levels and programming rights costs increases, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from programming based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the programming.

The seasonality of certain of our businesses and timing of certain of our product offerings could exacerbate negative impacts on our operations.

Each of our businesses is normally subject to seasonal variations and variations in connection with the timing of our product offerings. See our 2025 Annual Report on Form 10-K under Item 1 – ENTERTAINMENT – Competition and Seasonality; – SPORTS – Competition and Seasonality; and – EXPERIENCES – Competition and Seasonality and Part 1, Item 2 – SEASONALITY in this Form 10-Q for a discussion of seasonal and other timing variations, as well as certain other fluctuations, on our results of operations. Further, negative impacts on our business occurring during a time of typical high seasonal demand, such as our park closures due to hurricane damage during the summer travel season or other high seasons or sports league work stoppages during that sports season, could have a disproportionate effect on the results of that business for the year.

RISKS RELATED TO INTELLECTUAL PROPERTY, LITIGATION, CYBERSECURITY AND REGULATORY REQUIREMENTS

We face risks related to the intellectual property rights that we hold as well as rights asserted by third parties.

The value to us of our IP is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. Where those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our IP may decrease, or the cost of obtaining and maintaining rights may increase.

In the United States and countries that look to the United States copyright term when shorter than their own, the copyright term for early works and the specific early versions of characters depicted in those works expires at the end of the 95th calendar year after the date the copyright was originally secured in the United States. The terms of some copyrights for IP related to some of our products and services have expired, and other copyrights will expire in the future. For example, the copyright term for the short film Steamboat Willie (1928) and early versions of characters depicted in this film have expired. As copyrights expire, we expect that revenues generated from such IP will be negatively impacted to some extent.

The unauthorized use of our IP typically increases our costs, including in connection with our efforts to protect rights in our IP, and may reduce our revenues. The convergence of computing, communications and entertainment devices, increased broadband internet speed and penetration, increased availability and speed of mobile data transmission and increasingly sophisticated attempts to obtain unauthorized access to data systems have made the unauthorized digital copying and distribution of our films, television productions and other creative works easier and faster and protection and the enforcement of IP rights more challenging. The unauthorized distribution and access to entertainment content generally continues to be a significant challenge for IP rights holders. Further, the availability of certain AI tools has facilitated the creation of infringing works based on the unauthorized use of our IP. Inadequate laws or weak enforcement mechanisms to protect entertainment industry IP in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its IP rights. Distribution innovations have increased opportunities to access content in unauthorized ways. Additionally, negative economic conditions or a shift in government priorities or policies could lead to less enforcement. These developments require us to devote substantial resources to protecting our IP against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content and other commercial misuses of our IP. The legal landscape for some new technologies, including some AI tools, remains uncertain, and development of the law or other regulatory frameworks in this area could impact our ability to protect against unauthorized uses.

With respect to IP developed by the Company and rights acquired by the Company from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain. Successful challenges to our rights in IP typically result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from or utilize the IP that is the subject of challenged rights.

The Company is also subject to the risk of claims and litigation asserting that the Company is infringing certain third-party IP rights. Technological changes in industries in which the Company operates and extensive patent coverage in those areas increase the risk of such claims being brought and prevailing. For example, the Company’s streaming services and technology are subject to patent infringement claims and litigation both in the United States and outside the United States. In defending such matters, we have developed, and may in the future develop, alternatives to features, functionalities and services in the relevant jurisdictions or more broadly, which increase our costs through investment of engineering and other resources and may result in some customers discontinuing use of our services. Adverse results in these matters and other matters asserting infringement of other types of third-party IP rights may include substantial payments by us, including royalties, licensing fees or monetary awards, and orders preventing us from offering or requiring us to change certain features, functionalities or services, which could harm our businesses and in aggregate negatively impact our results of operations.

We face risks from claims, litigation, governmental investigations and other proceedings to our businesses, reputation, results of operation and financial condition.

We are subject to various actual and threatened claims, litigation, investigations and other proceedings, including private individual actions, class actions and actions and investigations by governmental and other regulatory authorities, relating to a range of issues, including securities; competition and antitrust; intellectual property, including patent and copyright; employment and labor; taxes; privacy and data protection; data security; personal injury and property damage; consumer protection; broadcasting; contractual and commercial disputes; the production, distribution and licensing of our content; and other matters. For example, a private securities class action lawsuit was filed in federal court against the Company and certain current and former senior management on behalf of certain purchasers of securities of the Company seeking unspecified damages, plus interest and costs and fees, and an adverse final judgment or the terms of a settlement of such matter could result in the payment of substantial monetary damages. See Note 12 to the Condensed Consolidated Financial Statements for more details regarding this lawsuit and our 2025 Annual Report on Form 10-K under Item 1A, “Risk Factors”, as updated by these risk factors, regarding patent infringement litigation and other claims. In addition, from time to time, we pursue litigation against third parties seeking to vindicate our rights.

Actual and threatened proceedings and investigations increase our costs, divert management resources and disrupt business operations and may negatively impact our reputation and brands. The outcomes of such matters are inherently unpredictable, and determining legal reserves or potential losses from such matters involves judgment. If the losses to resolve such matters exceed the amounts recorded in any given reporting period, our results of operations for that interim or annual reporting period could be materially adversely affected. Further, from time to time, adverse resolutions or settlements of such matters result in substantial monetary damages or substantial future payment obligations and injunctive relief or other orders or actions that limit or prevent our implementation of our business plans, including our ability to complete strategic transactions and offer certain products and services, impact the enforcement or validity of our property and other (including intellectual property) rights, franchises and licenses or cause us to alter our business practices, which individually or taken together, negatively impact our business prospects, our results of operations, our financial condition and price of our common stock. While we maintain insurance for certain types of claims, our insurance may not be adequate to cover all losses and does not cover all types of claims that may arise.

Regulations applicable to our businesses impact the profitability of our businesses.

Each of our businesses, including our broadcast networks and television stations, is subject to a variety of U.S. and international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:

• U.S. Federal Communications Commission (FCC) regulation of our television and radio networks, our national programming networks and our owned television stations. See our 2025 Annual Report on Form 10-K under Item 1 — Federal Communications Commission Regulation.
• Federal, state and foreign privacy and data protection laws and regulations, including with respect to child safety. See our 2025 Annual Report on Form 10-K under Item 1 — Privacy and Data Protection Regulation.
• Regulation of the safety and supply chain of consumer products and theme park operations, including regulation regarding the sourcing, importation and the sale of goods.
• Land planning, use and development regulations applicable to our theme parks operations.
• Environmental protection and sustainability regulations.
• U.S. and international anti-corruption laws, sanction programs, trade restrictions, tariffs, anti-money laundering laws or currency controls.
• Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or film or television content requirements, investment obligations or quotas. See our 2025 Annual Report on Form 10-K under Item 1 — International Content Regulation.
• Domestic and international labor laws, tax laws and antitrust laws.

Laws and regulations in any of these and other areas and changes in judicial and agency interpretation or regulatory priorities, actions or initiatives (or, if applicable, private litigation to enforce such laws and regulations), as well as an increasingly unpredictable regulatory landscape, require us to incur additional costs and may limit our ability to implement our business strategies as planned or offer products and services in ways that are profitable, or at all. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations that increase the cost of providing our products and services, negatively impact demand for our products and services and limit international trade and investment, disrupting our operations in and outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong.

For example, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, including new prohibitions on the importation of goods from certain regions and other jurisdictions are considering similar measures; and U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce. Tariffs announced with respect to and by certain U.S. trading partners, could, depending on how these or future tariffs or other regulations with respect to trade are implemented, have a significant impact on our results of operations, including by impacting the macroeconomic environment, increasing costs or adversely affecting demand for our products and services. In April 2026, the FCC ordered the Company to file early license renewal applications for all of our owned television stations by May 28, 2026.

Further, the legal and regulatory landscape for certain new technologies, such as AI, is uncertain and evolving and our compliance obligations could increase our costs or limit how we may use these technologies in one or more of our businesses.