Disney Q3 ad revenue edges up as ESPN offsets entertainment slowdown

MUMBAI: When one kingdom lost a little sparkle, another hit it out of the park. Disney’s advertising story this quarter was less fairy tale and more game of two halves, with ESPN’s sporting success making up for softer entertainment demand.

The Walt Disney Company reported a mixed advertising performance for the third quarter of fiscal 2026, as robust growth in its Sports business helped offset weakness in Entertainment advertising, while the media giant accelerated investments in AI and creator-led content.

Based on the company’s segment disclosures, advertising revenue across its Entertainment and Sports businesses stood at $2.83 billion during the quarter, inching up from $2.79 billion in the corresponding period last year.

The Entertainment division saw advertising revenue decline 1 per cent year-on-year to $1.625 billion, as weaker advertising rates outweighed gains from higher ad impressions and contributions from the Fubo transaction.

Sports, however, kept the scoreboard ticking. Advertising revenue in the segment climbed 5 per cent to $1.204 billion, fuelled by higher advertising impressions during a quarter that delivered record NBA and NHL playoff audiences across ESPN platforms.

Disney’s streaming advertising business also showed signs of moderation. Advertising revenue across Disney+ and Hulu grew 3 per cent, with the company noting that an expanding advertising inventory created a softer demand environment compared with the previous quarter, even as subscription revenue remained resilient.

Lower marketing expenditure helped cushion the impact of softer advertising growth. Selling, general and administrative expenses fell by $187 million year-on-year, primarily due to reduced marketing costs, partly offset by expenses related to the Fubo transaction. As a result, Entertainment segment operating income surged 64 per cent to $1.68 billion.

Beyond advertising, Disney continued to broaden its monetisation strategy. Consumer Products revenue rose 7 per cent year-on-year, driven by merchandise linked to Toy Story 5 and The Mandalorian and Grogu. The company also said the Toy Story franchise recorded its strongest year-on-year Consumer Products revenue growth in 20 quarters.

Disney also expanded its creator economy ambitions by announcing its first partnership with TikTok. Under the arrangement, creator-produced videos featuring Disney franchises will appear on Disney+’s Verts vertical-video feed, supported by a dedicated creator ambassador programme designed to deepen audience engagement.

Overall, Disney reported 7 per cent revenue growth to $25.25 billion during the fiscal third quarter, while total segment operating income increased 21 per cent to $5.56 billion.

Artificial intelligence also featured prominently in Disney’s future roadmap. The company said AI is being used to enhance creativity rather than replace it, maintaining that its storytelling process will remain human-centred, artist-driven and creator-led.

Disney revealed that its J.A.R.V.I.S. AI platform has now been rolled out to more than 2,000 Imagineers, providing instant access to over 70 years of institutional knowledge. The company is also deploying AI-powered digital twins and simulation tools to design attractions, including its upcoming Abu Dhabi theme park, while AI is helping improve guest bookings, assist park employees and deliver more personalised content recommendations across Disney+.