Why Netflix’s Strong Quarter is Good News for Disney Shareholders

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Strong earnings from streaming leader Netflix on Thursday set the stage for Disney to excel with its results in a few weeks. Netflix reported positive quarterly results after the bell Thursday, with revenue increasing 16% year over year, marking its seventh consecutive quarter of double-digit growth. The streaming service also exceeded expectations on operating income, earnings per share, and free cash flow, and raised its full-year revenue guidance. (Shares dipped on Friday after Netflix cautioned that its operating margin would be lower in the second half of 2025).

While these results keep Netflix at the forefront of the competitive streaming industry, they also provide useful insights for Disney, which has been focused on expanding its streaming platforms — Disney+, Hulu, and ESPN+ — as its traditional TV business faces challenges. Indeed, Netflix reported “healthy member growth” — it no longer discloses quarterly net member adds — indicating that consumers continue to value streaming entertainment. The company also achieved success with higher pricing of its products and revenue from new ad-supported services.

This increase in pricing is beneficial for other platforms, including Disney, which has raised prices for both Disney+ ad-supported and ad-free plans, as well as for bundles that combine Disney+, Hulu, and ESPN+. The rise in ad revenue at Netflix shows that major streaming platforms like Disney+ can implement price hikes and enhance advertising income without losing subscribers, highlighting that customers are willing to pay for premium content, and that ad-supported models can effectively diversify revenue streams.

In related news, NBCUniversal’s streaming service Peacock announced on Friday that it is raising prices by $3 per month for its ad-supported and ad-free tiers. This price adjustment follows a surge in subscribers for the latest season of “Love Island” and anticipation of its NBA broadcast package beginning this fall.

Ahead of Disney’s third quarter on Aug. 6, UBS estimated that double-digit earnings per share growth will persist, supported by strong demand at the company’s theme parks and improvements in direct-to-consumer profitability. They also noted that concerns regarding the opening of Universal’s Epic theme park in Orlando appear to have been overstated. The analysts raised their price target on Disney stock to $138 a share from $120 earlier this week.

After a significant rebound from their April lows, shares have remained within a range as investors await further insights on streaming profitability improvements, the strength of its parks and experiences business, and management’s strategies to address declines in linear TV. The stock is trading roughly 1% lower at $121 per share on Friday.

Disney is viewed as a “show-me stock,” as noted by Jim Cramer on Thursday. “People want to see the Disney+ numbers and determine whether a breakthrough is happening due to the skepticism surrounding linear TV,” he stated. “No one seems confident until they see the numbers. I believe those numbers will materialize, making the stock seem undervalued. I’m optimistic.”

Of course, maintaining discipline is key, even when confident about Disney’s potential for growth over time. We adjusted our position on June 27 to take advantage of this significant move. Now, we’re awaiting earnings in a few weeks for a business update. We maintain our price target of $130 with a 2-rating on the stock.

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