Can Disney’s Entertainment Division Overtake Its Theme Parks?

Key Points

• Entertainment leads Disney in revenue and growth but lags in profitability due to higher operating costs.
• Entertainment’s operating profits rose 95% year-over-year, fueled by streaming profitability and successful theatrical releases.
• A blockbuster 2025 film slate, including Lilo and Stitch, Thunderbolts, Fantastic Four, Zootopia 2, and Avatar 3, could help Entertainment close the profit gap with Experiences.

Walt Disney Co. NYSE: DIS has long leaned on its Experiences segment—theme parks, resorts, and cruises—to drive profits. In its fiscal first quarter of 2025 (FQ1 2025), Experiences produced $3.1 billion in operating income, maintaining its status as Disney’s primary profit engine.

Entertainment is the second-largest income-producing segment for the consumer discretionary sector leader, which posted an operating income of $1.7 billion in the quarter. Sports is its third, and least profitable, segment, posting $247 million in operating income in FQ1 2025. 

Not every Disney fan can make it to a Disney theme park or take a Disney cruise, but they do have access to Disney’s TV shows, movies, and streaming platforms. Now, investors are asking: Can Disney leverage its Entertainment division to close the gap?

Entertainment Leads in Revenue and Growth

Entertainment generates the most revenue of the three segments, pulling in $10.87 billion in FQ1, while Experiences generated $9.4 billion. More impressively, Entertainment’s revenue grew 9% year-over-year (YOY), compared to just 3% for Experiences.

If Entertainment generates the most growth and revenues, why can’t it generate the most profits? It’s all about the operating margins.

Why Entertainment Margins Lag Experience

Movie production, especially Disney’s blockbuster projects, demands massive budgets—with some Disney+ series episodes costing up to $25 million each. In addition, streaming investments and competition have played a role in Entertainment’s low profitability.

Film sets aren't cheap, and Disney's motion picture production budgets are some of the highest of all the studios. Whereas the Experiences segment demands more capex upfront, operating costs are relatively cheaper afterward.

In FQ1 2025, Entertainment posted a 15.64% operating margin ($10.87 billion in revenue with $1.7 billion in operating income), while Experiences achieved a 32.93% margin ($9.415 billion in revenue with $3.1 billion in operating income)—more than double. These numbers underscore the intense cost pressures on the Entertainment segment, from film production to maintaining and expanding streaming platforms like Disney+, Hulu, and ESPN+.

Entertainment: A Promising Profitability Trajectory

While the Entertainment segment has less than half the operating profits of Experiences, its trajectory has been improving. 

Operating profits rose 95% YOY from $874 million to $1.7 billion in FQ1 2025 in the Entertainment segment, while growth was flat in the Experiences segment, rising barely from $3.105 billion to $3.11 billion.

The surge was driven by the turnaround in its direct-to-consumer (DTC) streaming services, including Disney+, Hulu and ESPN+, shifting from an operating loss into an operating profit. The subscription price increases helped—along with a slowdown of Disney+ series content (i.e., episodes of MCU’s live action superheroes series cost up to $25 million per episode) to focus on quality.

Disney also enjoyed solid box office performances from Deadpool & Wolverine and Inside Out 2. However, the Studios segment could suffer a setback from the underperformance of the newly released live action Snow White, which only drew a disappointing $43 million opening at the box office.

Lilo & Stitch Could Boost Profits Further

Marvel Studios’ Captain America: Brave New World had an $88.8 million opening box office weekend but struggled to have staying power as it barely generated $200 million domestic gross, even a month after release.

However, its live-action Lilo & Stitch remake is forecast to generate over $100 million at the domestic box office over Memorial Day weekend, and Marvel Studios' Thunderbolts is forecast to generate $70 million at the weekend box office, which is the midpoint of $63 million to $77 million estimates.

Further Blockbusters on the Movie Slate in 2025 Could Tip the Scales

Disney has a solid lineup of blockbuster hits in 2025.

The long-awaited Marvel Comic Universe (MCU) version of the Fantastic Four, titled The Fantastic Four: First Steps, is finally set to launch in July 2025. It will be going up against Warner Bro. Discovery Inc. NASDAQ: WBD James Gunn’s rebooted Superman is due out July 11, 2025.

Two blockbuster franchises are set to release thereafter. First, Zootopia 2, a sequel to the original billion-dollar hit, is slated to launch in November 2025. Second, Avatar: Fire and Ash will be released in December 2025. The first two Avatar films broke a total of $5.23 billion worldwide. Avatar is still the highest-grossing movie of all time, with $2.9 billion at the worldwide box office.

These blockbuster films could help tip the scales for the Entertainment segment profits to catch up to the Experiences, especially with momentum from the 95% YOY growth, as its streaming services have reached profitability and entered the scaling stage.