DIS

The operating story is genuinely improving. Revenue rose 3.4% to $94.4B and operating income grew 12.5% to $17.6B (18.6% margin), while operating cash flow jumped 29.6% to $18.1B. The MD&A credits higher subscription revenue, parks/experiences growth and content sales — and notes the headline 3% revenue print actually absorbed an ~3-point drag from deconsolidating Star India, so underlying demand is stronger than it looks. Management is also returning the franchise to financial health: long-term debt fell 9.4% to $35.3B, the dividend rose 32% to $1.8B and buybacks rose 17% to $3.5B. This is a recovering, cash-generative franchise, not a broken one.

The catch is earnings quality. The eye-popping +149.5% net income ($12.4B) and +151.8% EPS ($6.85) are NOT operational. The MD&A is explicit: the jump came from 'a lower effective tax rate' driven by a non-cash benefit from reclassifying Hulu's U.S. tax status (income taxes were a +$1,428M benefit in FY2025 vs a -$1,796M expense in FY2024) plus the easy comparison to prior-year Star India and goodwill impairments. Pretax income rose a healthier-but-far-more-modest 59% ($12,003M vs $7,569M). Normalize for a typical tax rate and EPS is materially lower, which means the cited 15.2x P/E is an illusion — on normalized earnings the multiple is closer to ~20-23x, and EV/EBITDA (~$22.9B of operating income + D&A) sits near ~10x. DIS is fairly valued, not cheap.