How High Can Disney's Streaming Profit Go?

Walt Disney (NYSE: DIS) can be considered a late entrant to the streaming trend. Its flagship Disney+ platform wasn't launched until November 2019, more than a decade after Netflix (NASDAQ: NFLX) introduced streaming in the U.S. Disney's delay was understandable, given that it has legacy cable-TV networks, which used to be very lucrative, to manage.

These days, however, the House of Mouse is making substantial progress with its direct-to-consumer (DTC) operations, particularly on the bottom line. How high can Disney's streaming profit go?

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Streaming is now a material earnings contributor

Within Disney's entertainment division, its DTC streaming segment includes Disney+ and Hulu (excluding Hulu Live TV). These services combined to bring in $1.3 billion in operating income in fiscal 2025 (ended Sept. 27, 2025), up about ninefold from the prior year. And in first-quarter 2026 (ended Dec. 27, 2025), operating income soared 72% year over year to $450 million.

These numbers show the incredible progress that has been made. The company's streaming operations were losing massive amounts of money less than three years ago.

Investors have every reason to be optimistic as we look ahead. According to management's estimates, DTC's operating margin is projected to be 10% in fiscal 2026, which would lead to a surge in operating income.

On an annualized basis, the entertainment DTC segment brought in $21.4 billion in revenue in the latest fiscal quarter. This consists primarily of subscription fees, with a smaller sum coming from ad sales. Based on the leadership team's forecast, Disney would report $2.1 billion in DTC operating income in fiscal 2026, up 62% year over year.

Trying to catch up to Netflix

More subscribers lead to higher revenue and greater scale. This trend supports a cost advantage, as fixed content expenses can be spread out over a much bigger sales base. This is precisely what has benefited Netflix over the years. Netflix reported a fantastic operating margin of 29.5% in 2025. It's looking to raise that to 31.5% in 2026. Clearly, Disney is extremely far behind.

But it's unreasonable to believe that the House of Mouse's entertainment DTC platforms can approach a 20% operating margin in five years, which is still much lower than Netflix. Assuming revenue increases at a compound annual rate of 10% between fiscal 2025 and fiscal 2030, and operating income comes in at $6.3 billion, that's a monumental 388% gain in five years.

It's obviously difficult to make an accurate prediction. Increases in content spending, competition for attention and new members, and operational prowess are all critical factors to consider. Nonetheless, Disney's trajectory has been impressive, indicating much higher streaming profits in the future. This can potentially propel the entertainment stock.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.