Disney Stock Is Finally Back in Action. Will new Tariffs Derail It?

Is Disney (NYSE: DIS) finally finished with its struggles? The entertainment king has been having on and off troubles for years, and its stock is still 50% off its previous highs. But it's been making steady progress since the return of iconic CEO Bob Iger, and it reported solid results for the 2025 fiscal second quarter (ended March 29).

Management is confident about the future, and in addition to the strong performance, it's expecting more good news. The most recent results were announced in the shadow of the Trump administration's recent announcement about tariffs on foreign-filmed movies. Let's see what's happening and how the company might be impacted.

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Making lots of magic

Over the past few years, there's been one or another problem at Disney. It's a huge company with many moving parts, and sometimes that works in its favor; if there's an issue in one segment, the others can make up for it.

However, the market has been seeing this a drag on total earnings lately. There hasn't been much time when there isn't something negative happening somewhere. It might be poor parks performance, a writers' strike that affects filmmaking, operating losses in streaming, or something else.

Image source: Disney.

The second quarter was back to the ideal Disney paradigm in which everything works together to create a powerful entertainment system. Total revenue increased 7% from last year to $23.6 billion, beating Wall Street's expectations of $23.14 billion, and that was driven by strength across segments, with entertainment up 9%, parks up 6%, and sports up 5%.

All of the segments were profitable, but there was a notable increase in entertainment where operating income increased 61%. This had been hampered by streaming losses, but direct-to-consumer operating income was $336 million in the quarter, up from $47 million last year. Disney+ added 1.4 million subscribers, and Disney+ Hulu as a bundle added 2.5 million. Earnings per share (EPS) were $1.45, topping the consensus target of $1.20.

2025 is shaping up to be a banner year

Disney studios had the top three highest-grossing films last year: Inside Out 2, Deadpool & Wolverine, and Moana 2, and it had a fourth in the top 10 with Mufasa: The Lion King. It has a strong slate this year again, with 10 movies expected to be released, including the next installment in the Avatar series, Avatar: Fire and Ash. Its most recent release, Marvel Studios' Thunderbolts, opened in the No. 1 spot with a $76 million domestic debut.

Disney is finally on schedule to launch its ESPN streaming service later this year, and management also announced that it's planning to open its newest theme park in Abu Dhabi, although it will take several years to design and build. It's a lucrative, low-risk project, since Disney won't need to add any capital to the project; it will just collect royalties.

Management projected confidence about how things are shaping up for the rest of the year, and it's guiding for profit increases in all segments and for the company's total earnings.

Will tariffs set it back?

Last Monday, just prior to Disney's earnings report, President Donald Trump announced new tariffs on foreign-made films. Industry insiders have been worried for years about studios moving overseas to take advantage of cheap labor and tax incentives, and this move is meant to protect American movie industry workers like camera people and makeup artists.

Large movie studios like Disney haven't yet figured new tariff costs into their outlooks, and they haven't yet figured out how these tariffs will be applied, since these aren't "products" being sold. Iger and CFO Hugh Johnston did not directly talk about tariffs on the earnings call, but they remained confident in their near-term outlook, especially for profitability, implying that, for the time being at least, they're not worried.

Although Disney stock fell after the announcement, it was back up after the earnings report on Wednesday and is now up 23% over the past month. Investors will have to see how the tariff program plays out here, but in the meantime, Disney is well positioned to sustain its momentum and get back to creating shareholder value.

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Jennifer Saibil has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.