Disney’s Secret Weapon: How Streaming Can 2x The Stock

Disney (NYSE:DIS) latest quarter marks a clear turning point. Even as linear TV continues to face real pressure and weighs on overall earnings, streaming has shifted from being a drag to becoming a genuine profit engine. The direct to consumer business delivered more than $1.3 billion in operating profit for FY’25, far ahead of guidance. It’s the clearest signal yet that Disney’s streaming strategy is working. Netflix (NASDAQ:NFLX) still wears the streaming crown. Its stock is up nearly 25 percent this year versus Disney’s 5 percent loss, and its market cap is around $465 billion, twice Disney’s roughly $200 billion. But here’s the interesting part. When it comes to actual streaming scale, Disney isn’t nearly as far behind as the valuation difference implies. Disney brought in close to $25 billion in DTC revenue last fiscal year, compared to Netflix’s $39 billion for the previous fiscal year and an estimated $45 billion this year. When a business at this scale flips to profitability, the valuation implications can be meaningful. That’s the setup for why Disney’s stock could roughly double from current levels.

Image by Damian Trochanowski from Pixabay

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Streaming Execution Is Improving

Subscriber momentum has been solid. At the end of the latest quarter, Disney+ and Hulu reached about 196 million combined subscriptions, an increase of 12.4 million versus Q3 2025. Disney+ alone hit 132 million subscribers, up 3.8 million from the prior quarter. While Netflix remains larger, with 301 million global subscribers as of Q4 2024, Disney’s 12% year-over-year growth shows the platform still has considerable runway.

Pricing has also been a key driver of revenue expansion. In October, Disney raised the price of the stand-alone Disney+ ad-supported plan by $2 to roughly $12 per month, while the premium no-ads plan increased by $3 to about $19. These increases are flowing through ARPUs. Disney+ ARPU climbed to $8, up from $7.30 a year ago. Hulu, with its stronger pricing power, continues to generate higher average monthly revenue of around $12.20.

The ad-supported strategy is becoming central to the business. About half of U.S. Disney+ subscribers now choose the ad-supported tier, and roughly 37% of global active subscribers were on ad-supported plans as of last year. Hulu’s ad-supported mix is even higher, estimated at above 60%. Disney has been intentionally pushing users toward these tiers by raising ad-free prices, and the logic is straightforward. Ad-supported plans increasingly generate more revenue per user since they bring in both subscription fees and advertising dollars. Better targeting, a rapidly maturing ad tech stack, and the strength of Disney’s family-friendly content make these ad units attractive to advertisers.

How Disney Compares With Netflix

The gap between the two companies is real, but more nuanced than it might appear. Netflix no longer discloses subscriber numbers regularly, but its last update for December 2024 put the figure at about 300 million globally. Disney’s combined streaming base of about 196 million is smaller, yet not insignificant, particularly when accounting for the different stages of maturity.

The biggest difference remains profitability. Disney’s direct to consumer business posted operating margins of just 5.3% over the last year, compared to margins approaching 30% for Netflix. This profitability gap is a major factor behind the massive valuation spread. Netflix trades at roughly 44x estimated 2025 earnings, while Disney, even when including its theme parks, film studios, linear TV, and other assets, sits at around 16x.

But this is also where the opportunity lies. Disney’s margins have already begun improving as marketing costs fall and as the subscriber base stabilizes. As the business matures, Disney’s cost structure should gradually resemble something closer to Netflix’s. With pricing power, ad monetization, and bundling all trending positively, the margin story is still early.

Catalysts for the Next Phase of Growth

Disney is also rolling out several initiatives that could meaningfully boost growth over the next few years.

The first is paid sharing. Disney introduced paid account sharing in the United States in September, allowing members to add a user outside their household for a fee starting at roughly $7 per month. Netflix introduced a similar program in May 2023 and saw a wave of new signups as well as higher ARPUs. Disney could see comparable benefits, particularly as engagement on the platform improves.

Another major catalyst is sports. In August, Disney launched its ESPN direct to consumer app. The service offers the full suite of ESPN TV networks, ESPN+, and other sports programming, with two subscription tiers including an unlimited plan at $29.99 per month. Sports remains the strongest remaining draw for traditional linear TV, commanding massive advertising spends and sizable audiences. By bringing ESPN directly to consumers, Disney is hedging against the decline of linear while opening up a new high-value subscription and advertising revenue stream.

Bundling also matters. Disney is leaning heavily into its bundle strategy, offering Disney+, Hulu, and ESPN+ together for as little as $17 per month. Bundles tend to reduce churn, increase engagement, and spread customer acquisition costs across multiple products. As the bundle grows in importance, it should help stabilize subscriber numbers and gradually lift margins.

Finally, Disney’s content investments have a longer and broader monetization cycle than Netflix’s. Netflix primarily monetizes through monthly subscription fees. Disney monetizes through theatrical releases, theme parks, merchandise, licensing agreements, and franchise extensions. Iconic brands from Marvel, Star Wars, Pixar, and Disney Animation give each big content investment the potential for decades, not years, of return. This makes the economics of Disney’s content engine a bit different.

How Disney’s Stock Can Double

Disney’s DTC revenues grew 14% year-over-year to $22.7 billion in FY’24 and then rose another 8 percent to roughly $24.6 billion in FY’25. If revenue expands at around 12% per year over the next two years, driven by price hikes, better ad monetization, and paid sharing, streaming revenue could reach about $31 billion by FY’27. If Disney can lift streaming operating margins to roughly 25% by then, compared to Netflix’s roughly 30%, the DTC segment could generate around $7.1 billion in operating income. Netflix currently trades at about 35x its estimated 2025 operating income. If investors value Disney’s streaming business at 25x operating income (a roughly 33% discount to Netflix), that would imply an enterprise value of close to $180 billion for the streaming segment alone.

That’s already near Disney’s entire current market cap. And this excludes theme parks, TV, sports, movies, consumer products, and licensing, which generated $67 billion in combined revenue last year. Add that to the equation, and it isn’t hard to imagine a path where Disney’s stock roughly doubles from current levels as the streaming turnaround becomes clearer and margins steadily improve. See our analysis of Disney’s valuation for a closer look at what’s driving our current price estimate for Disney. Also, see our analysis of Disney revenue for a closer look at the company’s key revenue streams and how they have been trending.

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