Will Disney record any goodwill impairment charge in FY2026?

The resolution criteria asks for ANY goodwill impairment in FY2026, any segment, any amount. This is broader than just Entertainment. However, after a thorough review of Disney's segments, the most likely impairment candidates are limited. Star India was already written down and is now a 37% equity JV — further write-downs would flow through equity method losses, not goodwill impairment. The Entertainment segment's $52.7B goodwill is supported by streaming profitability ($1.3B FY2025, +50% YoY Q1 FY2026), which validates the Fox acquisition thesis. No impairment was recorded in Q1 despite the annual test having been conducted recently. The Parks (Experiences) segment with $5.5B goodwill is performing strongly. The Sports segment ($16.5B) has ESPN stabilization. For a goodwill impairment to occur, a material deterioration event would need to happen between now and September 2026 — streaming losses, recession, or a triggering event. The base case is no impairment.

I focus on the tail risk paths. The 'any impairment, any amount, any segment' criterion is important because it includes small, peripheral write-downs. Disney added $1.5B in Fubo goodwill in Q1 — if the Fubo integration doesn't proceed as planned or the virtual MVPD business deteriorates, that relatively new goodwill could face an interim impairment test. Disney's annual impairment test is in Q4 (July-Sept), giving 7+ months for conditions to change. Linear TV ad revenue is declining 8-10% annually; if this accelerates to 15%+ due to cord-cutting acceleration, the Entertainment segment's long-term cash flow projections could be revised downward. Additionally, Disney's goodwill testing uses DCF models with undisclosed discount rates and terminal growth assumptions — the committee flagged this opacity as a risk. The Star India equity JV is still generating losses ($28M Q1), and while this wouldn't trigger a goodwill impairment per se, it signals that Disney's international ventures carry risk. I weight this at ~28% — acknowledging that Disney's improving fundamentals make impairment unlikely but not negligible given the broad resolution criteria.

Taking a base-rate approach: Disney has not recorded a goodwill impairment in the Entertainment, Sports, or Experiences segments in recent years. The Star India impairments ($1.4B) were exceptional — a specific international asset that underperformed in a market Disney subsequently exited via JV structure. For FY2026, the fundamentals are moving in the right direction: streaming turned profitable and is growing, Parks are at record levels, ESPN is stabilizing with a new streaming product. The annual goodwill test uses fair value estimates that incorporate forward projections — with streaming profitability improving, these projections are likely getting stronger, not weaker. Management would need to see a significant deterioration to fail the quantitative test. Even the Fubo acquisition, while small, represents a strategic bet on virtual MVPDs that management endorsed as recently as Q1. The discount rate environment (interest rates) is the main external risk, but Disney's investment-grade profile means their WACC hasn't materially changed. I see this as an 18% event — primarily driven by macro shock or unexpected business deterioration scenarios that are not currently visible.

Disney's goodwill situation is concerning from a structural perspective ($74.7B, 37% of assets), but the question is about FY2026 specifically. The key positive: streaming profitability validates the Fox acquisition thesis and supports the $52.7B Entertainment goodwill. No impairment in Q1 is a strong data point since it means the most recent annual test passed. The remaining 3 quarters of FY2026 would require an interim triggering event — a recession, streaming reversal, or major asset deterioration — to force a mid-year test. Star India is no longer consolidated goodwill. The broad 'any impairment' criterion adds some probability for minor write-downs, but Disney's reporting units are large enough that small acquisitions typically get absorbed. I estimate 20%.

The probability should account for both the likely scenario (no impairment given improving fundamentals) and the tail scenarios. Key tail risks: (1) macro recession hitting Parks and ad revenue simultaneously, (2) streaming subscriber churn accelerating from price increases, (3) Fubo integration challenges revealing overpayment, (4) linear TV decline accelerating beyond 15% YoY. The Consolidation Calibrator's QUESTIONABLE rating signals genuine vulnerability in the goodwill structure even if current economics support it. Disney's opacity about DCF assumptions in impairment testing means we can't independently verify the margin of safety. However, the most probable scenario remains no impairment — the improvement trajectory in streaming and Parks would need to meaningfully reverse. I weight at 25%, slightly above my base because of the 'any amount' criterion and 7+ months of remaining exposure.

I anchor on the most concrete data point: the Q1 FY2026 annual goodwill test produced zero impairment. This means as of the most recent comprehensive assessment, all reporting units passed. For an impairment to occur in Q2-Q4, Disney would need to identify a triggering event warranting an interim test AND that test would need to fail. Triggering events are specific: sustained stock price decline significantly below book value, loss of a major customer/contract, significant adverse economic changes. Disney's stock is well above book value, its customer base is diversified, and current economic conditions are stable. The streaming business is on an improving trajectory. Even the linear TV decline, while real, has been gradual and already incorporated into management's long-term projections. I see this as a 15% event — the probability of a negative surprise sufficient to trigger and fail an interim test within 7 months.

No impairment in Q1 after annual test. Streaming profitable and growing. Parks strong. Resolution asks for ANY impairment which includes small write-downs, but Disney's reporting units are large. The Star India situation is resolved (JV). Main risk is macro shock in the remaining 7 months. Base case is no impairment at 20%.

The $74.7B goodwill load is structurally risky — 37% of assets is high by any standard. Linear TV secular decline continues. Fubo added $1.5B in new untested goodwill. 'Any amount' criterion captures minor write-downs too. But improving streaming economics and strong Parks provide significant support. Probability 25% accounts for the structural vulnerability while recognizing current momentum.

Annual test in Q1 passed. Streaming profitability validated Fox thesis. No triggering events visible. Star India written down and JV'd. Main scenario for impairment requires recession or major business deterioration — neither is base case. At 18%, reflects low probability with tail risk acknowledgment.