As part of a strategic shift, Disney will no longer stream its movies on Netflix starting in 2019 and instead offer them on a new streaming service of its own. The company also intends to launch a separate streaming service for ESPN in 2018.

The price tag would be adjusted over time to mirror the volume of content that is added to the service, Disney said during its earnings call.

The company said, however, that its service will be cheaper because it will initially have a smaller library than what the streaming giant offers. Disney said its goal is to attract as many subscribers as possible when it launches the service.

The Walt Disney Company share gained after the company said it plans to price its streaming service "substantially below" that of Netflix.

The stock initially fell more than 3 percent in extended trade after the company reported year-over-year declines for most of its businesses.

Media networks, the company's biggest segment, saw that figure decline 12 percent year over year. The company said it saw lower advertising revenue at Freeform, ESPN as well as its company-owned television stations.

But longtime CEO Bob Iger reassured investors during the earnings call, saying he believes Disney will be able to tackle current headwinds in the media landscape.

Here's what each segment reported in operating income compared to StreetAccount consensus estimates:

Media networks: $1.48 billion, vs. $1.58 billion

Parks and resorts: $746 million, vs. $735.1 million

Studio: $218 million, vs. $364.4 million

Consumer and interactive: $373 million, vs. $470.4 million

The stock initially fell about 3 percent in after-hours trade, but later reversed to trade 1 percent higher.

Longtime CEO Bob Iger said in a statement that Disney "will continue to invest for the future and take the smart risks required to deliver shareholder value."

Earlier this week, CNBC reported that Disney approached 21st Century Fox about acquiring some of its entertainment assets, which would leave the latter with a news and sports-focused business. When asked about the talks in a Thursday earnings call, Disney said it wouldn't take questions on press speculation.

Fox was similarly tight-lipped on the subject. In a Wednesday earnings call, Executive Chairman Lachlan Murdoch maintained that Fox has the necessary scale to grow and compete in a media landscape that's becoming increasingly digital.

That is a challenge for both Disney and Fox as tech-savvy competitors like Netflix continue to post eye-popping revenue growth. On Thursday, Disney reported a 3 percent year-over-year decline in revenue.

Here's how the company did compared with what Wall Street expected:

EPS: $1.07 vs. $1.12 expected according to Thomson Reuters

Revenue: $12.78 billion vs. $13.23 billion expected according to Thomson Reuters

In the year-ago quarter, Disney reported adjusted earnings of $1.10 a share on $13.14 billion in revenue.

The company has lately suffered a bruising media battle that ended with Disney backtracking on its decision to bar the Los Angeles Times from its movie screenings amid backlash from the news organizations and notable Hollywood figures. Disney had yanked the newspaper's access after it published a two-part investigation that detailed Disney's financial dealings with the city of Anaheim.

Shares of Disney have edged about 0.7 percent lower, year to date.

This is breaking news. Please check back for updates.

— CNBC's David Faber contributed reporting.