MGM Q3 Deep Dive: Margin Pressure and Portfolio Moves Shape Outlook

Hospitality and casino entertainment company MGM Resorts (NYSE:MGM) met Wall Streets revenue expectations in Q3 CY2025, with sales up 1.6% year on year to $4.25 billion. Its non-GAAP profit of $0.24 per share was 19.9% below analysts’ consensus estimates.

Is now the time to buy MGM? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

MGM Resorts faced a challenging third quarter, with revenue growth meeting Wall Street expectations but profitability metrics missing analyst forecasts. Management attributed the margin pressure to several factors, including higher insurance expenses, renovation disruptions at MGM Grand, and softer occupancy and room rates, especially at mid-tier properties. CEO Bill Hornbuckle acknowledged, “We lost control of the narrative over the summer,” citing guest sensitivity to value in Las Vegas and the need for price corrections at certain properties. The company also pointed to strong performance in Macau and the digital segment as partial offsets to domestic headwinds.

Looking ahead, MGM Resorts' outlook is shaped by ongoing investments in its digital business, anticipated growth from group and convention bookings, and continued strength in Macau. Management expects stabilization in Las Vegas driven by upgraded rooms, upcoming events like Formula 1, and robust early bookings through the Marriott partnership. CFO Jonathan Halkyard emphasized a focus on disciplined capital allocation, stating, “Our return thresholds are pretty darn high,” while Hornbuckle noted that initiatives in Japan and ongoing digital expansion are expected to be key contributors to future profitability.

Key Insights from Management’s Remarks

Management attributed the quarter’s underperformance to disruptions in Las Vegas operations, evolving consumer price sensitivity, and strategic decisions to optimize the asset portfolio.

• Las Vegas operational disruptions: Renovations at MGM Grand and a drop in occupancy at mid-tier properties like Luxor and Excalibur led to lower room rates and food and beverage volumes. Management noted that nearly half of the operational impact stemmed from these two properties.
• Consumer value sensitivity: Management admitted to missteps in pricing, especially at budget properties, prompting corrective actions such as price adjustments and targeted promotions to restore perceived value. Hornbuckle referenced the "infamous bottle of water" incident as an example of the need for better sensitivity to guest experience at lower-priced properties.
• Macau momentum: Despite a brief typhoon-related closure, MGM China delivered record third-quarter earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR), supported by premium offerings like the Alpha Gaming Club and ongoing upgrades to luxury suites.
• Portfolio optimization: MGM withdrew from its New York commercial license application due to unfavorable investment terms and announced the sale of its Northfield Park operations at a significant premium to the original acquisition price, illustrating a disciplined approach to capital deployment.
• Digital and regional growth: The digital business and BetMGM joint venture showed strong revenue growth and are beginning to generate cash distributions. Management cited international expansion, especially in Brazil and Europe, as key drivers, while North American regional properties achieved record slot win and contributed to overall revenue diversification.

Drivers of Future Performance

MGM Resorts’ guidance reflects a focus on stabilizing Las Vegas performance, expanding digital operations, and leveraging international growth opportunities.

• Las Vegas recovery efforts: Management expects improved performance as all MGM Grand rooms come back online, renovations are completed, and convention bookings ramp up. The return of events such as Formula 1 and a strong pipeline of group business, particularly through the Marriott channel, are anticipated to support occupancy and room rates.
• Digital and international expansion: The company is prioritizing investment in its digital platforms and international markets, notably Macau and Japan. Management believes that the digital segment can deliver double-digit returns as player fundamentals improve in Brazil and Europe, and that Macau’s focus on premium mass customers will sustain growth.
• Disciplined capital allocation: The company has set high return thresholds for new investments, favoring share repurchases and selective growth projects like the integrated resort in Osaka, Japan. Management highlighted that further asset sales or portfolio shifts will be evaluated based on their potential to unlock shareholder value, with CFO Halkyard stressing the importance of maintaining a strong balance sheet.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will be watching (1) the pace of Las Vegas recovery, particularly improvements in mid-tier property occupancy and room rates; (2) continued growth and market share gains in the digital segment, especially in Brazil and Europe; and (3) execution of international expansion projects, including progress in Macau and construction milestones in Japan. The company’s ability to maintain capital discipline and optimize its asset portfolio will also be key signposts.

MGM Resorts currently trades at $30.11, down from $31.22 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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