Light & Wonder (NASDAQ:LNW) Reports Sales Below Analyst Estimates In Q3 Earnings

Gaming products and services provider Light & Wonder (NASDAQ:LNW) missed Wall Street’s revenue expectations in Q3 CY2025 as sales rose 2.9% year on year to $841 million. Its non-GAAP profit of $1.81 per share was 35.8% above analysts’ consensus estimates.

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Company Overview

With names as crazy as Ultimate Fire Link Power 4 for its products, Light & Wonder (NASDAQ:LNW) is a gaming company supplying the casino industry with slot machines, table games, and digital games.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Light & Wonder grew its sales at a sluggish 4.7% compounded annual growth rate. This wasn’t a great result compared to the rest of the consumer discretionary sector, but there are still things to like about Light & Wonder.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Light & Wonder’s annualized revenue growth of 7% over the last two years is above its five-year trend, but we were still disappointed by the results.

We can better understand the company’s revenue dynamics by analyzing its three most important segments: Gaming, Social Gaming, and iGaming, which are 66.3%, 23.4%, and 10.2% of revenue. Over the last two years, Light & Wonder’s revenues in all three segments increased. Its Gaming revenue (slot machines, casino games) averaged year-on-year growth of 8.3% while its Social Gaming (free-to-play games) and iGaming (digital games) revenues averaged 3.4% and 9.9%.

This quarter, Light & Wonder’s revenue grew by 2.9% year on year to $841 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 12.4% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average. At least the company is tracking well in other measures of financial health.

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Operating Margin

Light & Wonder’s operating margin has been trending up over the last 12 months and averaged 22.3% over the last two years. On top of that, its profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.

This quarter, Light & Wonder generated an operating margin profit margin of 27.2%, up 7.8 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Light & Wonder’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

In Q3, Light & Wonder reported adjusted EPS of $1.81, up from $0.71 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Light & Wonder’s full-year EPS of $5.06 to grow 33.3%.

Key Takeaways from Light & Wonder’s Q3 Results

It was good to see Light & Wonder beat analysts’ EPS expectations this quarter. We were also happy its iGaming revenue narrowly outperformed Wall Street’s estimates. On the other hand, its Social Gaming revenue missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this print was mixed. The stock remained flat at $73.43 immediately following the results.

Sure, Light & Wonder had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.