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Amid continued growth in the U.S. sports-betting market and stagnant expansion of online casino gambling, Caesars Entertainment and MGM Resorts International believe the substantial investments they have made in their digital businesses are adding to the bottom line.
“I think by the late part of next year … unless there’s something else that breaks of scale, I think as we come out of 2025, we're going to be something substantial across the board leading into 2026,” Bill Hornbuckle, president and CEO of MGM Resorts International, told analysts about anticipated profits from its expanding digital business.
Hornbuckle said MGM expects to earn $400m to $500m in free cash flow from MGM’s digital business, in 2026 and beyond.
“We could turn the lever on some of it today and push half of that out the front door,” Hornbuckle said during a third-quarter earnings call on Wednesday (October 30). “So, I think that’s a reasonable expectation.”
MGM's BetMGM U.S. joint venture with Entain was profitable again in the third quarter, seeing record results with a 70 percent year-over-year increase in first-time depositors and stabilization of market share.
The company reported that gross gaming revenue grew nearly 20 percent with online sports betting and iGaming nearly equal as BetMGM continues to further integrate new parlay games developed by Entain's Angstrom.
Barry Jonas, a gaming analyst with Truist Securities, noted that through eight weeks of the National Football League season, MGM has seen a 200-basis-point increase in the percent of bets coming from both traditional parlay and same game parlays.
“In iGaming, management is encouraged that legacy states such as New Jersey continue to grow double digits,” Jonas wrote in a research note.
Having previously stated a target of $1bn of cumulative investment in the BetMGM joint venture, Hornbuckle stressed that “as it relates to raw capital, we’re all in” and that MGM is also not anticipating to make further digital acquisitions of its own, having already bought LeoVegas and Push Gaming.
Via LeoVegas, MGM has already launched the BetMGM brand in the UK, Netherlands and Sweden, with Brazil set to follow soon.
MGM established a joint venture in August with media giant Grupo Globo to enter the licensed online gambling market in Brazil, which is set to launch on January 1.
Under the terms of the deal, the offering will use BetMGM’s branding and LeoVegas’ technology.
Grupo Globo is the largest media group in Latin America with approximately 70m daily users across television, digital, radio and print media.
Shaun Kelley, an analyst at Bank of America Securities, asked Hornbuckle about the investment needed for the Brazilian market.
Hornbuckle replied that the partnership with Globo was “not a standard sponsorship deal.”
“This is truly an equity deal. They've put in advertising dollars for equity. And so, the expense of that, while meaningful to all of us, will be ... part of what they do in terms of the business.”
Hornbuckle said BetMGM will provide the technology while Globo will provide the media platform and going live in Brazil with a new offering would require material marketing spend.
“We’re going to launch in a new country,” he added. “So, that number will be in the tens of millions over the course of the year. There’s probably going to be a lot of competition. There’s already many, many folks who have operated inside the grey market there.”
Caesars Digital Revenue Tops $300m
Despite a modest $9m loss for MGM's chief rival Caesars Entertainment in the third quarter, Caesars Digital posted year-over-year revenue growth. The division, which operates Caesars’ online sports betting and iGaming business, reported $303m in revenue in the third quarter, up from $215m for the same period last year.
The company's online gambling division also generated record quarterly adjusted EBITDA of $52m, versus just $2m in the third quarter of 2023.
Eric Hession, co-president of Caesars Sports and online gaming, said the Caesars Palace online casino app continued to grow.
However, the company also saw an 83 percent increase in iGaming net revenue growth compared with the same period last year, which Hession attributed to the launch of a second online casino brand, Horseshoe Casino, in Michigan.
The Horseshoe online casino also expanded to both Pennsylvania and West Virginia this week, with launches in Ontario and New Jersey expected by the end of the year.
“[I] feel very good about the roll out of that brand,” said Caesars CEO Tom Reeg. “Growth continues on a sequential basis month over month. So, we feel really good about what’s happening there.”
The company’s sports-betting business also reported year-over-year revenue growth during the third quarter, with a 36 percent increase compared with the third quarter last year. Caesars Digital cited an increase in hold for the revenue growth, with sports-betting hold at 8.6 percent compared with 6.5 percent in the third quarter of 2023.
“Given our roadmap and our customers’ receptivity to the enhanced parlay options, we now believe that achieving structural hold above 10 percent threshold is achievable over the next few years,” Hession told analysts during a quarterly conference call on Tuesday (October 29).
As of September 30, Caesars offered online and retail sports betting in 32 North American markets.
“I think the future is very bright for our digital business,” Reeg told analysts. “I think that business is going to end up generating a hell of a lot more than the $500m target that everybody’s been wringing their hands about for the last three years. So, we feel very good about that.”
