Macau’s gaming sector is expected to post solid revenue growth in the first quarter of 2026, but rising costs tied to high-value players are likely to weigh on profitability, signaling a shift in the industry’s earnings profile, according to CLSA.
The brokerage forecasts sector-wide EBITDA to reach $2.07 billion in 1Q26, representing a 7 percent year-on-year increase, supported by a 14 percent rise in gross gaming revenue (GGR). However, the slower pace of earnings growth relative to revenue highlights mounting margin pressure linked to a premium-driven recovery.
Sector margins are also expected to decline, with EBITDA margins projected at around 25.3 percent for the quarter, compared with levels above 27 percent in previous periods, reflecting the higher cost base associated with premium play.
‘Amid premium-led growth, we do not expect margins to expand,’ CLSA said, noting that VIP win rates are unlikely to exceed normalized levels due to ongoing competition.
Analysts said demand is increasingly driven by higher-value players, requiring greater incentives such as rebates and reinvestment spending. This has become a key factor limiting earnings conversion, even as headline gaming volumes continue to recover.
Channel checks cited in the report indicate that VIP win rates remained largely within or below the normal range of around 3.0 to 3.3 percent during the quarter, reducing the likelihood of margin upside from favorable hold.
‘With Macau’s strong headline GGR growth, a key focus will be how effectively this can be translated into earnings growth,’ the report said, adding that luck-adjusted margins remain a key indicator of operators’ spending efficiency.
Competitive dynamics are also intensifying, with larger concessionaires stepping up reinvestment programs to capture premium demand. This has increased pressure on peers to match incentives, raising the overall cost of acquiring and retaining customers across the market.
At the operator level, Sands China is expected to lead market share at around 26.5 percent in 1Q26, followed by Galaxy Entertainment at approximately 20.8 percent, pointing to continued concentration among leading operators.
Ahead of first-quarter earnings releases, analysts revised their earnings forecasts across the sector, trimming EBITDA projections to reflect updated assumptions on operating expenses, rebates, and non-gaming revenue, even as revenue expectations remain broadly intact.
Target prices were lowered across most operators, although CLSA maintained Galaxy Entertainment and Sands China as its top picks, citing balance sheet strength and dividend visibility. Wynn Macau was downgraded to ‘Hold,’ reflecting limited earnings upside under the current operating environment.
