Morgan Stanley has questioned whether Sands China’s increased spending is delivering sufficient returns, after strong gaming volumes failed to prevent a sharp decline in second-quarter earnings and margins.
In a post-results investment note on Thursday, Morgan Stanley analysts Praveen Choudhary and Anson Lee said the earnings shortfall could not be attributed solely to the FIFA World Cup and unfavorable gaming luck.
Sands China reported adjusted property EBITDA of $430 million for the second quarter of 2026, down 24 percent year-on-year and 32 percent sequentially. An exceptionally low VIP rolling win rate of 1.35 percent reduced EBITDA by approximately $87 million, taking the hold-adjusted result to about $518 million.
The operator’s reported EBITDA margin fell to 24.0 percent from 31.5 percent a year earlier. Net revenue was broadly flat year-on-year at $1.79 billion.
‘We don’t see Sands gaining EBITDA share consistently despite intense reinvestment since June 2025,’ the Morgan Stanley analysts wrote.
‘Macau is challenged by more than the World Cup. It is facing issues of intense competition in premium mass, with less support from base mass.’
Higher volumes, heavier spending
Sands China’s mass-market table drop increased 15 percent year-on-year, while VIP rolling volume rose 73 percent and slot handle grew 30 percent. Premium mass revenue increased 13 percent, but grind mass revenue rose only 1 percent.
The operator’s overall gross gaming revenue market share reached 23.8 percent, up from 22.8 percent in the second quarter of 2025. However, it fell 2.3 percentage points from the previous quarter.
Morgan Stanley said Sands China’s mass-market reinvestment ratio climbed to 26.6 percent, rising 1.3 percentage points quarter-on-quarter and 3.4 percentage points year-on-year. Daily operating expenses were 18 percent higher than a year earlier.
The brokerage estimated that annualized hold-adjusted corporate EBITDA of approximately $2.07 billion was 8 percent below the 2026 market consensus of $2.24 billion.
Morgan Stanley maintained its Equal-weight rating.
Jefferies expects margin recovery
Jefferies offered a more positive assessment in a separate post-results note issued on Thursday. The brokerage said underlying operating trends remained strong, with gaming volumes outperforming the wider Macau market across key segments.
It also noted that May was Sands China’s strongest month on record for mass-market GGR.
Performance weakened in June as the World Cup diverted some high-value customers from Macau and compounded normal seasonal softness.
Jefferies said Sands China’s ‘reinvestment strategy remains unchanged’, while spending as a percentage of revenue was broadly stable from the previous quarter despite increasing year-on-year.
The brokerage expects operating-expense growth to moderate during the second half, supporting a recovery in EBITDA margins if revenue continues to increase. It retained its Buy rating.
