Is Light & Wonder (LNW) Still a Buy After Missing Revenue Estimates and Institutional Exit?

In the third quarter of 2025, Light & Wonder (LNW) delivered a mixed performance, marked by record-breaking iGaming results and a revenue miss in its social casino segment. Amid institutional exits and regulatory headwinds, investors are left to weigh whether the company's capital allocation strategies and earnings resilience justify a long-term position.

Financial Performance: A Tale of Two Segments

Light & Wonder's Q3 2025 results underscored the divergent trajectories of its business units. The iGaming segment reported $86 million in revenue, a 16% year-over-year increase, driven by first-party content proliferation and the successful launch of titles like Huff and Puff the Family, according to a Next.io report. Adjusted EBITDA for the segment surged 42% to $34 million, reflecting strong margin expansion, as noted in the Next.io report. This outperformance was bolstered by the Grover Gaming acquisition, which contributed $40 million in revenue through charitable gaming units, as detailed in a Gaming Intelligence report.

Conversely, the SciPlay division, which accounts for a significant portion of LNW's revenue, saw a 4% decline to $197 million, attributed to the underperformance of its flagship title Jackpot Party, as the Next.io report notes. CEO Matt Wilson acknowledged that the game's complex economy and layered live operations features had hindered player retention and spending, according to the Next.io report. Despite these challenges, consolidated revenue for the quarter reached $841 million, a 3% year-over-year increase, with net income surging 78% to $114 million, as reported in the Gaming Intelligence report.

Institutional Exits: A Growing Concern

The most alarming development for LNW investors was the sharp decline in institutional ownership. According to 13F filings, the number of institutional holders dropped from 298 in Q2 2024 to 108 in Q3 2025, with total holdings value plummeting from $7.32 billion to $1.07 billion, as shown in the 13F data. This exodus suggests a loss of confidence, particularly in the face of SciPlay's struggles and regulatory uncertainties. While some firms, like Smith Group Asset Management, increased stakes, according to a MarketBeat alert, the broader trend indicates a flight from the stock.

The implications for capital allocation are significant. With institutional ownership now at 88.08% of total shares, as reported in the MarketBeat alert, a further sell-off could pressure liquidity and drive down the stock price. However, LNW's aggressive share repurchase program-returning $111 million to shareholders in Q3-signals management's commitment to supporting the stock, as detailed in the Gaming Intelligence report.

Regulatory Risks and Tailwinds

Regulatory challenges remain a double-edged sword for LNW. The SciPlay segment's struggles are partly attributed to competition from unregulated sweepstakes casinos, which have eroded player spending in key markets, as the Sweepsy report notes. However, the company is lobbying for stricter regulations, and early signs are promising. In states like Connecticut and New York, where sweepstakes casinos have been banned or subjected to cease-and-desist orders, SciPlay's performance has improved, as noted in the Sweepsy report. CEO Wilson anticipates further tailwinds in 2026 as more states crack down on unregulated platforms, as the Next.io report notes.

The transition to a sole primary listing on the Australian Securities Exchange (ASX) also introduces regulatory risks. While the move aims to simplify LNW's capital structure and enhance its profile in Australia, it could temporarily impact liquidity and investor access, as reported in the Gaming Intelligence report.

Capital Allocation and Earnings Resilience

LNW's capital allocation strategy has been a bright spot. The company extended the maturity of its 2028 debt to 2033 while reducing interest rates, improving long-term flexibility, as noted in the Gaming Intelligence report. Its net debt leverage ratio of 3.5x remains within the targeted range of 2.5x–3.5x, as reported in the Gaming Intelligence report, suggesting prudent financial management. Share repurchases under the expanded $1.5 billion program further demonstrate a focus on shareholder value, as detailed in the Gaming Intelligence report.

Earnings resilience is evident in the iGaming segment's ability to offset SciPlay's weakness. With iGaming revenue growing 16% and adjusted EBITDA up 42%, the division has become a critical growth engine, as the Next.io report notes. If regulatory tailwinds materialize and SciPlay stabilizes, LNW's earnings could see a meaningful rebound.

Conclusion: A Calculated Buy?

Light & Wonder's Q3 results highlight both strengths and vulnerabilities. The iGaming segment's record performance and disciplined capital allocation provide a solid foundation, while the SciPlay struggles and institutional exits raise red flags. Regulatory risks are real but could ultimately benefit the company if sweepstakes casinos are curtailed.

For investors, the key question is whether LNW's management can execute its stabilization plans for SciPlay and capitalize on regulatory tailwinds. Given the company's strong balance sheet, aggressive buybacks, and iGaming momentum, LNW may still be a buy for those with a long-term horizon and a tolerance for near-term volatility. However, the institutional exodus and regulatory uncertainties warrant caution.