MGM Resorts Delivers Q1 Beat on BetMGM Surge, But Challenges Loom Ahead

MGM Resorts International (NYSE: MGM) reported a stronger-than-expected Q1 2025, with adjusted EPS of $0.69, handily beating the FactSet consensus of $0.47. While the company’s net income dipped year-over-year to $148.6 million, its adjusted results underscored resilience in core operations amid macroeconomic headwinds. The earnings beat was driven by surging performance from its digital gaming venture, BetMGM, which turned EBITDA positive for the first time, signaling a strategic inflection point. Yet, lingering challenges—including a 2% revenue decline and broader industry pressures—highlight the path ahead.

Financial Highlights: A Quarter of Contrasting Trends

MGM’s Q1 revenue reached $4.28 billion, narrowly exceeding the $4.27 billion estimate, but marking a 2% drop from Q1 2024’s $4.38 billion. Net income fell 31% year-over-year to $0.51 per share, though adjusted EPS (excluding non-recurring costs) rose to $0.69, outperforming expectations.

Historically, MGM shares have declined 68% of the time following earnings, with an average one-day drop of 3.4%. This quarter, however, shares rose +2.3% in after-hours trading, reflecting investor optimism about BetMGM’s turnaround.

The BetMGM Breakthrough: EBITDA Turns Positive, Growth Accelerates

The star of the quarter was BetMGM, MGM’s 50/50 sports betting joint venture with Entain. BetMGM reported $657 million in Q1 Net Revenue, a 34% year-over-year surge, with:
- iGaming revenue up 27% to $443 million.
- Online sports revenue soaring 68% to $194 million.
- Total handle (bets placed) rising 29% to $4.09 billion.

Crucially, BetMGM achieved $22 million in EBITDA, a dramatic improvement from a $132 million loss in Q1 2024. CEO Adam Greenblatt highlighted this milestone as proof of the venture’s “reinvigorated strategy,” driven by:
- Enhanced player engagement: Active player days jumped 20% in sports and 39% in iGaming.
- Improved product mix: Parlay bets (high-margin wagers) now account for 42% of sports bets, up 4.8 percentage points year-over-year.
- Cross-selling success: 13 percentage points more Online Sports users also engaged in iGaming compared to 2024.

Operational Challenges and Strategic Priorities

Despite BetMGM’s gains, MGM’s broader business faces hurdles:
- Revenue decline: The 2% drop reflects ongoing macroeconomic pressures and tariff-related costs.
- Margin pressures: Net income fell due to higher operating expenses and a 1.6% decline in Las Vegas Strip revenue.

MGM is countering these headwinds with:
1. Cost discipline: The company aims to reduce SG&A expenses by $100 million annually through automation and process improvements.
2. Pricing optimization: Targeted rate hikes at Las Vegas properties and international resorts are underway.
3. Global expansion: Plans for a $14 billion integrated resort in Japan (targeting a 2030 opening) and growth in Asian markets like Macau remain key long-term drivers.

Peer Comparison: Laggard in Revenue Growth, But Strong ROE

While MGM trails peers like Light & Wonder (LNY) and Churchill Downs (CHDN) in revenue growth, its 4.94% return on equity (ROE) outperforms industry averages. Analysts note this reflects MGM’s focus on high-margin digital assets like BetMGM.

Investor Takeaways: Buy the Dip or Wait for Clarity?

The Q1 results paint a mixed picture. On one hand, BetMGM’s EBITDA turnaround and ESG initiatives (e.g., its “Focused on What Matters” sustainability program) position MGM for long-term growth. On the other, the company’s stock—currently trading at $32.21—remains 20.75% below its 52-week high, reflecting investor skepticism about its ability to sustain revenue growth.

Analysts’ average 12-month price target of $46.75 implies a 45% upside, but execution risks linger. Key catalysts to watch include:
- BetMGM’s FY 2025 EBITDA positivity goal (current guidance: $2.4–2.5B revenue).
- Japan’s regulatory approvals for its resort project.
- Las Vegas Strip recovery, which remains uneven due to tourism volatility.

Conclusion: A Positive Quarter, But the Road to Sustained Growth Is Paved with Uncertainties

MGM’s Q1 2025 results were a win for shareholders, driven by BetMGM’s operational turnaround and cost management. The venture’s EBITDA milestone and 34% revenue growth validate its potential as a cash flow engine. However, the company’s broader business faces headwinds, including declining revenue and margin pressures.

Investors should weigh the positives:
- BetMGM’s scalability: Its 22% iGaming market share and 8% sports betting market share position it for further gains.
- Strong liquidity: MGM’s undrawn $150 million credit facility and $9.1 billion market cap provide a cushion for strategic bets.
- Analyst optimism: A “Buy” consensus with a $46.75 price target suggests confidence in long-term prospects.

Yet risks persist:
- Macroeconomic slowdowns could crimp discretionary spending at resorts.
- Regulatory delays in Japan or U.S. markets could stall growth.
- Competitive pressures from peers like DraftKings and FanDuel in digital gaming.

In the near term, MGM’s stock is worth monitoring as a speculative play on BetMGM’s potential. For the risk-averse, waiting for clearer signs of sustained revenue growth and margin expansion may be prudent. The quarter’s beat was a positive start—but the real test is yet to come.