Gaming products and services provider Light & Wonder (NASDAQ: LNW) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 2.4% year on year to $774 million. Its non-GAAP profit of $1.35 per share was 19.7% above analysts’ consensus estimates.
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Light & Wonder (LNW) Q1 CY2025 Highlights:
- Revenue: $774 million vs analyst estimates of $809.2 million (2.4% year-on-year growth, 4.3% miss)
- Adjusted EPS: $1.35 vs analyst estimates of $1.13 (19.7% beat)
- Adjusted EBITDA: $311 million vs analyst estimates of $308.3 million (40.2% margin, 0.9% beat)
- Operating Margin: 22%, in line with the same quarter last year
- Free Cash Flow Margin: 14.3%, similar to the same quarter last year
- Market Capitalization: $7.93 billion
Matt Wilson, President and Chief Executive Officer of Light & Wonder, said, “Our R&D investment, vast array of product offerings and comprehensive content strategy continue to deliver success in game deployment and franchise expansions. We continue to see our omni-channel strategy prosper with enhanced game development and performance fueling our existing businesses, and further opportunity to extend this strategy with the pending Grover Charitable Gaming Acquisition. We remain confident in the various avenues of growth that we see for 2025 with continued execution on our robust product roadmap driving performance across the business. We are committed to executing off the strong foundation of world class talent and game portfolio that we have built for long-term success.”
Company Overview
With names as crazy as Ultimate Fire Link Power 4 for its products, Light & Wonder (NASDAQ: LNW) is a gaming company supplying the casino industry with slot machines, table games, and digital games.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Light & Wonder struggled to consistently increase demand as its $3.21 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result, but there are still things to like about Light & Wonder.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Light & Wonder’s annualized revenue growth of 10.8% over the last two years is above its five-year trend, but we were still disappointed by the results. 
We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Gaming, Social Gaming, and iGaming, which are 64%, 26.1%, and 9.9% of revenue. Over the last two years, Light & Wonder’s revenues in all three segments increased. Its Gaming revenue (slot machines, casino games) averaged year-on-year growth of 12% while its Social Gaming (free-to-play games) and iGaming (digital games) revenues averaged 8.4% and 11%.
This quarter, Light & Wonder’s revenue grew by 2.4% year on year to $774 million, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 10.5% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its newer products and services will not accelerate its top-line performance yet.
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Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Light & Wonder’s operating margin has risen over the last 12 months and averaged 20.2% over the last two years. On top of that, its profitability was top-notch for a consumer discretionary business, showing it’s an well-run company with an efficient cost structure.
This quarter, Light & Wonder generated an operating profit margin of 22%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Light & Wonder’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.
In Q1, Light & Wonder reported EPS at $1.35, up from $0.89 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Light & Wonder’s full-year EPS of $4.20 to grow 39.3%.
Key Takeaways from Light & Wonder’s Q1 Results
We enjoyed seeing Light & Wonder beat analysts’ EPS expectations this quarter. On the other hand, its Gaming revenue missed and its revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.6% to $91.27 immediately following the results.
Light & Wonder may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
