Entering 2026, the gaming industry landscape presents a complex picture shaped largely by the ongoing influence of online sports betting, according to BofA Securities analyst Shaun C. Kelley. In a detailed forecast update, Kelley and his team assessed the recent performance trends of Las Vegas landmarks, regional casinos in the United States, and the Macau gambling hub, while re-evaluating the earnings outlook for online betting leaders DraftKings Inc (NASDAQ:DKNG) and Flutter Entertainment Plc (NYSE:FLUT).
Kelley draws attention to the downward trend experienced by gaming stocks during the fourth quarter and the start of 2026. Overall, the gaming sector has contracted by approximately 9% over this period, with U.S.-based operators declining by nearly 4%. Meanwhile, Macau-based enterprises saw a steeper retreat of 13%, and digital or online gaming stocks contracted by about 23%, signaling heightened volatility in the industry.
Examining recent data, Kelley notes that December's indicators for online betting, Las Vegas hotel performance metrics, and regional casino revenues all reflected softer results than anticipated. Despite these headwinds, there remains an expectation that Las Vegas locals and other regional properties may secure long-term advantages through operational leverage and potential fiscal stimulus policies.
Within the online gaming sector, BofA’s earnings models project a stronger performance for DraftKings relative to consensus estimates, while predictions for FanDuel appear more conservative compared with broader market expectations. Notably, although hold rates surpassed forecasts, a noticeable reduction in betting handle during December and January has revived concerns regarding promotional expenditures and the sustainability of profit margins. Consequently, DraftKings is positioned to deliver a significant earnings beat for the fourth quarter, whereas FanDuel seems to encounter greater margin pressure.
Las Vegas Performance Remains Mixed, Locals Show Resilience
Kelley's analysis suggests that fourth-quarter earnings estimates for major Las Vegas operations remain slightly below prevalent Wall Street forecasts. On the Strip specifically, BofA’s consolidated forecast trails consensus by around 1%, with projections for MGM Resorts International (NYSE:MGM) about 2% lower than market estimates.
While gross gaming revenues have held relatively steady, challenges persist in areas such as Revenue Per Available Room (RevPAR) and overall visitor volume, which continued to exhibit weakness through December, a notably poor month for the market. Projections anticipate that first-quarter results will experience ongoing pressure before comparisons for the second quarter become more favorable.
In contrast to the Strip, the local Las Vegas market demonstrates more robust dynamics, with BofA’s forecasts exceeding consensus predictions. This segment's relative strength may reflect differentiated demand patterns and operational factors distinct from those affecting the resort corridor.
Asia and Regional U.S. Markets Deliver Divergent Results
Turning to Asia, Macau’s gaming segment is expected to report fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) broadly aligned with Street consensus estimates. Kelley highlights solid revenue expansion within the region and positions BofA's outlook slightly above consensus driven by stronger-than-anticipated results from MGM China. Investor attention is anticipated to pivot towards monitoring market share developments at Las Vegas Sands Corp (NYSE:LVS), especially as year-over-year comparisons intensify starting from the second quarter.
In Singapore, Marina Bay Sands is likely to outperform modestly relative to expectations. This optimistic outlook benefits from the timing of the Formula One event, which is scheduled to move into the fourth quarter, alongside gradual improvements in hotel performance metrics within the region.
US regional casinos exhibit mixed signals. BofA projects earnings estimates modestly above consensus, fueled by strength at MGM Resorts and Boyd Gaming Corp (NYSE:BYD). At the same time, caution emerges around Penn Entertainment Inc (NASDAQ:PENN), which may face challenges due to increased competition in the Louisiana market. Further, gaming revenue trends at same-store locations appear to soften throughout the quarter, suggesting potential headwinds.
Notably, Caesars Entertainment Inc (NASDAQ:CZR) shows indications that promotional intensity—which has been a source of margin pressure—might be stabilizing. This trend could bode well for improving profitability metrics over time within the promotional environment.
Summary and Outlook
BofA Securities' comprehensive update underscores the central role of online sports betting as a primary driver in the gaming sector amidst a backdrop of widespread softness across traditional gaming venues. Volatility remains a defining feature, particularly in the digital segment where share prices and betting volumes have declined sharply. In Las Vegas, divergences between the Strip and locals highlight the nuanced nature of recovery and growth, while regional U.S. casinos and Asian markets display varied momentum. Investor focus remains finely tuned to upcoming earnings results, promotional intensity, and operational leverage in evaluating the prospects of major gaming operators as 2026 progresses.