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Wynn Resorts' strong U.S. performance is offset by Macau weakness and rising costs, leading to margin pressures and cautious investor sentiment despite UAE growth potential.

# Wynn Resorts Q2 FY2025: U.S. Strength Offsets Macau Weakness, But Margin Pressures Persist

---

## Executive Summary

- **Wynn Resorts reported Q2 FY2025 revenue of $1.74B, essentially flat year-over-year (+0.3%) and in line with consensus, but adjusted EPS of $1.09 missed expectations by $0.11.** GAAP EPS of $0.64 reflected a larger miss, highlighting ongoing profitability challenges.
- **Earnings quality was mixed:** Robust U.S. operations, particularly in Las Vegas (record adjusted property EBITDAR of $234.8M, +1.9% YoY), were offset by a significant decline in Macau EBITDAR (-14.8% YoY). Overall, adjusted property EBITDAR fell 3.4% YoY, and GAAP net income dropped 40.9% YoY, reflecting margin compression from rising costs.
- **Management struck a cautiously optimistic tone,** emphasizing strong U.S. fundamentals and progress on the UAE project (Wynn Al Marjan Island), but acknowledged persistent cost inflation and continued softness in Macau, especially in the VIP segment.
- **Key risks include regulatory headwinds, ongoing cost inflation (notably in G&A and stock-based compensation), and volatility in Macau.** However, upside potential remains in the U.S. and from the UAE expansion, with the market possibly underestimating these growth levers.
- **Catalyst watch:** Execution milestones for the UAE project and stabilization in Macau performance are critical. Near-term, investors should monitor cost trends and any updates to guidance.

---

## Performance Snapshot

| Metric                | Reported   | Consensus | Surprise   | YoY Change   |
|-----------------------|------------|-----------|------------|--------------|
| Revenue               | $1.74B     | $1.74B    | In line    | +0.3%        |
| Adjusted EPS          | $1.09      | $1.20     | -$0.11     | -9%          |
| GAAP EPS              | $0.64      | $0.85     | -$0.21     | -40.9%       |
| Adj. Property EBITDAR | $524.6M    | $542M     | -$17.4M    | -3.4%        |
| Las Vegas EBITDAR     | $234.8M    | —         | —          | +1.9%        |
| Macau EBITDAR         | $246.6M    | —         | —          | -14.8%       |

---

## Earnings Quality

- **Revenue mix was heavily weighted toward U.S. operations,** with Las Vegas and Encore Boston Harbor delivering record volumes. However, this was not enough to offset the sharp decline in Macau, where VIP hold and mass market softness weighed on results.
- **Margins deteriorated:** Despite stable top-line performance, GAAP net income fell 40.9% YoY and adjusted net income declined 9% YoY. The primary drivers were increased General & Administrative expenses and higher stock-based compensation, which outpaced revenue growth.
- **Cost structure is under pressure,** with management highlighting ongoing inflation in both fixed and variable costs. This divergence between sales growth and profitability is a key concern for investors.

---

## Management Commentary & Guidance

- **Management’s tone was mixed:** They expressed confidence in the resilience of U.S. operations and the long-term potential of the UAE project, but were candid about the challenges in Macau and the impact of rising costs.
- **Guidance was not formally updated,** but management’s commentary suggests a conservative outlook, with a focus on cost discipline and cautious assumptions for Macau recovery. The company continues to prioritize shareholder returns, with $158.1M in share repurchases and a $0.25 per share dividend in the quarter.

---

## Key Risks

- **Cost inflation remains a significant headwind,** particularly in G&A and equity compensation, threatening further margin compression.
- **Macau regulatory and demand-side risks** persist, especially in the VIP segment, where volatility and weak hold rates continue to impact results.
- **Execution risk** around the UAE project could affect the growth narrative if timelines slip or costs escalate.

---

## Expected Market Reaction

- **Analyst sentiment is cautious:** While the strong U.S. performance and UAE potential are positives, the EPS miss and margin pressures are likely to weigh on near-term sentiment. Options market positioning (63% bearish whale trades) suggests investors are bracing for continued volatility.
- **Stock reaction is likely to be muted or modestly negative,** with upside capped until there is clearer evidence of margin stabilization and Macau recovery.

---

## Final Takeaway

- **Q2 FY2025 was a mixed quarter for Wynn Resorts:** U.S. operations remain a bright spot, but margin pressures and Macau weakness are significant drags. The market may be overvaluing near-term shareholder returns while underestimating the impact of rising costs and international volatility.
- **Key upcoming catalysts:** Progress updates on the Wynn Al Marjan Island (UAE) project and any signs of stabilization in Macau will be critical for sentiment and valuation.
- **Bottom line:** Wynn Resorts’ quarter is fundamentally sound in the U.S., but fragile overall due to cost and international headwinds. Investors should closely monitor cost trends and international segment performance for signs of sustainable recovery.

Wynn (WYNN): U.S. Strength, Margin Pressures, Macau Drag

Wynn Resorts faces margin pressure and Macau headwinds, but resilient U.S. gaming trends and disciplined capital allocation may support stabilization in Q2 2025.

# Wynn Resorts, Limited: Navigating Gaming Momentum and Macau Headwinds—A Forward-Looking Q2 2025 Earnings Outlook

## Executive Summary: Cautious Optimism Amid Mixed Regional Signals

We hold a **Neutral-to-Slightly Bullish** outlook for Wynn Resorts, Limited heading into the Q2 2025 earnings release. While **Q1 2025 revenue declined 8.7% YoY to $1.70B** and operating margin compressed to **15.8%**, robust slot machine handle growth (up **16.8–23.4%** across key geographies) and sustained high occupancy (**87–99%**) provide a foundation for stabilization and modest sequential recovery. However, persistent softness in Macau’s VIP segment and ongoing capex delays due to tariff uncertainty present material risks. **The market may be underestimating the impact of management’s proactive capital allocation—balancing share repurchases ($300M YTD) with deferred investments—which could buffer near-term volatility but signal caution on future growth.**

## Recent Trends Signal What’s Next

Recent quarters reveal a clear pattern: **revenue softness and margin compression, offset by improving gaming KPIs**. The last four quarters show:

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS ($) |
|--------------|--------------|------------------|----------------------|---------------|---------|
| Q2 2024      | 1.85         | 36.2             | 19.5                 | 11.2          | 1.22    |
| Q3 2024      | 1.80         | 35.1             | 18.7                 | 10.8          | 1.15    |
| Q4 2024      | 1.74         | 33.8             | 17.2                 | 9.9           | 1.09    |
| Q1 2025      | 1.70         | 32.5             | 15.8                 | 8.7           | 1.07    |

**Trend:** Revenue and margins have declined sequentially, but the rate of decline is slowing. The **recent surge in slot handle** and **stable occupancy** suggest a potential inflection point for Q2 2025, with the possibility of margin stabilization if cost controls hold.

## Management’s Forward Tone and Positioning

Management’s Q1 2025 commentary was **measured but cautiously optimistic**. Key statements include:

- “We’re seeing early signs of normalization in demand in Las Vegas, with healthy booking trends.”  
- “There’s still uncertainty out there, particularly in Macau’s mass market.”  
- “We remain focused on strong cost discipline and prudent capital allocation.”

Compared to prior quarters, the tone has shifted from defensive (emphasizing cost cuts and macro headwinds) to a more balanced stance, highlighting both **opportunity in gaming volumes** and **ongoing caution in Asia**. The lack of explicit forward guidance and references to “tariff-related Capex delays” signal a wait-and-see approach, especially regarding international recovery.

## KPI Trends & Upcoming Quarter Drivers

The most relevant KPIs for Q2 2025 are:

| KPI                        | Q1 2025 | YoY Change | QoQ Change | Q2 2025 Outlook         |
|----------------------------|---------|------------|------------|-------------------------|
| Slot Machine Handle        | +18.8%  | +16.8%     | +4.2%      | Continued strength      |
| Occupancy Rate             | 92%     | -1.5pp     | +0.3pp     | Stable to slightly up   |
| Macau VIP Table Win        | -12.5%  | -18.0%     | -3.0%      | Further pressure likely |
| ADR (Macau)                | $312    | -7.2%      | -2.1%      | Flat to down            |

- **Slot handle growth** is likely to drive incremental revenue, especially if win rates hold.
- **Occupancy stability** supports room and ancillary revenue, offsetting some ADR softness.
- **Macau VIP weakness** remains a drag, with further downside risk if regional demand does not rebound.

## Missed by the Street

Two subtle but important signals:

1. **Capex Deferral:** Management disclosed that **$375M in Capex** is being delayed due to tariff and regulatory uncertainty. This is a forward-looking signal of caution, not just a cost-saving measure.
2. **Share Repurchase Acceleration:** The company repurchased **$200M in Q1 and $100M in early Q2**, indicating confidence in intrinsic value but also a lack of near-term high-return investment opportunities.

These actions suggest a more defensive posture than headline commentary implies.

## Scenarios for the Upcoming Quarter

| Scenario | Revenue ($B) | EPS ($) | Operating Margin (%) | Key Assumptions                                              |
|----------|--------------|---------|----------------------|--------------------------------------------------------------|
| Bull     | 1.75         | 1.15    | ~16.0                | Slot handle growth sustains, Macau ADR stabilizes, cost control holds |
| Base     | 1.70         | 1.07    | 15.8                 | Occupancy steady, Macau remains soft, no major cost surprises        |
| Bear     | 1.65         | 0.98    | ~15.0                | Macau VIP/table games deteriorate, further ADR/REVPAR declines       |

**Most Likely:** The **Base case** is most probable, given current KPI trends and management’s balanced tone. Upside is capped by Macau headwinds, while downside is limited by strong U.S. gaming and cost discipline.

## Appendix – Data Tables & Management Quotes

### Quarterly Financial Trends

| Quarter      | Revenue ($B) | EPS ($) | Gross Margin (%) | Operating Margin (%) |
|--------------|--------------|---------|------------------|----------------------|
| Q2 2024      | 1.85         | 1.22    | 36.2             | 19.5                 |
| Q3 2024      | 1.80         | 1.15    | 35.1             | 18.7                 |
| Q4 2024      | 1.74         | 1.09    | 33.8             | 17.2                 |
| Q1 2025      | 1.70         | 1.07    | 32.5             | 15.8                 |

### KPI Movement Table

| KPI                 | Q1 2025 | YoY Change | QoQ Change |
|---------------------|---------|------------|------------|
| Slot Handle         | +18.8%  | +16.8%     | +4.2%      |
| Occupancy Rate      | 92%     | -1.5pp     | +0.3pp     |
| Macau VIP Table Win | -12.5%  | -18.0%     | -3.0%      |
| ADR (Macau)         | $312    | -7.2%      | -2.1%      |

### Key Management Quotes

1. **“We’re seeing early signs of normalization in demand in Las Vegas, with healthy booking trends.”**  
   – Q1 2025 Earnings Call  
   *Signals potential for sequential revenue stabilization in the U.S.*

2. **“There’s still uncertainty out there, particularly in Macau’s mass market.”**  
   – Q1 2025 Earnings Call  
   *Highlights ongoing risk to international segment recovery.*

3. **“We remain focused on strong cost discipline and prudent capital allocation.”**  
   – Q1 2025 Earnings Call  
   *Implies margin protection is a near-term priority.*

4. **“Tariff-related Capex delays are impacting the timing of our Encore Tower remodel.”**  
   – Q1 2025 10-Q  
   *Suggests investment risk and potential future growth constraints.*

5. **“We repurchased $200 million of shares in Q1 and an additional $100 million in early Q2.”**  
   – Q1 2025 Earnings Call  
   *Indicates management’s confidence in valuation but also a lack of immediate growth projects.*

6. **“High occupancy rates, particularly in Las Vegas, continue to support our topline.”**  
   – Q1 2025 Earnings Call  
   *Supports the base case for revenue stability.*

7. **“We are monitoring wage inflation closely, especially in our U.S. operations.”**  
   – Q1 2025 Earnings Call  
   *Points to a potential cost risk if labor markets tighten further.*

---

**In summary:** Wynn Resorts enters Q2 2025 with a mixed but stabilizing outlook—U.S. gaming strength and cost discipline are offset by persistent Macau softness and investment delays. The base case scenario is most likely, with upside capped by international uncertainty and downside limited by operational resilience.

Wynn (WYNN): Margin Pressure vs. U.S. Gaming Resilience