Melco Resorts (MLCO) Q3 2026 earnings review
Melco's Macau casino profits fall, while net debt climbs
Melco Resorts suffered a deeper drop in Macau casino play while its smaller Cyprus resort hit a record. Third-quarter revenue fell 10% from a year ago to $1.17 billion, and property operating cash profit dropped 24% to $288 million, wiping out almost all net profit after interest costs. Chief executive Lawrence Ho expressed confidence in Macau's prospects, even as high-roller luck at City of Dreams Macau fell below the company's target range and everyday table betting shrank.
| Operating revenue | $1.17B -10.4% from a year ago |
|---|---|
| Property operating cash profit (Adjusted Property EBITDA) | $287.6M -24.4% from a year ago |
| Profit per ADS, excluding one-offs | $0.018 $0.212 a year ago (-92%) |
| High-roller win rate target | Unchanged 2.85%–3.15% expected range (2.49% actual at City of Dreams Macau) |
⚖️ Verdict: 🔴 Bearish
The story got worse because Macau betting volumes kept falling after the second quarter's World Cup dip, showing the slump was not a one-off event. At the same time, the casino operator spent $160 million on share buybacks between July and early November, draining cash and pushing net debt up to $6.09 billion by our math. One bright spot: corporate overhead dropped into the planned range after the company bought out its parent's trademark fee.
The question now is whether Macau's drop reflects temporary disruption from retail renovations and bad table luck or permanent market share losses to rival casinos. If the newly opened REM hotel brings high-spending guests back, table volumes will rebound; if rivals are winning those players, profits will stay depressed. Fourth-quarter Macau table betting volume covering the October holiday period will settle it.
🐂 Bull Case
Cyprus Casinos Delivered Record Operating Cash Profit
Melco operates the City of Dreams Mediterranean resort and three smaller satellite casinos in Cyprus. Regional conflicts in the Middle East hurt tourism there earlier this year, keeping hotel occupancy at 41% in the first quarter. Chief executive Lawrence Ho said the properties showed resilience "despite the ongoing headwinds in those countries and regions." "In particular, City of Dreams Mediterranean and our satellite casinos delivered its highest quarterly EBITDA on record," Ho said.
The numbers confirm a summer rebound in Cyprus. Revenue rose 13% from a year ago to $96.7 million, and property operating cash profit (Adjusted EBITDA, which excludes interest, taxes, depreciation and one-offs) grew 11% to $25.7 million. Mass-market table drop—the money everyday players exchanged for chips—jumped 17% to $220.6 million, while hotel occupancy climbed 11 percentage points to 83%.
What to watch: fourth-quarter hotel occupancy in Cyprus. Last year occupancy fell to 55% after the summer peak, so holding above 65% in the fourth quarter would show the resort is building year-round demand.
Corporate Costs Dropped After Trademark Buyout
In April, the casino operator agreed to pay its parent company $375 million to buy the brand trademarks used at its resorts. Previously, Melco paid a licensing fee booked inside corporate overhead, which management had planned at $35 million in the first quarter before cutting the third-quarter outlook to $20 million to $25 million.
Third-quarter corporate and other expenses excluding one-offs landed at $22.9 million, down 20% from $28.5 million a year ago and inside the planned range. That reduction saved $5.6 million compared with last year and shows the licensing fee has stopped hitting the income statement. However, the savings did not prevent total general and administrative overhead from rising 1.3 percentage points of revenue to 14.1% because overall sales shrank.
What to watch: fourth-quarter corporate expenses and the timing of the final $75 million trademark payment. Staying near $23 million next quarter will confirm the lower cost run-rate is permanent.
🐻 Bear Case
Macau Table Betting Kept Falling After the World Cup
"We continue to be confident in the long-term prospects of our businesses in Macau," Ho said. After a weak second quarter that executives partly blamed on the World Cup and unlucky high-roller results, third-quarter Macau results worsened on both comparisons. The company attributed the 10.4% group revenue decline to "softer performance in rolling chip and mass market table games as well as overall non-gaming operations."
- Macau property operating cash profit: $225.0 million, down 29.0% from a year ago and down 9.8% from last quarter by our math
- City of Dreams Macau rolling chip volume (high-roller bets): $4.63 billion, down 17.0% from a year ago and down 10.3% from last quarter
- City of Dreams Macau high-roller win rate: 2.49%, below the 2.85%–3.15% expected range, cutting table winnings by $23.6 million against the 3.0% middle of the range by our math
- Everyday mass-market table drop: down 10.2% from a year ago at Studio City ($846.3 million) and down 1.8% at City of Dreams ($1.63 billion)
Bad luck at high-roller tables explains only part of the drop, because customers also put less money on the tables at both major Macau resorts than in the second quarter. Because casino operating costs are mostly fixed, group operating margin fell 5.6 percentage points from a year ago to 8.5%, as casino expenses rose 1.8 points of revenue and depreciation plus administrative overhead rose 2.6 points.
What to watch: fourth-quarter mass-market table drop at City of Dreams and Studio City. If betting volume does not rebound during the October Golden Week holiday quarter, the company is losing players to rival Macau resorts.
Net Debt Rose While Cash Funded Share Buybacks
Melco carries $6.98 billion of total debt and faces a heavy interest bill that consumed $110.8 million in the third quarter, leaving just $34 thousand in net profit for shareholders. While management previously stated that debt reduction remains the priority, the group also runs an active share repurchase program that bought back $160.0 million of stock between July 1 and November 3.
During the third quarter, the casino group redeemed $600.0 million of senior notes due in 2027 and $165.0 million of Studio City notes due in 2028. Rather than paying those bonds off with earnings, it funded them by drawing down revolving credit lines and spending cash on hand. Total cash including restricted balances dropped from $1.04 billion in June to $886.6 million in September, pushing net debt up by $77.7 million in the quarter to $6.09 billion by our math.
What to watch: fourth-quarter net debt and credit line balances. The group drew another $15.0 million on its credit facility on October 28, so continued buybacks while Macau profits are depressed will increase borrowing further.
Manila Gaming Slump Deepens Across All Table Types
City of Dreams Manila is the company's integrated resort in the Philippines, where domestic competition and weaker high-roller visits have weighed on results all year. Ho said the Philippine property "continued to demonstrate resilience" against local headwinds, even as every gaming line at the resort contracted.
Manila revenue fell 10.6% from a year ago to $99.0 million, and property operating cash profit dropped 20.2% to $32.9 million. Unlike in Macau, high-roller luck in Manila was favorable at a 4.09% win rate against the 2.85%–3.15% target range, but high-roller betting volume fell 6.3% to $484.5 million and everyday mass table drop fell 6.4% to $134.9 million. Hotel room pricing also weakened, with the average daily rate dropping 11.4% to $140.
What to watch: Manila mass-market table drop and room rates in the fourth quarter. A further drop below $130 million in mass table volume would show the Philippine resort is still losing local gaming spend.
Risks this quarter didn't answer
Three standing concerns from prior quarters received no new figures in the third-quarter earnings release because those details are typically given on the conference call or in full regulatory filings.
- Macau daily operating costs: not in the release; the conference call remarks will show whether daily costs stayed inside the $3.3 million to $3.4 million target range after opening the REM hotel.
- Parent trademark buyout closing payment: not in the release; full filings will show whether the remaining $75.0 million cash payment has been made.
- Affiliate loan counterparty: not in the release; full filings will show who received the $368.0 million loan advanced from the Macau credit facility in the second quarter.
👓 Other Themes
REM Hotel Opened and Studio City Extended Land Rights
Melco is upgrading its Macau resorts to attract wealthy travelers without relying on high-roller middlemen. Ho said that with "the opening of our newly branded hotel REM and the renovation of our retail space at City of Dreams, we believe we are well positioned to capture the demands of our evolving customer base, supporting long-term growth." Separately, the group paid $10.6 million in October to renew the Studio City land lease through October 2036.
💲 Other KPIs
Melco reduced its diluted ordinary share count by 6.4% from a year ago and 4.9% from last quarter. The resort operator repurchased 33.1 million American depositary shares (99.2 million ordinary shares) for $160.0 million between July 1 and November 3, leaving $487.0 million authorized for future buybacks.
Capital spending on resort upgrades fell from $123.9 million in the second quarter to $83.0 million, or 7.1% of revenue, focused on City of Dreams Macau, Cyprus and Studio City. By our math, management's prior forecast of $225 million in second-half spending leaves $142 million for the fourth quarter.
Interest expense net of capitalized amounts fell 2.1% from a year ago and stayed flat against the second quarter's $111.0 million. The figure beat management's $115 million to $120 million expense forecast for a third consecutive quarter after the company refinanced higher-rate senior notes with revolving credit lines.
🔮 Guidance
Unchanged. The company maintains its theoretical high-roller win rate target of 2.85% to 3.15% across its Macau, Manila and Cyprus resorts. In the third quarter, actual win rates landed below the range at City of Dreams Macau (2.49%) and Cyprus (-15.34% on tiny volume), while Manila beat the range at 4.09%.
❓ Key Questions
What was Macau daily operating cost in the third quarter?
Management previously planned to hold Macau daily operating costs at $3.3 million to $3.4 million even after opening the REM hotel. Because the press release omits this figure, investors need the number to see if fixed costs stayed under control while revenue fell.
How much is retail construction hurting City of Dreams Macau?
Non-gaming revenue at City of Dreams Macau fell 6.8% from a year ago to $88.4 million, and everyday table betting dropped 6.9% from the second quarter. Management has not quantified how much of this drop comes from ongoing retail renovation disruption through mid-2027.
Why draw credit lines for buybacks while cash profit falls?
Melco spent $160 million on share buybacks between July and early November while net debt rose to $6.09 billion and net profit nearly vanished. Investors need to know if management will slow repurchases until Macau cash flow recovers.
Has the final $75 million parent trademark payment closed?
Corporate expenses fell into the planned $20 million to $25 million range, indicating the parent trademark licensing fee has ended. The release did not state whether the final $75 million cash payment to the controlling shareholder's company has been paid.