Studio City International Holdings Limited (MSC) Q3 2026 earnings review
Studio City gaming revenue falls, while debt paydowns cut interest
Studio City, the Hollywood-themed casino and hotel resort in Macau, saw gaming and concert revenue shrink while hotel rooms stayed nearly full. Total revenue fell 11% from a year ago to $163 million, and operating profit dropped 39% to $15 million because fixed overhead and casino operator deductions took a larger bite of sales. Headline net loss narrowed to $13 million only because last year's currency losses did not repeat.
| Total operating revenue | $163.3M -10.5% from a year ago |
|---|---|
| Mass market table drop | $846.3M -10.2% from a year ago |
| Operating income | $14.7M -38.7% from a year ago |
| Total net debt | $1.95B -$28.8M from last quarter |
⚖️ Verdict: 🔴 Bearish
The story got worse because the slump at the resort's main gaming tables deepened for a third straight quarter. Gamblers bought 10% fewer chips at mass-market tables than a year ago, and adding over 200 slot machines from closed sister clubs failed to lift slot betting. One bright spot: paying down bonds cut quarterly interest costs by 10%.
The question now is whether the table slump reflects a temporary lull in arena concerts or permanent player losses to rival Cotai resorts. If fewer shows kept players away, a fuller fourth-quarter event schedule will lift both entertainment and table betting; if rivals took them, casino revenue will keep shrinking. Fourth-quarter table drop and entertainment revenue will tell.
🐂 Bull Case
Debt Paydowns Lowered Quarterly Interest Costs
Studio City carries $1.95 billion in debt on its balance sheet, so interest bills eat up more than all of its operating profit. The Macau resort group is using its credit line and cash to pay off older, costlier bonds. In July, it redeemed $165 million of its 6.5% senior notes due in 2028 by drawing $150.5 million from its bank facility and paying the rest from cash.
In September, management paid back $15 million of that bank loan. By our math, total debt net of financing costs fell by $28.8 million from last quarter and 5.2% from a year ago. Because the resort owes less and swapped 7% notes for 6.125% notes earlier this year, quarterly interest expense dropped 9.7% from a year ago to $27.9 million.
What to watch: fourth-quarter interest expense and net debt after the $10.6 million October land payment. Further declines in interest expense will show how much cash the summer bond redemption saves each quarter.
Hotel Rooms Stayed Full Despite Arena Slowdown
Outside the casino floor, Studio City runs 2,493 luxury hotel rooms, restaurants, a shopping mall, an indoor waterpark and a 5,000-seat concert arena. Total non-gaming revenue fell 8.4% from a year ago to $96.4 million, because fewer concert events cut entertainment revenue by 28.2% to $9.7 million and reduced shared services fees by 18.5%.
Even with fewer arena shows, guests kept filling the hotels and shops. Room occupancy stayed at 97% for a third straight quarter, while average daily room rates slipped just 1.1% to $176. That kept room revenue nearly steady at $43.5 million, down 1.4%, and mall tenant sales lifted rental revenue 6.1% to $5.4 million.
What to watch: fourth-quarter room rates and entertainment revenue during Macau's autumn holiday season. Holding 97% occupancy while entertainment rebounds would lift non-gaming revenue back above $100 million.
🐻 Bear Case
Mass Market Table Betting Shrank Again
Since Studio City moved its high-roller VIP tables to a sister property in late 2024, the resort relies on everyday mass-market gamblers. The company blamed its 10.5% revenue decline on "softer performance in mass market operations leading to a decrease in revenue from casino contract and lower overall non-gaming revenues".
- Mass market table drop (chips bought at tables): $846.3 million, down 10.2% from a year ago
- Table win per unit per day: $12,663, down 6.7% from a year ago
- Total gross gaming revenue: $320.9 million, down 6.8% from a year ago
- Net revenue from casino contract: $66.9 million, down 13.4% from a year ago
Table drop has now fallen from a year earlier for three quarters in a row, and the decline is getting steeper: from 2.4% in the first quarter to 7.7% in the second and 10.2% in the third. A higher hold rate — the casino kept 34.3% of chip purchases versus 33.1% a year ago — softened the blow, but better luck at the tables cannot replace missing players.
What to watch: fourth-quarter mass market table drop. A fourth consecutive drop decline, especially if table hold returns toward last year's 33.7%, would push casino contract revenue down again.
Currency Swings Hid A Wider Operating Loss
On the headline numbers, Studio City's bottom line looked better: net loss attributable to the company narrowed by 29.2%, from $18.6 million a year ago to $13.1 million, or $0.07 per American depositary share. Adjusted net loss, which strips out debt extinguishment and property charges, showed the exact same improvement.
That improvement came entirely from currency accounting rather than resort operations. In last year's third quarter, Studio City booked $10.1 million in net foreign exchange losses; this quarter, it booked a $0.8 million gain. Because the company does not remove foreign exchange swings from its adjusted loss figure, that $10.9 million positive swing masked a steeper operating slump.
Operating income fell 38.7% from a year ago to $14.7 million. By our math, excluding foreign exchange gains and losses from both periods, total net loss widened by 48.1%, from $10.2 million a year ago to $15.1 million this quarter.
What to watch: operating income relative to quarterly interest expense in the fourth quarter. Operating profit covered just 53% of interest expense this quarter, down from 77% a year ago, meaning the resort must lift operating profit by $13 million just to cover its interest bill.
Reallocated Slot Machines Diluted Daily Unit Win
Late last year, parent group Melco Resorts closed three off-site Mocha slot clubs in Macau and moved nearly 200 of their electronic gaming machines onto Studio City's floor. That transfer lifted Studio City's average machine count by 31.3% from a year ago, from 726 machines to 953.
The extra machines brought in almost no extra betting. Total gaming machine handle — the dollar value of all bets placed on slots — edged up just 2.2% from a year ago to $892.9 million, and down 14.1% from the second quarter. With nearly a third more machines sharing roughly the same betting volume and a lower 3.4% win rate, daily win per machine fell 27.5% from a year ago to $351.
What to watch: gaming machine handle and daily win per unit in the fourth quarter, when the resort laps the first wave of Mocha machine arrivals. If daily win per unit stays near $350, the transferred machines are adding floor upkeep without new players.
Fixed Overhead And Casino Costs Squeezed Margins
Studio City does not hold a Macau gaming licence directly; instead, parent Melco Resorts operates the casino and deducts gaming taxes and floor operating costs before passing the remaining contract revenue to Studio City. This quarter, those deducted taxes and casino costs fell only 4.9% to $254.0 million while gross gaming revenue fell 6.8%, so the operator deduction took 79.2% of gross gaming revenue, up 1.6 percentage points by our math.
Inside Studio City's own accounts, fixed overhead could not shrink fast enough to match the revenue drop. General and administrative expenses — corporate overhead and property upkeep — rose 2.5 percentage points of revenue to 27.9%, while depreciation and amortization rose 1.8 percentage points to 31.4%. Together, those rigid costs pushed operating margin down 4.1 percentage points to 9.0%.
What to watch: the share of gross gaming revenue deducted by the gaming operator next quarter. Any move back toward 77% would show Melco trimming table and floor staffing costs to match lower betting volumes.
👓 Other Themes
Macau Renewed The Resort Land Lease To 2036
After the quarter closed, Studio City extended the government lease for the Cotai land under its resort for another ten years, running from October 17, 2026 to October 16, 2036. The company secured the renewal "pursuant to the payment of a special contribution in the amount of MOP85.7 million (equivalent to US$10.6 million)", which removes land-title uncertainty beyond the 2032 gaming concession expiry.
💲 Other KPIs
Cash on hand, including $0.1 million of restricted cash, dropped by $20.4 million from $118.2 million at the end of June and sits 10.7% below its year-end 2025 level of $109.5 million. The resort used cash alongside its credit line to retire $165 million of senior notes in July and pay down $15 million of bank debt in September.
Spending on property upgrades fell from $8.1 million in the second quarter and $9.7 million a year ago. With its Phase 2 hotel and waterpark expansion already completed, capital spending took just 3.7% of operating revenue by our math, leaving more operating cash available for debt reduction.
Parent Melco Resorts reported Studio City Adjusted EBITDA (earnings before interest, taxes, depreciation and one-offs) $25.0 million higher than the $65.5 million in this release. The gap reflects "fees and shared service charges billed between the Company and its subsidiaries and certain subsidiaries of Melco Resorts" plus concession costs, down from $28.5 million in Q2 and $31.7 million in Q1.
❓ Key Questions
Why is mass table drop falling faster each quarter?
Mass market table games drop fell 10.2% from a year ago to $846.3 million, worse than the 7.7% drop in Q2 and 2.4% drop in Q1. Did the resort lose market share in Cotai, or are visitors spending less per trip?
Will Studio City remove idle slot machines?
Adding 227 transferred Mocha machines over the past year lifted slot handle by only 2.2% while cutting daily win per unit by 27.5% to $351. Will management cut floor capacity to reduce upkeep costs, or can marketing fill those seats?
What drove the 28% drop in entertainment revenue?
Entertainment revenue fell from $13.5 million a year ago to $9.7 million, and reached just $16.6 million across the first nine months versus $35.6 million last year. When will the 5,000-seat arena return to a full residency concert schedule?
When will Studio City publish Q3 operating cash flow?
The holding company release omits a cash flow statement, which usually arrives weeks later in the Studio City Finance bondholder report. With cash down $20.4 million this quarter and a $10.6 million land payment in October, how much cash did operations generate?