Light & Wonder (LNW) Q2 EPS Jumps 15%

Key Points

• Adjusted EPS (non-GAAP) was $1.58 for Q2 2025, beating estimates by 15.3%, despite consolidated revenue (GAAP) missing expectations by about 4.9%.

• Net income (GAAP) and margins improved, even as revenue (GAAP) fell 1% from the prior year due to softer game sales.

• The Grover acquisition contributed $21 million in new GAAP revenue, helping to boost recurring revenue streams.

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Light & Wonder (NASDAQ:LNW), a gaming technology and cross-platform content provider, released its second quarter earnings on August 6, 2025. The headline news from this period was a strong outperformance in adjusted (non-GAAP) earnings per share despite a revenue (GAAP) miss. The company reported adjusted non-GAAP diluted EPS of $1.58—well above the analyst consensus of $1.37—while revenue (GAAP) of $809 million fell short of the $851.06 million expectation. Compared to the same period last year, net income (GAAP) rose to $95 million from $82 million, even as consolidated revenue (GAAP) declined 1%. The quarter featured significant margin expansion and healthy additions to recurring revenue streams, though it also reflected cautious customer purchasing due to broader economic conditions. Overall, the quarter underscored disciplined operational execution and successful integration of new business segments, set against delayed capital spending by key customers.

Source: Analyst estimates for the quarter provided by FactSet.

Company Overview and Key Business Drivers

Light & Wonder is a global developer and supplier of gaming technology and content, with a presence spanning land-based casino machines, online gaming platforms, and social casino apps. The company is organized into three main business segments: Gaming, SciPlay (social casino games), and iGaming (real money online casino content). Its product range covers gaming machines, digital content, software systems, and platform technologies aimed at operators worldwide.

The company's recent strategic focus has centered on building hit game franchises that can move seamlessly across different platforms, investing in research and development to drive both innovation and recurring revenue, and enhancing operating margins. Success depends on creating engaging, cross-platform content, complying with complex regulatory requirements, and keeping its technology and product base fresh in a highly competitive industry.

Quarter Highlights and Segment Developments

The quarter reflected several key milestones for Light & Wonder. Despite a year-over-year drop in total revenue, both net income (GAAP) and margins increased, showing the company’s focus on high-margin, recurring revenue streams and efficiency initiatives. Adjusted EPS (non-GAAP) of $1.58 came in 15.3% higher than consensus, supported by a 7% rise in consolidated AEBITDA (non-GAAP), which reached $352 million. Net income climbed to $95 million, an increase of 16% compared to the prior year period (GAAP).

Product and platform innovation continued to drive performance, with the North American premium installed base (high-earning gaming machine units) growing for the 20th straight quarter. The company’s COSMIC and HORIZON cabinet hardware lines further supported expansion. The newly acquired Grover business (charitable gaming platforms) added $21 million in revenue, and more than 600 new Grover units were integrated since the initial deal announcement in February 2025. Grover also provided a practical test platform for developing Light & Wonder’s Carbon software architecture, aimed at unifying game development and reducing costs.

In the Gaming segment, Gaming revenue was $528 million, down 2% compared to the prior year period, as customer caution delayed some hardware purchases, particularly internationally where unit sales declined. Operations revenue rose 19% year over year. Gaming AEBITDA (non-GAAP) reached $280 million, with Gaming segment AEBITDA margin (non-GAAP) expanding 3 percentage points to 53%. Average sales price per new unit held steady around $18,930, and the premium machine mix reached 52% of the North America base.

SciPlay, Light & Wonder’s social casino games division, posted revenue of $200 million (down 2%). Positive trends included a 4% increase in average revenue per daily active user, now $1.08, and progress in direct-to-consumer sales, which reached 18% of segment revenue. However, average monthly payers declined, resulting in a dip in the payer conversion rate to 9.8%. AEBITDA in this segment increased to $74 million, with margins rising to 37%.

The iGaming segment saw revenue climb 9% to $81 million, setting a new quarterly record (GAAP). This growth was powered by strong momentum in North American real money online gaming and expanding operator networks. iGaming AEBITDA (non-GAAP) reached $28 million, with AEBITDA margin (non-GAAP) advancing to 35%. A record $26.6 billion in player wagers was processed on the company’s Open Gaming System aggregation platform. Light & Wonder also continued to integrate new content and leverage its first-party game franchises to attract players and partners.

On the capital front, Light & Wonder completed an $850 million acquisition of Grover’s charitable gaming business and returned $266 million to shareholders through buybacks in the first half of fiscal 2025. Its net debt leverage ratio was 3.7x, within the long-term target of 2.5x–3.5x. The company plans to return leverage to target levels over the next several quarters.

Material one-time expenses this period included $73 million in legal settlements and $2 million in transaction-related costs tied to the Grover acquisition, which together reduced reported free cash flow to $29 million, down from $70 million in Q2 2024.

Looking Ahead: Guidance and Watch Points

Management provided forward-looking non-GAAP earnings and cash flow guidance for FY2025. It projects consolidated AEBITDA (non-GAAP) between $1.43 billion and $1.47 billion for FY2025, including about $65 million contribution from Grover to consolidated AEBITDA guidance. Adjusted NPATA is expected to land between $550 million and $575 million for FY2025. The company noted that earnings will be “second half weighted,” with a noticeable step-up in growth anticipated for Q3 and especially Q4 as delayed international game sales and new projects materialize.

Other watch areas for investors include the pace of rebound in global gaming machine sales, stabilization of SciPlay’s payer base, and progress on cross-platform initiatives such as the Carbon architecture and further direct-to-consumer expansion. No changes were made to long-term strategic targets, and the company continues to focus on margin improvement, digital growth, and disciplined capital allocation as the year progresses.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Light & Wonder. The Motley Fool has a disclosure policy.