JP Morgan Cuts Macau 2026 EBITDA Estimates

JP Morgan has lowered its 2026 EBITDA projections for Macau’s casino operators following the surge in VIP baccarat activity in the fourth quarter of 2025, which contributed to weaker-than-expected revenue growth, according to Macau’s gaming regulator.

Analysts DS Kim, Selina Li and Lindsey Qian highlighted that while gross gaming revenue (GGR) is still projected to rise in 2026, confidence in a sustained profit recovery has declined. The increasing proportion of VIP gaming, which offers thinner margins than base mass and premium mass segments, remains a key concern.

Caution in Analyst Ratings
The bank has cut 2026 EBITDA estimates across Macau’s six major operators by roughly 3–4 percent. JP Morgan also adjusted its outlook on SJM Holdings from Neutral to Underweight, while Melco Resorts was downgraded from Overweight to Neutral. The previous optimism is now considered unsustainable, despite 2025 GGR surpassing initial growth expectations of 5 percent by reaching 9 percent.

Margins Lag Behind Revenue
JP Morgan’s analysis shows that EBITDA growth for 2025 totaled only 6 percent. When adjusted for VIP-driven variance, the increase falls to 1–2 percent, below the 4 percent target. VIP baccarat’s share of total GGR rose to 16 percent by year-end, compared to 12 percent in 2024, while even premium mass segments experienced margin pressures relative to base mass play.

Rising Operating Costs
Operating expenses climbed about 7 percent in 2025, above the 3 percent baseline inflation, driven not only by gaming volume but also by non-gaming activities such as concerts, sports and private events. These contributed positively to GGR but negatively affected margins due to reduced operational efficiency.

Outlook for 2026
Reinvestment and competition were not primary margin constraints in 2025, except at Sands China, which pursued catch-up measures. JP Morgan noted that GGR growth peaked in 4Q25, with slower expansion expected in 2026. EBITDA forecasts remain conservative until clear signs of margin improvement emerge.