Casino, sports betting and entertainment operator PENN Entertainment (NASDAQ: PENN) fell short of the markets revenue expectations in Q3 CY2025 as sales rose 4.8% year on year to $1.72 billion. Its non-GAAP loss of $0.22 per share was significantly below analysts’ consensus estimates.

Is now the time to buy PENN? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

PENN Entertainment’s third quarter results were met with a significant negative market reaction, as the company missed Wall Street’s revenue and profit expectations. Management attributed the underperformance to challenges in its digital operations, particularly lower-than-anticipated online sports betting volumes and customer-friendly game outcomes. CEO Jay Snowden acknowledged that despite meaningful progress in product and cross-sell efforts, PENN was unable to establish ESPN Bet as a major player, prompting an early termination of the ESPN partnership. Snowden stated, “It is the right time to realign our interactive focus and enhance connectivity across our ecosystem.”

Looking ahead, management’s guidance is influenced by the transition to a unified digital brand strategy, with an emphasis on efficiency and profitability in the interactive segment. The upcoming shift to theScore Bet across North America is expected to streamline operations and reduce fixed media costs, freeing up resources for targeted marketing in high-return markets. Snowden outlined the focus on cross-selling between digital and land-based assets, noting, “Our digital realignment will free up resources to strategically invest in the North American markets and customer cohorts with the strongest return potential.” Management remains cautious about retention risks during the rebranding but believes the new approach positions PENN for improved profitability in 2026 and beyond.

Key Insights from Management’s Remarks

Management cited the early end of the ESPN partnership, evolving digital strategy, and continued investment in omnichannel capabilities as primary factors shaping the quarter’s results and near-term outlook.

• ESPN Deal Termination: PENN announced the early conclusion of its ESPN marketing agreement, citing insufficient competitive scale for ESPN Bet and the need to reallocate resources to higher-return segments. Management expects the cessation of fixed ESPN payments to improve cost flexibility and digital margins.

• Transition to theScore Bet: The company is shifting its digital focus to theScore Bet, leveraging its established presence in Canada and North America. Management highlighted a seamless customer transition, with all account data and balances automatically ported, and emphasized expected improvements in operational efficiency and cross-sell opportunities.

• iCasino Momentum: PENN’s North American iCasino business achieved its highest quarterly gaming revenue to date, with management noting a 40% year-over-year improvement driven by increased cross-sell from sports betting and new standalone app features. This growth channel was described as a key area for future expansion.

• Retail Casino Stability: The core regional casino business saw stable demand, particularly in markets without new competition. New property openings, such as Hollywood Casino Joliet, contributed to database growth and customer reactivation, with over 50% of new signups coming from previously inactive customers.

• Operational Cost Pressures: Management pointed to increased marketing and labor expenses in markets facing new competition, resulting in temporary margin compression. They expect these pressures to subside as promotional activity normalizes and the company continues to invest in property upgrades and customer experiences.

Drivers of Future Performance

Management’s outlook centers on executing the digital brand transition, optimizing marketing spend, and strengthening omnichannel cross-sell while navigating competitive and regulatory challenges.

• Digital Brand Realignment: The move away from ESPN Bet to theScore Bet aims to streamline PENN’s digital operations, reduce fixed marketing costs, and enable more targeted spend toward profitable customer segments, especially in Canada and U.S. iCasino states. Management emphasized achieving breakeven or better digital results by 2026.

• Customer Retention Focus: Management identified customer retention risks during the rebranding as a key uncertainty, referencing improved app features and targeted CRM strategies to minimize user churn. The company expects retention outcomes to become clearer in the coming months, which will inform marketing and investment plans for 2026.

• Retail and Digital Synergy: PENN continues to prioritize cross-sell between its digital and land-based properties, leveraging its large customer database. New property openings and product enhancements are expected to support visitation and spending, particularly among younger, digitally-engaged customers.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the effectiveness of theScore Bet rebranding and customer retention strategies, (2) the impact of reduced fixed marketing costs and more targeted digital investment, and (3) performance trends at new and existing casino properties, including cross-sell between digital and retail. Execution on digital profitability targets and regulatory developments in iCasino markets will also be key factors shaping future results.

PENN Entertainment currently trades at $14.58, down from $16.37 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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