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.

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Revenue: $1.72 billion vs analyst estimates of $1.73 billion (4.8% year-on-year growth, 0.6% miss)

Adjusted EPS: -$0.22 vs analyst estimates of -$0.03 (significant miss)

Adjusted EBITDA: $194.9 million vs analyst estimates of $385.2 million (11.3% margin, 49.4% miss)

Operating Margin: 2.8%, down from 4.1% in the same quarter last year

Market Capitalization: $2.04 billion

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.

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.