The investing narrative surrounding the gambling industry has shifted dramatically, moving away from the once simple equation of increased betting leading to higher growth. A significant indicator of this downturn is Entain's recent departure from the FTSE 100, reflecting broader struggles faced by gambling stocks across Europe and the United States. Despite reporting growth in its key markets, Entain's shares have slumped over the past year.
In the first half of the year, Entain's online net gaming revenue grew by 7% when adjusted for currency fluctuations. Revenue in Britain and Ireland surged by 13%, and the company maintained its forecast for a full-year growth in online revenue of between 5% and 7%. So, what’s impacting its stock price negatively?
The market now prioritizes profitability, cash flow, and sustainable regulations, rather than just growth potential. Ed Birkin, managing director at H2 Gambling Capital, suggests that the decline in share prices indicates something more entrenched than mere shifts in earnings forecasts.
"The industry share price declines have been much more severe than the cut to earnings projections," he noted, explaining that weakening fundamentals contribute to lowered valuations that investors apply to these businesses.
Entain's slip from the index follows a more dramatic move by Flutter Entertainment, which transitioned to the New York Stock Exchange in January 2024, later shifting its primary listing from London to New York. Initially, this move paid off, with Flutter’s market capitalization soaring from about $36 billion upon trading commencement in New York to nearly $50 billion by June of the following year. However, this value plummeted as investors adjusted their earnings expectations downward.
In the second quarter of 2026, Flutter’s US revenue dropped by 6% to $1.683 billion, while its sportsbook revenue decreased by 15%. Even though FanDuel maintained its dominance as the leading US sportsbook, capturing a 39% share of the market, the company's adjusted EBITDA saw a sharp decline, prompting Flutter to lower its guidance.
Ben Robinson, managing partner at Corfai, commented on how the US listing initially served its purpose, but problems surfaced later on. He described the market dynamics as a “K-shaped” environment, where capital now favors a narrow band of technology stocks and penalizes others based on earnings.
Shifting focus back to Entain, the company grapples with specific challenges in the UK, primarily revolving around tax, debt, and diminished investor confidence. By the end of June, Entain carried nearly £3.6 billion in net debt, alongside a reported leverage of 3.1 times underlying EBITDA. Although online net gaming revenue increased by 7%, the online underlying EBITDA fell by 5% in the same timeframe, largely due to the substantial tax repercussions from recent regulatory changes.
Starting April 1, the UK government raised Remote Gaming Duty (RGD) from 21% to 40%, with a new 25% General Betting Duty rate set for remote betting commencing in April 2027, excluding remote bets on UK horse racing.
The impact of higher RGD alone amounted to a £56 million dip in first-half EBITDA. While UK operators face tough government policy and mounting taxes, their American counterparts contend more with intense competition. To respond to these challenges, Entain has initiated a strategy to streamline its operations. It recently agrees to divest a 20% interest in Entain CEE for €425 million, projecting a total enterprise value of around €2.1 billion. The proceeds from this deal and future exits are intended to bolster debt reduction and potentially return excess capital to shareholders.
Analyzing four major gambling firms—Entain, Flutter, DraftKings, and MGM Resorts International—highlights why the sector cannot be considered a monolithic entity. While Flutter is seen as having the most robust online presence, its share price dramatically fell from $282.33 on September 18, 2025, to $89.56 on September 18 this year, resulting in a market valuation of $15.54 billion. FanDuel's leadership position continues to drive growth, but investor scrutiny regarding future earnings potential is increasing.
DraftKings has experienced a different kind of volatility, with its share price dropping from $43.30 to $21.75 in the same timeframe. Beynon posits that DraftKings presents significant operational potential if it can strengthen profitability from its customer base. Meanwhile, MGM Resorts International gains stability through its diversified investment approach, which includes Las Vegas, regional casinos, property assets, and a 50% stake in BetMGM, resulting in a modest share price increase to $37.81.
Entain occupies a middle ground, possessing substantial international reach and a valuable interest in BetMGM, yet faces larger debt and more exposure to UK fiscal pressures. Although signs of difficulty persist, analysts stress the gambling sector hasn’t reached a dead end. Companies are still generating revenue, and the market continues to innovate.
However, the focus for investors has pivoted; shareholders now demand evidence of immediate cash flow and profitability rather than overlooking future gains. Fantini pointed out existing companies like Red Rock Resorts and Monarch Casino that manage to attract investment due to their sensible growth strategies and sound leadership, contrasting sharply with the gambling industry's recent struggles.
The roadblocks faced by London’s gambling firms are evident. Entain's exit from the FTSE 100 and Flutter setting aside its London listing underscore this reality. Nevertheless, Flutter's New York experience illustrates that a listing change won't eliminate prevailing market pressures.
Greater shifts are evident on a global scale, as the market has grown increasingly demanding, seeking current financial performance rather than aspirational projections.
