For many years, the growth narrative surrounding the gambling industry was straightforward: increased betting would lead to higher returns. However, that narrative is becoming increasingly difficult to uphold.
A significant indicator of this shift is Entain's recent removal from the FTSE 100, mirroring the broader struggles of gambling stocks in both Europe and the United States. Despite Entain reporting growth in critical markets, its share price has plummeted over the past year.
In the first half of the year ending in June, Entain experienced a 7% increase in online net gaming revenue when adjusted for currency fluctuations. The company's revenue in Britain and Ireland rose by 13%, and it maintained its full-year expectations for a 5% to 7% growth in online net gaming revenue. So what accounts for the continued drop in its stock price?
Investors are no longer valuing the industry solely on the potential for unceasing growth; they are demanding profitability, cash flow, and manageable regulations across the board. Ed Birkin, managing director at H2 Gambling Capital, notes that the prolonged downturn in gambling stocks goes beyond mere adjustments to earnings forecasts.
"The declines in industry share prices have been significantly more pronounced than reductions in earnings projections," said Birkin. He explains that while some fundamental growth drivers may weaken, the primary cause for falling valuations has been market sentiment, which is closely intertwined with these fundamentals.
Entain's situation is compounded by Flutter Entertainment's symbolic shift, as it moved its primary listing from London to the New York Stock Exchange in January 2024. Initially, the change seemed fruitful, with Flutter's market capitalization climbing from approximately $36 billion at its New York debut to around $50 billion by mid-2025. However, this valuation plummeted as investor expectations for future earnings diminished.
In the second quarter of 2026, Flutter reported a 6% decline in US revenue, totaling $1.683 billion, alongside a 15% drop in sportsbook revenue. Although Flutter's FanDuel maintained its status as the leading sportsbook in the US, holding 39% of the market share in gross gaming revenue, the company faced pressure to adjust its financial outlook.
Ben Robinson, managing partner at Corfai, believes the listing change achieved its goal, but problems emerged later. He remarked, “The question was which arm of the K-shaped market Flutter would end up on. We have the answer now. Capital is concentrated in a narrow band of technology names while everything else is being assessed on earnings."
An American listing may enhance capital access without bolstering the underlying business's attractiveness. While London grapples with capital-market issues, the gambling sector faces significant investment challenges.
As Frank Fantini, founder and publisher emeritus of Eilers-Fantini, explains, a shift in sentiment began before the COVID-19 pandemic. "There is a tendency to view the world as divided into pre-COVID and post-COVID, but the gaming downturn started earlier with a slowdown in new regions and projects."
As the land-based casino market reached maturation and fewer new openings materialized, online gambling emerged as a potential growth avenue, particularly with the legalization of sports betting. However, the anticipated speed of legalization has stalled, compounded by rising taxes and increased competition.
Chad Beynon of Macquarie Capital observed, "Online gaming has faced a broader adjustment in growth-oriented internet stocks, alongside genuine downgrades in expectations for certain areas of the sector." He noted particular scorn towards sports betting companies as the market reevaluates future profitability and market size. Companies oriented around iGaming, like Rush Street Interactive and Super Group, have fared better operationally due to enhanced earnings growth and profitability.
Robinson describes prediction markets as "the main event" in the current US sports betting landscape. According to the American Gaming Association, Americans are projected to wager approximately $29.5 billion through regulated sportsbooks during the 2026 NFL season, reflecting little change from the $29.4 billion wagered in 2025. Importantly, these figures indicate the total wagered, not the revenue earned by sportsbooks.
In essence, prediction markets are reshaping competition for gambling companies. Kalshi, Robinhood, Crypto.com, and DraftKings are all vying for consumer engagement in betting scenarios. Beynon contends that prediction markets may influence valuations more than fundamentals, although the emergence of such competitors doesn't guarantee declines in sportsbook revenues.
Nevertheless, declining confidence in future growth can significantly impact valuations. Even as sportsbooks join the prediction market foray, investing in these new avenues comes at a time when shareholders are demanding improved returns. Flutter's financial reports show the strain; US adjusted EBITDA substantially dropped in the first half of 2026 while the company committed resources to projects like FanDuel Predicts.
In contrast, Entain's challenges stem more from debt obligations, taxation, and overall market confidence. By the end of June, the company reported around £3.6 billion in net debt, translating to a leverage ratio of 3.1 times its underlying EBITDA. Despite an increase in online net gaming revenue by 7%, online underlying EBITDA dipped by 5% in the first half.
Recent tax hikes have put a significant strain on Entain; the UK government raised the Remote Gaming Duty from 21% to 40% effective April 1. Starting in April 2027, a new 25% General Betting Duty will also be enforced for remote betting, though bets on UK horse racing will be exempted.
Entain estimated that this increased duty had a £56 million adverse effect on its first-half EBITDA. While UK operators contend with regulatory pressures and tax increases, American counterparts face fierce competition. Although the issues differ, they significantly impact the same stock group.
In response, Entain is trying to streamline operations, agreeing to sell an initial 20% stake in Entain CEE for €425 million, valuing the enterprise at around €2.1 billion. The company aims to use the sale proceeds to diminish debt and possibly return excess capital to shareholders, focusing on cash generation rather than rapid expansion.
Analyzing four major gambling entities—Entain, Flutter, DraftKings, and MGM Resorts International—highlights the distinct challenges faced across the industry. Flutter features the most robust online operations of the quartet, witnessing its share price drop from $282.33 on September 18, 2025, to $89.56 on September 18 of this year, resulting in a market valuation of $15.54 billion.
FanDuel continues its reign as the top US sportsbook, supplemented by Flutter's international operations. However, high expectations accompany that success. Beynon characterizes Flutter as "the highest-quality online betting franchise globally,” though he acknowledges market skepticism regarding future earnings amidst an evolving industry.
Conversely, DraftKings has declined from $43.30 on September 18, 2025, to $21.75 this past week. Beynon notes its potential for significant operational upside, should it convert customer growth into sustainable profitability and leverage prediction markets effectively.
MGM Resorts International's appeal lies in its diverse offerings, including Las Vegas operations, regional casinos, and a 50% stake in BetMGM. Its stock price has diverged from its online-centric peers, rising by 5% to $37.81 on September 18. Beynon explains, “MGM provides a more diversified investment appeal, combining regional gaming and Las Vegas assets, which mitigates dependence on online sports betting alone.”
Entain occupies a middle ground, possessing considerable international reach and a valuable stake in BetMGM but grappling with higher debt levels and significant exposure to UK tax obligations and regulatory instability across Europe.
Analysts across the board seem to converge on the same overarching conclusion: the decline in share prices extends well beyond diminishing earnings expectations. The consensus points to an industry whose period of exceptional growth appears to be waning, as the market shifts its criteria, focusing more on current earnings and cash flow instead of speculative future profits.
Fantini highlights land-based companies like Red Rock Resorts and Monarch Casino, which still draw investment because they demonstrate sensible growth and robust management. This is emblematic of the substantial changes in the industry’s landscape.
The challenges faced in London are unmistakable, evidenced by Entain's exit from the FTSE 100 and Flutter’s transition from its primary London listing. Yet, Flutter's New York experience underscores that merely changing listings doesn't alleviate competitive pressures.
Ultimately, the gambling market is evolving—a shift characterized by growing demands for immediate, tangible returns over promises of future growth, heralding a new chapter for investors and operators alike.
