Light & Wonder Inc (ASX: LNW) shares are having a tough session on Thursday.
At the time of writing, the ASX 200 gaming stock is down 11% to $100.08.
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What is weighing on Light & Wonder shares?
The catalyst for the selling has been the release of a mixed first-quarter result.
According to the release, Light & Wonder reported revenue of US$790 million for the quarter, up 2% on the prior corresponding period.
Also growing was its consolidated adjusted EBITDA, which rose 5% to US$327 million, while adjusted NPATA per share increased 7% to US$1.45.
Reported profit falls
Despite the adjusted earnings growth, statutory earnings were significantly weaker.
Net income fell 37% to US$52 million, while diluted net income per share declined 30% to US$0.66.
Management attributed the decline largely to approximately US$50 million in legal reserve contingencies associated with legacy legal matters.
This appears to be one reason the market is reacting negatively today.
Gaming machine sales disappoint
There were also signs of weakness in parts of the Gaming division.
While Gaming revenue increased 3% to US$512 million, Gaming machine sales revenue fell 25%. Management advised that this reflects the timing of international and North American video lottery terminal shipments in the prior year period.
Gaming Systems revenue also declined 14%, mainly due to lower hardware sales.
The ASX 200 stock also revealed that the SciPlay business remains under pressure.
Revenue fell 7% to US$187 million, driven by continued weakness in JACKPOT PARTY Casino.
Management notes that the mature social casino market remains challenging, although SciPlay did deliver higher adjusted EBITDA and margin expansion.
Management commentary
The ASX 200 stock's CEO, Matt Wilson, was pleased with the quarter. He said:
The first quarter of 2026 marks the beginning of the next phase of the Company's growth trajectory: one defined by our content-centric operating model, deepening customer relationships, disciplined execution, expanding margins and enhanced capital structure. We are seeing the benefits of our continued investment in studios and content, as our franchises drive strong game performance across the portfolio.
Gaming momentum remained robust, with our North American premium installed base growing for the 23rd consecutive quarter, and Grover continued its expansion into the recently legalized Indiana market. iGaming delivered another double-digit growth quarter in both revenue and AEBITDA, while SciPlay continued to expand its DTC revenue.
Cash flow a brighter spot
On the positive side, adjusted free cash flow increased 86% to US$207 million, reflecting strong underlying cash generation.
The company also maintained its net debt leverage ratio within its target range and reiterated its intention to reduce leverage below 3.0 times during the first half of 2027.
Outlook
Light & Wonder expects full year consolidated adjusted EBITDA growth in the mid to high single digits.
However, management warned of ongoing macroeconomic and geopolitical uncertainty, including tariff-related cost pressures and a pending increase in UK iGaming gambling duties.
Wilson concludes:
Looking ahead, we remain focused on investing in product innovation and talent to further strengthen our recurring revenue model and enhance our global competitive position as we progress toward our 2028 financial targets.
