The Zacks Gaming industry is facing pressure from cautious consumer spending amid inflation and economic uncertainty. Intense competition among casinos, sportsbooks and online gaming operators has increased promotional costs, while higher labor expenses, regulatory hurdles and rising taxes in some markets are squeezing margins. Additionally, stricter responsible gaming measures and slower spending from lower-income customers are creating challenges for industry growth. However, the industry is benefiting from rising Macau gaming revenues and strong demand for sports betting. Stocks such as Las Vegas Sands Corp. (LVS Quick QuoteLVS - Free Report) , MGM Resorts International (MGM Quick QuoteMGM - Free Report) , Churchill Downs Incorporated (CHDN Quick QuoteCHDN - Free Report) and Rush Street Interactive, Inc. (RSI Quick QuoteRSI - Free Report) are likely to gain traction.

Industry Description

The Zacks Gaming industry includes companies that own and operate integrated casinos, hotels and entertainment resorts. Some industry playersalso deliver technology products andservices across the lotteries, electronic gaming machines, sports betting and interactive gaming markets. Some firms develop and operate gaming establishments and associated lodging, restaurants, horse racing and entertainment amenities. Many companies are involved in developing and selling gaming applications. E-sports or sporting events or tournament services, content management systems, video software, mobile applications and e-sports data platform solutions are provided as well.

Key Themes Shaping the Gaming Industry

Macroeconomic Pressure on Discretionary Spending: Economic uncertainty and persistent inflation have started to weigh on consumer discretionary spending, which directly impacts casino visitation and online betting activity. Gaming and gambling are largely entertainment-driven expenditures, making them sensitive to shifts in household budgets. When consumers face higher costs for essentials such as housing, food and energy, they often reduce spending on leisure activities like casino trips, sports betting and online gaming. This environment can lead to slower revenue growth for operators, particularly in regional markets that depend heavily on local consumer spending.

Rising Regulatory Pressure and Tax Burden: The U.S. gaming industry continues to face increasing regulatory scrutiny and higher tax rates across several states. As online sports betting and iGaming expand, many state governments are imposing stricter compliance requirements and higher tax structures to boost public revenues. These measures can significantly compress operator margins and increase operating costs. Additionally, the lack of uniform federal regulation means companies must navigate a complex patchwork of state-specific rules, licensing procedures and reporting requirements, which adds administrative burden and slows expansion plans.

Strong Macau Gaming Trends Support Industry Growth: According to Macao’s Gaming Inspection and Coordination Bureau, Macau's gaming market continued to gain momentum in May, supported by healthy tourism activity and strong holiday-related demand. Gross gaming revenues reached approximately 22.6 billion patacas ($2.8 billion) during the month, reflecting solid growth from both the prior year and the previous month. For the first five months of 2026, cumulative gaming revenues totaled about 108.4 billion patacas, representing nearly 11% growth year over year. Monthly revenues have remained above 20 billion patacas for most of the year, signaling sustained strength in Macau's recovery and providing a favorable backdrop for casino operators with exposure to the market.

Sports Betting Remains a Key Industry Growth Catalyst: The continued expansion of legalized sports betting across the United States has become a major driver of growth for the gaming industry. An increasing number of states now permit mobile and retail sports wagering, allowing operators to reach a broader customer base through digital platforms. Leading sportsbooks such as DraftKings, FanDuel, BetMGM, ESPN BET and BetRivers continue to attract users with enhanced betting options and technology-driven experiences. The growing adoption of online wagering, combined with strong consumer interest in major sporting events, has created a significant revenue opportunity for gaming operators and technology providers alike.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Gaming industry is grouped within the broader Zacks Consumer Discretionary sector. Carrying a Zacks Industry Rank #157 places it in the bottom 36% of more than 245 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential.

We will present a few gaming stocks that you can add to your investment portfolio, given their strong fundamentals. However, it is worth looking at the industry’s shareholder returns and current valuation first.

Industry Underperforms the S&P 500

The Zacks Gaming industry has underperformed the S&P 500 Index and the broader Zacks Consumer Discretionary sector in the past year.

The industry has declined 14.1% over this period against the S&P 500 Index’s growth of 31.2%. In the same time frame, the sector has declined 10.8%.

1-Year Price Performance

Gaming Industry's Valuation

Since gaming companies are debt-laden, valuing the same based on the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) ratio makes sense. The industry currently has a trailing 12-month EV/EBITDA ratio of 14.68 compared with the S&P 500’s 18.91.

Over the past three years, the industry has traded as high as 24.77X and as low as 13.31X, with a median of 18.04X, as the chart below shows.

Enterprise Value-to-EBITDA Ratio (Past 3 Years)

4 Gaming Stocks to Watch

Rush Street Interactive: Rush Street Interactive is benefiting from the continued expansion of online sports betting and iGaming markets across North America. The company has been attracting more active users through its user-friendly digital platforms, broad product offerings and effective customer retention strategies.

This Zacks Rank #2 (Buy) player’s shares have gained 101.6% in the past year. RSI’s 2026 earnings are likely to witness growth of 56.8% year over year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price & Consensus: RSI

Churchill Downs: Churchill Downs is benefiting from strong demand across its gaming, racing and wagering businesses. The company continues to expand its portfolio of historical racing machine venues, which have become an important contributor to revenue and earnings growth.

This Zacks Rank #2 player’s shares have declined 4.4% in the past year. CHDN’s 2026 earnings are likely to witness growth of 19.4% year over year.

Price & Consensus: CHDN

Las Vegas Sands: The company continues to benefit from resilient spending by premium customers at Marina Bay Sands, where strong demand for luxury hospitality, gaming and entertainment offerings has supported healthy revenues and cash flow generation. Meanwhile, the company is advancing strategic investments in Macau, focusing on property enhancements, service improvements and expanded non-gaming attractions. 

This Zacks Rank #3 (Hold) company’s shares have gained 26.4% in the past year. LVS’ 2026 earnings are likely to witness growth of 12.3% year over year.

Price & Consensus: LVS

MGM Resorts: MGM Resorts continues to benefit from strong momentum in its Macau and digital businesses, which have emerged as key growth drivers. Healthy performance at MGM China, coupled with expanding contributions from online gaming and sports betting operations, has helped offset softer trends in certain domestic markets.

This Zacks Rank #3 company’s shares have gained 58.6% in the past year. MGM’s 2026 sales are likely to witness a rise of 1.3% year over year.

Price & Consensus: MGM