Brightstar Beats EPS Estimates but Cuts 2026 Outlook

Key Points

• Brightstar downgraded its 2026 guidance by $80 million at the midpoint to $2.435 billion to $2.455 billion.
• In the United States, the multi-state jackpot bets decreased 30.6% from a quarter that had a Powerball jackpot run of almost $1.8 billion.
• CEO Vince Sadusky noted that the change in the $5 Mega Millions “has not been all that successful” during smaller jackpots.

Brightstar Cuts Guidance despite Beating Estimates

With last year’s record Powerball jackpot of nearly $1.8 billion, Brightstar Lottery has faced a tough comparison. On 10 November, the company downgraded its 2026 revenue guidance to $2.435 billion to $2.455 billion. The prior outlook was $2.50 billion to $2.55 billion, which means that at the midpoint it decreased by $80 million.

For the third quarter, revenue decreased 4% to $607 million from $629 million a year ago. This decline is not the full story about the downgraded outlook. The company Brightstar, previously called International Game Technology, finished selling its Gaming and Digital segment on 1 July 2025. 

Adjusted EPS for the quarter amounted to $0.10, beating the Investing.com consensus estimate of $0.06. On the other hand, revenues missed the estimate of $612.23 million. Adjusted EBITDA for the period decreased 2% to $289 million, and GAAP diluted EPS decreased 60% to $0.12. Both adjusted measures are calculated by the company and therefore are non-GAAP metrics, i.e., not included in the GAAP results. The CEO Vince Sadusky noted, “Revenue and profit were in line with our expectations.” It is quite logical to ask how the company could have described its results as expected?

Powerball’s $1.8 Billion Jackpot Looms Over the Comparison

Some part of it can be attributed to an exceptionally strong quarter last year. Finance chief Max Chiara explained the comparison on the third-quarter earnings call. “We had a historical Powerball at almost $1.8 billion, which we couldn’t repeat this quarter,” he noted. This year, the largest run was a lot less. Chiara pointed out, “We basically stopped at just barely above $1 billion this year.”

As Brightstar’s statistics prove, this fact played a major role in the performance. US multi-state same-store wagers dropped 30.6%, as opposed to a 69.2% growth the year before. The figures refer to the wagers made in the same lottery jurisdictions, not the number of players. They don’t necessarily prove that the number of players declined. Revenues from the same games fell 30% to $25 million.

Problems of Mega Millions With Increased Ticket Prices

However, Powerball isn’t the reason for all of the negative dynamics. There are some issues with Mega Millions’ latest changes too.

On April 8, 2025, Mega Millions increased the ticket price from $2 to $5, making the starting jackpot equal $50 million. In 2002, when the game started to operate, there were only two price increases – the first one took place in 2017 when tickets became $1 instead of $2. At the time of the latest price change, the game’s lead director noted, “We expect to see a sales lift on this.”

Sadusky gave an entirely different forecast. According to him, “it has not been all that successful.” Sadusky believes that the sales of the tickets are still lower than those of the previous period when the advertised jackpots were small. They returned to normal only when the jackpots reached the $1 billion level. The 30.6% drop refers to all of the US multi-state jackpot games; therefore, it is hard to estimate the contribution of Mega Millions to this figure.

Sadusky notes that consumer spending becomes another issue: “People are more selective and more intentional with their spending.” “The lower income consumer is most significantly impacted,” he adds. The management claims that the demand in other products is better: US iLottery sales, instant games that cost $20, $30 and $50. Globally, same-store instant ticket and draw wagers fell by just 1.0%.

Accounting Charges and Currency Push the Company Harder

Amortisation of initial fees, noncash accounting charges against service revenue, was $99 million compared to $53 million in the same period last year. In addition, amortisation of about $175 million related to the Italy Lotto license will also impact growth figures for this year.

Chiara reported that growth without the amortisation charge and at constant currency was 4%. Revenue is reported to have decreased by 4% year-over-year. At constant currency, the decrease was 3%. The company noted the UK service contract transition and foreign currency impacts as other influences on the company’s performance.

Product sales grew 137% and amounted to $60 million because of retail hardware, software and instant tickets. Adjusted EBITDA increased 5% year-to-date to $861 million despite a 4% revenue decrease to $1.78 billion. Income from continuing operations for the nine months increased to $164 million from $43 million. The effect of noncash currency impact on debt helped the company.

Italy’s revenue fell 19% to $208 million. Same-store instant and draw wagers in the country dropped only 1.2%. Sadusky stated that about 50% of the players participating in Italy’s dual Play lottery switched to the MyLotteries app.

Consolidated income from continuing operations dropped 53% to $45 million. From that figure, $23 million belonged to the non-controlling interests. Brightstar Lottery PLC’s shareholders received $22 million, a reduction from $57 million in the same period last year.

According to Chiara, the three major reasons that caused a reduction in revenue guidance were low jackpot expectations, the timing of Italy-related revenue and currency impact. The company’s new forecast for 2026 takes into account an exchange rate between the euro and the dollar equal to 1.15 compared to 1.17. For Q4, the exchange rate is expected to be 1.12.

The adjusted EBITDA guidance was revised to $1.14 billion to $1.16 billion. The currency movement is the main reason behind this change. The management still expects operational growth to drive a mid-single-digit revenue increase in H2.

Improved Cash Flow, but High Levels of Debt Persist

Cash flow from operations was $73 million, against a $445 million outflow in the same quarter last year. This is because the previous quarter had an outlay of $579 million towards the acquisition of the Italian Lotto license, which was not required in the quarter of 2026.

Capital spending was $81 million, leading to free cash flow being negative at $8 million. Brightstar maintained its cash flow forecast and expects $750 million cash flow from operations excluding the Italian license cost.

Brightstar acquired the new Italian Lotto license in November 2025 to November 2034 for a period of nine years. Brightstar leveraged $2.0 billion generated from the sale of the Gaming and Digital business to pay off debts in July 2025. The company has already received the final installment amounting to $1.67 billion in relation to Italy, bringing net debt to $3.8 billion from $2.7 billion.

Leverage stands at 3.30 times adjusted EBITDA, which is a non-GAAP metric that Brightstar uses based on the last twelve months’ numbers. The total liquidity is $1.9 billion, of which only $538 million is unrestricted cash, and the remaining $1.3 billion comes from undrawn credit facilities, meaning that Brightstar must first borrow the funds before using them.

Brightstar investors responded to the guidance before the start of the market session, with Brightstar shares dropping by 10.83% in pre-market trading on 10 November.

Despite all these developments, Brightstar plans to give a dividend of $0.23 to the shareholders who are on record as of 24 November. So far, the company has distributed over $200 million in dividends and repurchased shares as of 9 November. Chiara commented, “Operational growth drivers are contributing at an accelerated pace, reinforcing our medium-term growth outlook.”

Analysis by the Expert: Is the Powerball too Convenient an Excuse?

While we agree that Powerball is an explanation of Brightstar’s poor performance, we do not see it as the whole story. As Chiara stated, last year’s jackpot run was not an event that could be replicated. Sadusky also confessed that the $5 Mega Millions product was not doing well because the jackpots were low at that time. These are two separate factors contributing to the drop in performance. The effect of last year’s unusual jackpot will soon pass while Mega Millions needs to prove itself without a prize worth $1 billion.

Also, we believe Sadusky’s statement is logical: “It’s difficult to infer what’s taking place over the longer term based upon one quarter.”

The beat earnings are also less important than some headlines claimed. Adjusted EPS of $0.10 was higher than the $0.06 estimate of analysts, but still 73% lower than EPS of $0.36 recorded last year. The amortisation expense alone reduced EPS by $0.23 compared with $0.12 a year ago.

There is another confusing issue here – Brightstar’s statement on revenue and earnings being in line with their estimates contradicts an $80 million decrease in revenue guidance midpoint. But there is one piece of information missing in the press release – when did management set those estimates?

There are some bright spots for Brightstar. Sales of product increased more than twofold, and the sales of US iLottery remained robust. The data for the next quarter will be an indicator of whether players wait for jackpots to increase before buying lottery tickets. It is also possible that the ticket price of $5 makes casual purchases more considered.