Light & Wonder reported second-quarter fiscal 2026 consolidated revenue of US$828 million, up 2% year over year, and net income of US$120 million, up 26%. Consolidated AEBITDA rose 9% to US$383 million. Even so, the ASX-listed shares have fallen 23.0% year to date to A$120.16, and a discounted cash flow analysis published by Yahoo Finance suggests the shares are trading below estimated intrinsic value.
Q2 FY26 earnings and margins
Light & Wonder's consolidated revenue increased 2% to US$828 million, while consolidated AEBITDA rose 9% to US$383 million, lifting the AEBITDA margin by 200 basis points to 46%, according to a Motley Fool Australia report. Net income rose 26% to US$120 million. Adjusted NPATA increased 16% to US$156 million. Adjusted free cash flow was US$156 million, up 50% year over year, with a conversion rate of 41%.
Recurring revenue and segment performance
Recurring revenue reached US$580 million, representing 71% of total revenue. Gaming operations posted an 18% revenue increase, helped by premium and Grover product lines, while iGaming revenue rose 14% to US$92 million on first-party content. The company said SciPlay faced continued market softness.
Balance sheet and shareholder returns
Light & Wonder returned US$134 million to shareholders through its buyback program during the quarter. Net debt leverage was 3.4x, and the company said it has a clear plan to reduce that ratio below 3.0x during the first half of fiscal 2027, targeting an investment-grade profile.
CEO comments and FY26 outlook
Chief Executive Matt Wilson said the results reflected "continued execution of our content-centric operating model, with broad-based growth, margin expansion and quality earnings across all three businesses." He added that the North American premium installed base grew for the 24th consecutive quarter. Management reaffirmed mid- to high-single digit consolidated AEBITDA growth for fiscal 2026, weighted toward the second half, and maintained fiscal 2028 targets of more than US$10.55 in EPSa and US$2.0 billion in consolidated AEBITDA.
Why shares are seen as undervalued
Despite the earnings growth, the shares have struggled. The stock was at A$120.16, down 23.0% year to date, according to a Yahoo Finance analysis. That analysis used a two-stage free cash flow to equity model based on last twelve month free cash flow of about US$572.8 million, assuming free cash flow continues growing rather than swinging sharply lower or shrinking. The model output indicated an intrinsic value substantially above the current share price. The same report noted a price-to-earnings ratio of 23.8x. A Motley Fool Australia report had earlier noted the share price underperformed the S&P/ASX 200 index over the previous 12 months with a decline of 20%.
Valuation assumptions and caveats
The fair-value estimate depends on the assumption that free cash flow keeps growing from the trailing twelve-month level. Yahoo Finance said the group's value case leans heavily on whether it can turn gaming and content operations into steady, recurring cash, which can shape reinvestment capacity and returns to shareholders. Investors weighing the A$120.16 share price are effectively debating whether the cash-flow path implied by the model will materialize.
