Melco Q4 conference call: Returning to profitability, dealing with Macau's competitive intensity

Towards the end of the Melco Q4 results webcast there was a faint touch of defensiveness in the way management fielded a question that asked for some guidance on EBIT margins looking ahead, almost as if Melco's return to profitability wasn't quite enough.

Chairman and CEO Lawrence Ho was keen to point out that: "I think on margin, we've done a pretty good job [...] so you'll see that ongoing throughout 2026."

If there was any affront taken, it is maybe understandable given the positive overall margins, which came in spite of growing operating costs in 2025, the enforced closures of two satellite casinos in Macau and all the workforce upheaval that came from that.  

While some areas of non-profitability remain – Altira posted more losses, with negative EBITDA of $3.5m – overall revenue and profitability climbed in Q4 with Adjusted Property EBITDA up 12% year-on-year to $331.3m. 

Melco's spokespeople seemed content with this. And why not? Macau is full of opportunity, and therefore, it's full of competition.

How does Melco approach the competitive intensity of Macau?

If Melco Resorts' financial situation wasn’t in a good place, the discussion of competitive intensity could have been a clue that the company was trying to justify soft results – in fact, Q4 looked pretty positive for the land-based operator and that competitive intensity in Macau is just a hard fact. 

So, although results are mixed when you break down each segment, the story emphasized by management throughout the webcast was one of consistent recovery. 

There was no jumping up and down or cheering – in fact, one of Lawrence Ho's first statements of the presentation was to say: “2025 was a year of growth and recovery.” 

The use of these words together is significant, because while there is cause for optimism, this was growth presented as recovery, rather than growth as a sign of dominance.  

Looking to the future, this attitude of steadfast consistency was reflected in how management discussed the potential of further investment. The focus seems to be more about consolidating than amping up spending. 

There’s some good sense here, because while there’s a great deal to compete for in Macau, there also may be more to lose than gain in trying to compete with market leaders like Sands for instance, which registered Q4 revenues of $3.65bn. 

Another telling word used on the topic of investment was discipline. Without it, it could be easy to get carried away trying to compete with operators that, in terms of sheer scale, are in a different league. 

Evan Winkler, Director and the President of Melco Resorts, said: “Competition remains intense within the marketplace. We're not looking at any catalyst that would immediately bring that down... We don't ever drive up in the marketplace, we tend to be very disciplined. We'll make strategic moves at times, when we need to look at market share or move around with individual segments, but we'd certainly never lead the market up. I think we're stable and I don't see anything that's going to bring us down in the near-term, but I also don't see anything that's going to ratchet it up.

The importance of non-gaming operations 

Non-gaming operations was another topic of some scrutiny during the post-presentation Q&A, and it does seem to be the case that entertainment and hospitality channels are growing in importance throughout Macau. The House of Dancing Water is pulling in up to 1000 people to the City of Dreams twice a day, and the first question of the Q&A was about how this theatrical, aquatic performance is converting into other aspects of the resort’s offering.  

The response from Ho was that a ‘meaningful uptick’ had been recorded before and after the show’s opening in May. But even here, no one’s expectations seemed outlandish. The outlook was sensible and long-termist. Management pointed out that people often attend the show with their families, and therefore it’s reasonable to accept that the quantity of this additional headcount that's immediately converted to gaming is low. 

Instead, the benefits were flagged as being about the wider awareness that these people now have of the City of Dreams. Based on this, the name and development of that brand could be more important to Melco at the moment than immediate revenue boosts. 

Growing the City of Dreams brand

While growth of the City of Dreams brand seems to be a top priority, you also can’t argue or downplay the positive direction and pace of financial growth exhibited by City of Dreams Macau. Q4 operating revenue was up 17.7% to $695.7m and adjusted EBITDA rose an even more impressive 38.2% to $193.7m.  

But all the while, the global footprint of City of Dreams properties is playing an important role in the developing story of Melco. If anything, while of course starting from a far smaller scale, the growth of City of Dreams Mediterranean in Cyprus is even more impressive than that in Macau. Here there was 78% yearly growth for Q4 property EBITDA. This was in conjunction with three satellite casinos in Cyprus, and moved the figure from $11.8m in Q4 2024 to $21m.  

Results for City of Dreams Manila made for less cheery reading – revenue here was down from $133.8m to $100.2m, but the late 2025 opening of City of Dreams Sri Lanka shows that Melco still has a great commitment to this globe-trotting project. According to the webcast, the focus in Sri Lanka is to "ramp up operations” with ‘promising green shoots’ noted in early 2026 data.

Management also emphasized that it was a strong start all around in 2026, while pointing to a pipeline of exciting new initiatives. A remodeling of City of Dreams Macau is due to complete in Q3 2026 and will supposedly set a new 'benchmark' in Macau. Well, you can't expect them to downplay everything.