Industry growth is being driven by iGaming, according to analyst opinions, rather than traditional casinos.
In a note to clients, Jefferies analyst David Katz discusses the potential for Caesars Entertainment to boost shareholder value by spinning off its iGaming unit, Caesars Digital. The digital arm, which delivered $80 million in adjusted EBITDA in Q2 2025, doubling year-over-year, is showing significant growth and profitability that may not be fully reflected in the parent company's share price.
Caesars Digital's performance is trending positively and approaching key performance targets set by management. The digital unit is aggressively enhancing content with partnerships for live dealer games and exclusive slots, and expanding in new iGaming jurisdictions. This growth is strategically significant given the projected 12% CAGR of the U.S. online gaming market through 2030 and its seamless integration with Caesars’ physical casino rewards, enhancing customer retention.
In comparison, BetMGM (a joint venture between MGM and Entain) and Rush Street Interactive recently raised their 2025 guidance, indicating strong confidence in their digital businesses. However, analysts note that investors may underestimate Caesars Digital's value because it is part of a larger casino company whose core business remains physical casinos, unlike RSI, which is a pure-play digital operator. MGM's similar challenge partly stems from its joint-venture structure in BetMGM.
The potential spin-off of Caesars' iGaming unit would allow investors to better value this growth distinct from the brick-and-mortar segment, which faced softness in physical casino visitation. Caesars Digital's omni-channel loyalty integration and market expansions provide it with a competitive edge to capitalize on the growing U.S. iGaming market, potentially matching or outpacing peers as new states legalize online gaming.
Key points summarized:
| Aspect | Caesars Digital | BetMGM | Rush Street Interactive | |-------------------------------|--------------------------------|-----------------------------|-------------------------------| | EBITDA (Q2 2025) | $80 million (100% YoY growth) | Strong growth, raised guidance | Raised 2025 guidance | | Business model | Part of broader casino company | Joint venture with Entain | Pure-play iGaming and sports betting | | Market expansion strategy | Omnichannel, exclusive content, expanding jurisdictions | Broad U.S. presence, Entain partnership | Focused digital growth | | Investor perception | Potential undervaluation due to integration with brick-and-mortar | Similar undervaluation due to joint venture structure | Pure-play advantage noted | | Spin-off potential | High, to unlock shareholder value | N/A | N/A |
This evidence supports why a Caesars Digital spin-off post-H1 2026, once targets are met, could unlock significant value and why its performance is competitive with top players like BetMGM and RSI. However, operators face a conundrum when trying to appease the investment community via digital growth, as market participants aren't assigning much adulation to interactive improvements unless the entire business is performing well.
The second-quarter earnings reports from Caesars Entertainment (NASDAQ: CZR) and MGM Resorts International (NYSE: MGM) show softness on the Las Vegas Strip, with near-term estimates for Caesars' land-based operations finally low enough, according to Katz. Near-term concerns about Las Vegas Strip weakness and regional negative productivity for Caesars Entertainment are offsetting digital acceleration. For MGM and Caesars, it could be a challenge to get investors to devote more attention to digital growth due to their large presence in the struggling Las Vegas Strip gaming segment.
In conclusion, the potential spin-off of Caesars Digital reflects investor interest in isolating the high-growth, attractive-margin digital segment from the cyclical, capital-intensive casino resort operations, unlocking value that the market currently undervalues. As iGaming continues to accelerate, Caesars Digital's strong performance and strategic positioning make it an attractive candidate for a spin-off, potentially unlocking significant value for shareholders.
- Caesars Digital's growth in Q2 2025, with an EBITDA of $80 million and a 100% year-over-year increase, demonstrates its potential for continued success in the iGaming market.
- The digital unit's strategic expansion, marked by partnerships for live dealer games, exclusive slots, and entry into new iGaming jurisdictions, positions it competitively against peers like BetMGM and Rush Street Interactive.
- With the US online gaming market projected to grow at a 12% compound annual growth rate through 2030, a potential spin-off of Caesars Digital could allow investors to better value this high-growth segment, unlocking significant shareholder value.
