Melco Buys Its Own Stock While Macau Takes a Breather

Melco's third quarter was not a blowout. Group adjusted property EBITDA was about $288 million, or $298 million adjusted for VIP hold. But the call's real signal came from October: Macau GGR fell 10%, yet Melco says it outperformed the market. That gap between the market and the company is the story.

A soft pocket, not a demand break

The company's own language has shifted. soft pocket enters as a fresh top theme, while World Cup — dominant last quarter — is now invoked as an aftereffect. Lawrence Ho did not hide the weakness: “The market is challenging right now, and I think everybody saw that October was down 10%.” — Lawrence Ho, Chairman and CEO · 2026-11-04 He also noted the comparison was already ugly, with typhoons and Mid-Autumn Festival sitting in last year's October base. The causes he listed were a weak Chinese consumer, World Cup substitution, and overseas tax issues. But he called it a perfect storm rather than a structural change.

Evan Winkler sharpened the point. The softness was not confined to premium players: “We are seeing some general softness as you go down, which makes us sort of feel like it is probably a little bit more overall China economy than just the specific tax one.” — Evan Winkler, Chief Operating Officer or Executive · 2026-11-04 That is important. If the issue were only high-end tax enforcement, Melco's premium-mass mix would be a clean read-through. If it is the broader Chinese economy, then October's 10% decline is a macro warning for the whole Macau market, not just a high-roller air pocket.

The competitive response matters more than the diagnosis. Evan said Melco is launching a new player club and has built guide rails around reinvestment, explicitly refusing to chase share with uneconomic spend.

I think the right thing to be doing here is to continue to be disciplined in what we're doing going forward, because it's very easy to chase everybody down to the bottom... we're a leader in rationality, but whether or not everyone decides to follow suit or to check themselves into the asylum, we will see over the next month or so.

That is a different tone from prior calls, when management described competition as intense but stable. The new player club and the sales force changes are the operational proof. The market will get a clean test in November and December.

The buyback is the strategy

With the stock dislocated, management is using the balance sheet to buy its own equity. Geoff Davis disclosed that Melco repurchased about 33.1 million ADSs for roughly $160 million from July 1 through November 3, bringing 2026 repurchases to 47.1 million ADSs for about $236 million. “From July 1st through November 3rd, 2026, we repurchased approximately 33.1 million of our ADSs for consideration of approximately $160 million.” — Geoff Davis, Chief Financial Officer · 2026-11-04 The message is blunt: at current valuations, Melco prefers its own stock to almost any other use of cash.

Deleveraging remains the stated first priority, and the company has been active. It redeemed $600 million of 5.625% senior notes due 2027 and Studio City redeemed $165 million of 6.5% notes due 2028. Melco now says it has no debt maturities in 2027. That is real progress. But the dividend keeps slipping. Evan framed it as a potential restart toward the end of next year: “we would still aim to recommence a dividend potentially towards the end of next year.” — Evan Winkler, Chief Operating Officer or Executive · 2026-11-04 Three months earlier, Geoff had already pushed it: “we have pushed that from towards the end of this year to sometime in 2027.” — Geoffrey Davis, Executive (likely CFO) · 2026-08-13 The language is consistent, but the timing has moved repeatedly. Buybacks are winning the capital-allocation argument.

Consolidation is also off the table for now. Asked about simplifying the corporate structure, Lawrence was direct: “Any sort of Studio City consolidation, that is not a priority at all.” — Lawrence Ho, Chairman and CEO · 2026-11-04 That is a firmer answer than the open-minded stance on the August call: “we're always very open-minded.” — Yau Ho, Executive (likely CEO or President) · 2026-08-13 Melco is choosing the buyback over structural engineering.

REM, retail, and the renovation tax

The product story is real but costly. REM is open, and the City of Dreams retail and food-and-beverage redevelopment will roll out from late this year into summer 2027. Management has warned about construction disruption through the build. That is the price of staying relevant in a market where new supply and renovated competitors keep raising the bar.

The offset is cost control. Total daily OPEX in Macau fell to about $3.2 million, below prior guidance, even with The House of Dancing Water included. “Total daily OPEX in Macau declined to approximately $3.2 million during the third quarter of 2026, inclusive of The House of Dancing Water and below our prior guidance.” — Geoff Davis, Chief Financial Officer · 2026-11-04 Three months ago the guide was higher: “we're probably looking at something closer to $3.3 million to $3.4 million.” — Evan Winkler, Executive (likely CFO or COO) · 2026-08-13 CapEx is also being cut. Fourth-quarter CapEx is now about $95 million, bringing 2026 to roughly $375 million, with 2027 around $275 million. That is below the prior $225 million remainder for 2026 and the $275 million-$300 million range for 2027.

Outside Macau, the mix is stabilizing rather than transforming. City of Dreams Manila held adjusted property EBITDA at about $33 million despite economic pressure, Cyprus delivered its highest quarterly EBITDA since opening, and Sri Lanka is still ramping. None of that is large enough to offset Macau, but it reduces the downside.

The read-through

This is a show-me quarter. The bullish case is that October was a soft pocket, not a new baseline, and that Melco is using the dislocation to shrink its share count while cutting debt and CapEx. The bear case is that the Chinese consumer is weakening just as Melco absorbs renovation disruption and higher product costs, while the dividend policy remains parked and buybacks consume cash that could otherwise accelerate deleveraging.

What changed is not the strategy; it is the confidence with which management is defending it. A quarter ago the debate was competition and World Cup. Now it is October demand, buyback intensity, and whether discipline can hold if the market keeps sliding. Melco is betting that rationality wins. The next two months of Macau GGR will tell us whether the market agrees.