Penn Entertainment (NYSE: PENN) stock is down sharply in early US price action today after the company released its Q3 2025 earnings, which missed consensus estimates. While the stock was up sharply in premarkets today after it announced the termination of its online sports betting partnership with ESPN, branded as ESPN Bet, significantly earlier than its original 10-year term, it fell in regular trading.

Penn Misses Q3 Earnings Estimates

The casino and sports betting operator reported quarterly revenue of approximately $1.72 billion in the September quarter, which missed the consensus analyst estimate of $1.73 billion. On the bottom line, the company posted an adjusted loss of $0.22 per share, significantly wider than the average analyst estimate of a loss of around $0.10 per share. The reported net loss for the quarter was $864.6 million, or $6.03 per share, largely driven by non-cash charges.

The core retail property business generated the majority of the revenue, accounting for $1.4 billion, while the Interactive segment contributed $297.7 million, demonstrating a strong year-over-year increase despite the wider-than-expected loss.

ESPN Bet to be Shut

In a move that overshadowed the financial results, Penn announced the early termination of its US online sports betting agreement with ESPN. The company and the sports media giant mutually agreed to conclude their online sports betting marketing exclusivity effective December 1, with the termination of cash payments scheduled for the end of the fourth quarter.

“When we first announced our partnership with ESPN, both companies made it clear that we expected to compete for a podium position in the space. Although we made significant progress in improving our product offering and building a cohesive ecosystem with ESPN, we have mutually and amicably agreed to wind down our partnership,” said Penn CEO Jay Snowden in his prepared remarks.

When the deal was announced in August 2023, Penn and ESPN had intentions to capture a “podium position” and reportedly targeted a 10% to 20% market share after three years. ESPN Bet, however, struggled to gain traction against market leaders FanDuel and DraftKings, ending its run with an estimated market share hovering around 3% nationwide.

The partnership was costly, requiring Penn to pay ESPN $150 million annually for marketing services and the exclusive use of the ESPN Bet brand. Penn’s digital division reported substantial adjusted earnings losses during the two years it operated the platform.

HG Vora Was Pushing Penn to Exit Its Partnership With ESPN

The pressure from HG Vora Capital Management served as a significant backdrop and accelerator to Penn’s strategic shift, including the exit from the ESPN Bet deal.

HG Vora, an activist investor and one of Penn’s largest shareholders, publicly campaigned for a change in strategy, fiercely criticizing Penn’s digital ventures:

The fund argued that Penn’s transition from a leading regional casino operator to a “sports, media and technology conglomerate” was misguided and had destroyed significant shareholder value.

They specifically called out the ESPN Bet deal, noting that Disney’s CEO stated Penn’s offer was “substantially more than other suitors,” as well as the acquisitions of the Score and the earlier misadventure with Barstool Sports, which they described as “among the worst in the industry’s history.”

The activist investor, which won two seats on Penn’s board, pushed the company to shift focus away from its underperforming digital sports betting unit and back to its core, profitable brick-and-mortar casino operations.

The poor performance of ESPN Bet, coupled with the pressure from HG Vora and the looming contractual opt-out date tied to market share, ultimately pushed Penn’s management and the Board to terminate the partnership early and implement the strategic change that the activist investor had been demanding.

Penn’s New Digital Structure

PENN stated it plans to rebrand its U.S. sports betting offering to “the Score Bet”, signaling a shift back to an asset acquired in a prior strategy. This major operational change is designed to realign the company’s digital focus after the partnership did not yield the desired results.

Commenting on the new digital strategy, Snowden said, “PENN’s iCasino forward approach has clear long-term alignment to our core business, which will focus on cross-sell opportunities across our ecosystem and enhanced connectivity to our 33 million member PENN Play loyalty program.”

He added, “Our OSB offerings will continue to provide top of funnel acquisition and cross-sell opportunities for our Hollywood-branded iCasino, which will remain integrated into our OSB product in states where legal, in addition to serving as a standalone iCasino app.”

ESPN Partners With DraftKings

Meanwhile, shortly after announcing the termination of its partnership with Penn, ESPN immediately pivoted to a different model by partnering with DraftKings. The new multi-year agreement names DraftKings the exclusive Official Sportsbook and Odds Provider of ESPN. Crucially, DraftKings will not operate a product branded as ESPN; instead, the partnership focuses on deep integration across ESPN’s vast media channels.

This means DraftKings will power the betting tab within the ESPN app and be prominently integrated into ESPN’s digital and broadcast content, using ESPN’s audience to drive users to the established DraftKings platform. The defunct “ESPN Bet” brand will now transition into a sports-betting content brand, with all betting activity directed to DraftKings.

This shift moves ESPN away from the operational risk of a struggling sportsbook (which was entirely Penn’s responsibility) and aligns it with a market leader, leveraging its powerful brand visibility for a highly integrated content and marketing partnership.

Penn Announced a New Buyback Plan

PENN also demonstrated a continued commitment to shareholder returns, announcing a new $750 million share repurchase program authorized by its board, set to commence on January 1, 2026, and run through December 31, 2028. This follows approximately $154.1 million worth of stock repurchases executed during the third quarter. As of September 30, 2025, the company maintained a healthy liquidity position of $1.1 billion.