Gaming company Inspired (NASDAQ: INSE) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 6.2% year on year to $80.3 million. Its non-GAAP loss of $0.19 per share was significantly below analysts’ consensus estimates.

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“We are pleased to deliver another strong quarter, underscoring the continued strength across our diversified business model,” said Lorne Weil, Executive Chairman of Inspired.

Company Overview

Specializing in digital casino gaming, Inspired (NASDAQ: INSE) is a provider of gaming hardware, virtual sports platforms, and server-based gaming systems.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Inspired grew its sales at a 13.4% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Inspired’s recent performance shows its demand has slowed as its annualized revenue growth of 1.1% over the last two years was below its five-year trend.

Inspired also breaks out the revenue for its three most important segments: Gaming, Leisure, and Virtual Sports, which are 33.9%, 11.5%, and 37.7% of revenue. Over the last two years, Inspired’s Gaming revenue (land-based casino games) was flat while its Leisure revenue (gaming terminals and amusement machines) averaged year-on-year 4.2% declines. A silver lining was Virtual Sports (digital gaming and sports betting), which averaged 4.1% growth.

This quarter, Inspired reported year-on-year revenue growth of 6.2%, and its $80.3 million of revenue exceeded Wall Street’s estimates by 6.8%.

Looking ahead, sell-side analysts expect revenue to decline by 1.3% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Inspired’s operating margin has risen over the last 12 months and averaged 10.1% over the last two years. Its profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.

In Q2, Inspired generated an operating margin profit margin of 9.8%, down 2.6 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Inspired’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q2, Inspired reported adjusted EPS at negative $0.19, down from $0.20 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Key Takeaways from Inspired’s Q2 Results

We enjoyed seeing Inspired beat analysts’ revenue and EBITDA expectations this quarter. On the other hand, its EPS missed. Overall, this print had some key positives. The stock remained flat at $8.82 immediately after reporting.

So do we think Inspired is an attractive buy at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.