Image: Wynn Resorts.

The slowdown in Macau is taking no prisoners, and Wynn Resorts, Limited (NASDAQ:WYNN) hasn't been any different from its competitors. Wynn's second-quarter revenue dropped 26% to $1.04 billion, and net income fell 72% to $56.5 million. The company reported earnings Wednesday.  

Those are terrible results when you look at them on the surface, but putting it into context is necessary, especially with Wynn Palace under construction in Macau.

Wynn's standing in Macau
During the second quarter, Macau's gambling revenue plunged 37.4%, which is really the bar which results should be measured against.

At Wynn Macau, the resort saw a 35.8% decline in revenue to $617.0 million, and EBITDA fell 43.5% to $173.4 million. That's the lowest EBITDA in a quarter since the fourth quarter of 2010, showing just how far the industry has fallen. EBITDA was negatively affected by lower-than-expected hold in the mass market, but that doesn't entirely account for the disappointing results.

It's also unclear whether the gambling market is reaching a low point or whether there's further weakness ahead. More supply is being added to the market (which I'll get to in a moment), and unless overall gambling grows we could see lower profits for the next year or two at existing resorts.

Las Vegas hit by slow Asian gambling
It may not seem obvious that Asia has a big impact on Las Vegas gambling, but baccarat is the biggest game in town, and it's the game Asian gamblers prefer. (In fact, it's the only game of substance in Macau.) So when Asia struggles, so does baccarat in Las Vegas, which hits Wynn Resorts particularly hard.

For the quarter, revenue in Las Vegas operations dropped 6.2% to $423.5 million and adjusted EBITDA was down 23.9% to $122.0 million. Slow gambling was to blame for the bad results, but the positive side is that non-casino revenue jumped 5.3% to $330.3 million, which is the biggest driver of Las Vegas' results.

Rendering of Wynn Palace in Macau. Image Wynn Resorts.

It looks like the party in Las Vegas has continued because spending on food and beverage was up 8.7%, but gamblers aren't coming back, and that could be a negative long-term trend for Wynn Resorts.

The future for Wynn Resorts
While the recent results give a snapshot of what happened in the past three months for Wynn Resorts, the real focus for the company is on Wynn Palace, which is under construction in Macau. The project will cost $4.1 billion, and it could add up to $1 billion in EBITDA, even in a depressed Macau market.

In mid-2016, when the property is completed, the company's results will change dramatically. But by then the industry needs to see an improvement in gambling results in Macau, or even Wynn will see disappointing results from its next megaresort.

I'm bullish on a future for Wynn Resorts, but it may be a rocky ride over the next two years as the Macau market sorts itself out and absorbs new properties. Short-term investors beware.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.