H1 earnings show changing fortunes among property giants

SM Prime remains the biggest and far ahead from rivals, as Ayala slips, and Megaworld edges up.

The first half of 2026 is revealing a shift in the balance of power among the country’s property giants. After years of cautious residential demand, housing is once again proving capable of moving the earnings needle for developers with the right projects. At the same time, recurring-income businesses—malls, offices, hotels—continue to provide the stability that shields companies from volatility.

Just last week, publicly listed companies released their first‑half earnings, and the property sector was the most revealing. The latest results painted three very different pictures for the country’s largest developers. SM Prime Holdings, the biggest and most dominant in the sector, delivered relatively flat results but remains far ahead of peers thanks to the sheer scale of its recurring businesses. Ayala Land Inc. saw a decline, cushioned only slightly by leasing and hospitality revenues. In contrast, Megaworld Corp. extended its growth streak, the only one among the three to post an increase.

Based on net income performances, the differences in how the sector’s leaders are navigating the same market conditions stand out clearly. The reshuffling in rankings underscores this contrast: SM Prime remains in first place, Megaworld has climbed into second, and Ayala Land has slipped to third.

SM Prime: Too big to be caught up to  

SM Prime posted ₱24.5 billion in net income for the first six months of 2026, essentially flat compared to last year. Revenue rose 5% to ₱71.7 billion, but costs and expenses climbed nearly 6%, eroding margins and neutralizing the revenue gains. The stabilizing force was its recurring-income businesses: mall revenue climbed 8% to ₱41.8 billion, while rental income from malls, offices, hotels and convention centers accounted for 61% of consolidated revenue.

Flat earnings here are not stagnation but a demonstration of resilience. Rising operating costs — from utilities to construction and staffing — are squeezing profitability across the sector. Yet SM’s breadth of recurring income insulated it from sharper declines. The result shows that scale and diversification can neutralize margin pressure and preserve leadership. And because SM Prime is simply too large and far ahead of its peers, even a flat performance keeps it formidable in the sector—making it extraordinarily difficult for rivals to catch up. For the industry, SM’s performance is a reminder that recurring businesses are now the decisive buffer against inflationary headwinds, keeping the country’s largest developer firmly in command even when profit growth stalls.

Ayala Land’s property development is a drag  

Ayala Land’s net income fell 19% to ₱11.5 billion, its steepest drop in recent years. The weakness was concentrated in property development, where revenue plunged 22% and sales reservations fell 19% to ₱53.5 billion. Recurring businesses provided some lift—leasing and hospitality revenue increased 9%, shopping centers rose 4%, hospitality surged 28%—but these gains were not enough to counter the slump in development.

The decline highlights Ayala’s vulnerability to residential cycles. When property demand softens, even strong leasing and hospitality cannot fully compensate. For the industry, Ayala’s setback is a cautionary signal: developers that lean too heavily on property sales risk sharper swings in earnings when demand cools. More tellingly, this drop meant Ayala ceded its long‑held second place in the rankings. The fall is subtle but significant—a reminder that even established giants can lose ground when their portfolios lean too heavily on cyclical development rather than recurring income.

Megaworld’s residential and recurring income lift earnings 

Megaworld was the only one among the three to post growth in first-half net income, recording ₱12.7 billion, up 5% year on year. The lift came from residential demand: pre-sales reached ₱63 billion, up 15%. Gains in recurring businesses also supported growth—hotel and resort revenue rose 11%, lifestyle malls grew 8%, and office rentals increased 5%.

Megaworld’s strength extends beyond residential momentum. Its recurring-income streams have reinforced earnings, providing stability even in volatile markets. The township concept—master-planned communities that integrate residential, office, retail, and hospitality — has proven resilient in difficult times, creating self-sustaining hubs that sustain demand across cycles. Anchored by financial discipline practiced since its beginnings, Megaworld has built a model that balances growth with resilience. This combination of residential sales, recurring income, and disciplined execution explains why it grew while rivals struggled, underscoring how integrated townships and sound management position developers to climb the rankings.

Industry reordering at midyear  

Taken together, the numbers show how differently the three developers are navigating the same market. SM Prime’s unmatched scale and recurring-income strength kept it firmly in command, proving that even flat earnings leave it far ahead and difficult for rivals to catch up. Ayala Land’s reliance on property development dragged it down to third, while Megaworld’s stronger residential sales lifted it into second. The midyear reshuffle—SM first, Megaworld second, Ayala third — underscores how leadership now hinges on recurring income versus property development, with SM Prime setting the pace that others struggle to match.

The first-half numbers, however, are only a snapshot. With residential demand, recurring income and project launches likely to shape the next six months, the question is whether the midyear order will hold—or whether shifts in demand will test SM Prime’s commanding lead.

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