Shares in Evolution AB plunged more than 5% on Wednesday after the Swedish online casino supplier disclosed first-quarter results that missed EBITDA expectations. Europe revenue, the company's biggest market, declined 12% year-over-year to €345.3 million—its lowest since the second half of 2022. The miss underscores persistent regulatory pressures in a sector where governments worldwide tighten oversight on gambling operations.
EBITDA and Revenue Fall Short Amid Regional Disparities
EBITDA dropped 2% to €335.3 million, below the Bloomberg consensus of €338 million, with the margin slipping to 65.4% from 65.7% a year earlier. Net revenue edged down 1.5% to €513 million, aligning with estimates, though constant-currency growth reached 6.8%. Operating profit declined 3.6% to €292.6 million, narrowing the margin to 57.0%, while net profit fell 1.1% to €251.9 million and earnings per share edged up to €1.26.
Europe Slumps as Regulations Curb Activity
CEO Jens von Bahr highlighted regulatory volatility and subjective enforcement as primary drags on Europe, the group's largest segment by customer location. Self-imposed ring-fencing measures—designed to segregate player funds and ensure long-term sustainability—add short-term costs, even as they position the firm for enduring compliance. Morgan Stanley, rating the stock equal-weight with a SKr 680 target, pointed to absolute revenue levels not seen since late 2022 and flagged meager 2026 profit growth alongside regulatory uncertainty.
Emerging Markets Offset Weakness with Strong Gains
Latin America shone brightest, with revenue surging 29.3% to €64.4 million. North America expanded 10.1% in euros to €75.5 million, or 21.4% in local currency. Asia posted sequential growth to €16.9 million for the second quarter running, despite expected instability through 2026. Live games generated €434.9 million, down from €448.7 million, while RNG-based revenue climbed to €78.2 million from €72.3 million; mobile now drives 76% of operator gross gaming revenue, up from 72%.
Balance Sheet Strengthens Amid Regulated Shift
Cash reserves swelled to €1.098 billion from €969.2 million. Regulated market revenue rose to 48% of the total, from 45%, reflecting a strategic pivot toward jurisdictions with clearer rules. The board recommended no dividend for the 2025 financial year, prioritizing reinvestment as the company navigates global shifts in gambling policy that favor controlled environments over unchecked expansion.