Evolution Q2'25: Navigating Headwinds with Cautious Optimism
Revenue Beats, North America Accelerates, Headwinds in Europe & Asia
Evolution reported its second-quarter 2025 earnings yesterday, delivering what we'd call a solid, though not spectacular, quarter that shows promising signs of improvement. The company beat analyst expectations with revenue reaching €524 million (€517 million expected), up 3.1% year-over-year.
While the Company continues to grapple with challenges from proactive "ring-fencing" in Europe and cyberattacks in Asia, management appears to be steering the ship effectively, reaffirming its full-year EBITDA margin guidance for FY25 (66%-68%) and expressing "cautious optimism" for the second half of the year. The market reacted positively, with the stock finishing the day 8% higher.
Let's dive into the results.
Performance overview
At first glance, the numbers might seem modest. Revenue for the quarter was €524 million, a 3.1% increase year-over-year. However, revenue growth in constant currency basis was a much higher, at 8.8%.
EBITDA for the quarter was €345 million, leading to an EBITDA margin of 65.9%. This is down from the 68.0% margin in the same quarter last year, as revenue growth slowed while investments continued. However, it represents a welcome uptick from the 65.6% margin in Q1 2025. This sequential improvement is a positive step, reinforcing management's confidence in their reaffirmed full-year guidance.
Source: Evolution AB Investor Presentation Q2’25
Operating expenses grew by 10% year-over-year, outpacing revenue growth. This was primarily driven by higher costs for personnel (the number of staff was up 5.2% year-over-year but flat quarter-over-quarter) linked to the launch of new tables and general studio expansion.
Management is keenly aware of this and is actively optimizing its "resource mix" to enhance efficiency and protect profitability. This strategy involves consolidating some studio operations and rebalancing its employee base away from higher-cost regions, correcting a not so beneficial resource mix that resulted from scaling down its Georgia studio last year.
“We're also changing our resource mix, and we will see a higher degree of efficiency moving forward, and this will compress studios and also affect the number of employees as we move forward to 2025” Martin Carlesund, CEO
Segment Breakdown
The Live segment, Evolution's core business, generated €453.7 million in revenue, up 3.6% year-over-year.
Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)
The RNG segment remains a work in progress. It posted revenues of €70.6 million, representing minimal year-over-year growth of 0.3%. Performance was significantly hampered by one of the largest player payouts in the company's history for the RNG segment. Even without this one-off event, management was candid about the segment's performance.
“it’s an okay quarter, not a good quarter even if that wouldn’t have happened, but it’s an okay quarter. We are on track where we are, where we should be.” Martin Carlesund, CEO
For Evolution to truly dominate the broader online casino market, where RNG is the largest vertical, growth in this segment needs to accelerate.
Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)
Regional performance
Europe
Revenue in Europe was €180 million, showing a decline of 5.8% year-over-year. This was was a direct result of the company's proactive ring-fencing measures in Europe—ensuring games are offered only through locally licensed operators to get ahead of regulatory shifts. Ring-fencing measures started in Q1 and the results reflect the full three-month impact, compared to just two months in Q1.
CEO Martin Carlesund admitted the financial impact was "somewhat higher than anticipated" as player activity in some regions remains higher in unlicensed, grey markets. The dialogue with the UK Gaming Commission is ongoing.
Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)
Asia
There's good news from Asia. Revenue reached €209 million, marking a return to growth with a 3.6% year-over-year and 4.2% quarter-over-quarter increase. The Company continues its battle against the hijacking of its video streams but notes it is now "much better positioned to combat these issues". The acceleration from 2% YoY growth in Q1 to over 4% in Q2 is a clear positive signal. Additionally, during the quarter, Evolution launched its first-ever studio in Asia in the Philippines (first licensed iGaming jurisdiction in Asia), a significant milestone for growing their footprint in the region.
Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)
North America
North America continues to be a star performer, with revenue hitting €74 million, a robust 22.8% increase year-over-year. This growth rate represents an acceleration from the 15% seen in Q1’25. Management describes the region as "healthy, regulated with clear rooms, making businesses a little more predictable and stable".
With live casino still in its infancy in the U.S., the runway for growth remains long. To expand its footprint, Evolution is planning a new studio in Grand Rapids, Michigan , and is progressing well with the Galaxy acquisition, which is expected to close during the second half of 2025.
Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)
Latin America
Latin America delivered modest growth, with revenue of €38 million, up 2.8% year-over-year. The market holds "vast potential," but the adoption of new regulations in Brazil (regulated since January 2025) is taking time. Evolution remains confident that activity will pick up once the regulation is fully understood and implemented.
“There is vast potential in the region, especially in the Brazilian market where the adoption to a regulated environment takes time. That's normal, and we remain confident that when the regulation set in and the new playbook is fully understood, activity will pick up.” Martin Carlesund, CEO
In a perfectly timed move, Evolution opened its brand-new studio in Sao Paulo yesterday, strategically positioning itself to capture the massive opportunity as the Brazilian market embraces regulation.
Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)
Strategic Wins
Hasbro Licensing Deal: An agreement that makes Evolution the exclusive global provider for online games based on iconic brands like MONOPOLY. This deal ultimately strengthens Evolution’s moat due to the exclusivity of Hasbro’s rights. In fact, Evolution is preparing to launch MONOPOLY Live in the U.S. and is developing three new live casino Hasbro-based titles.
Bally's Partnership: A new deal with Bally's Corporation marks Evolution's entry into Rhode Island, establishing a presence in all seven U.S. states with regulated online casinos.
Capital Allocation
The Company continues its shareholder-friendly capital allocation. With a dividend of €572.5 million paid in Q2 and a share repurchase program of €500 million planned for 2025 (€219.5 million of which was completed in the first half), Evolution is on track to return approximately €1.07 billion to shareholders this year. This equates to a very attractive shareholder yield of 7.2% of its current market cap.
Despite these significant distributions, the balance sheet remains rock-solid, ending the quarter with a cash balance of €505 million and no debt.
Valuation
Even after yesterday's price jump, Evolution's valuation remains compelling. The stock trades at a trailing twelve-month EV/EBITDA multiple of just 10.3x and offers a free cash flow yield of 7.9%. For a market leader in an industry projected to grow at over 12% annually for the next five years, these multiples seem to imply a level of stagnation that we find overly pessimistic.
Final thoughts
This was a quarter of steady progress. The positives are clear: Asia is back to growing, North America is firing on all cylinders, and the sequential uptick in the EBITDA margin is very encouraging. Management's focus on resource optimization to protect profitability, even as revenue growth faces temporary headwinds, is exactly what investors should want to see.
The main negative remains the sluggish performance in the RNG segment and the impact of ring-fencing in Europe. For the market to fully appreciate the company's value and for the stock to continue its upward trend, Evolution needs to maintain its momentum in North America, see its Brazil investment begin to pay off in Latin America, and continue making progress against the challenges in Europe and Asia. Hitting its full-year EBITDA target will be a critical proof point.
Challenges remain, but Q2 was a step in the right direction. As management looks toward a stronger second half, so do we.