Evolution AB: 2025 growth is slowing — but is the moat cracking?

Whenever a high-quality compounder's share price pulls back, I like to revisit the fundamentals—not the price chart.

And recently, Evolution AB has been under pressure.

On the surface, this still appears to be the same dominant live-casino powerhouse. But once you dig into the latest results, you’ll notice growth isn’t as clean as before.

Let’s break down what actually happened in 2025 — and what I’m watching heading into 2026.

Before we go further, a quick disclaimer: I am a shareholder of Evolution AB, so this is not investment advice. This is how I think through the business as a long-term investor.

2025 financial performance: Flat growth, first signs of friction

For full-year 2025, Evolution reported net revenue of €2.07 billion, up just 0.2% YoY.

That’s essentially flat.

Adjusted EBITDA came in at €1.37 billion, down 3.2%, with margins still strong at 66.1%. Net profit was €1.06 billion (EPS €5.24) — still highly profitable, but no longer expanding.

This is the first year where growth felt… messy.

Not broken — but definitely pressured.

And if you’ve followed Evolution for a while, you’ll know this business rarely reports sluggish numbers.

So what changed?

Europe: Regulatory ring-fencing is hurting revenue

One of the biggest drags came from Europe.

Management proactively implemented what they call “ring-fencing.” In simple terms, Evolution restricted its games to locally licensed operators only.

Strategically, this is the right move for long-term compliance.

But financially? It hurt.

Europe revenue fell 8.1% YoY in Q4 2025, as channelisation rates declined— in some countries, legal platforms account for only about 50% of total player traffic.

So while Evolution is protecting its license and reputation, it’s sacrificing short-term revenue to do so.

This is the classic trade-off: compliance vs growth.

Asia: Cybersecurity issues disrupted growth

Asia was another soft spot in 2025.

Evolution has been battling “stream hijackers” — illegal operators who steal and redistribute live casino feeds.

Management responded aggressively in Q3 2025 by tightening security filters.

But they over-corrected.

Some legitimate players were blocked, which temporarily hurt revenue.

The good news? By Q4, Asia had returned to slow growth, as systems were recalibrated.

They’re also expanding their infrastructure, including the development of new studios in the Philippines, signalling a long-term commitment to the region.

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UK Gambling Commission Review: License risk under watch

Another overhang is regulatory scrutiny in the UK.

Evolution’s operating license remains under review by the UK Gambling Commission after reports that its games appeared on unlicensed websites.

Now, to be clear — Evolution doesn’t directly operate those sites.

But regulators are assessing whether enough safeguards were in place.

No final ruling yet.

Still, anytime a core license is under review, the market will price in uncertainty.

 

Strategic expansion: USA and Latin America lead

Despite short-term headwinds, Evolution continues to expand aggressively.

United States

• Relaunched Ezugi in New Jersey

• Planning a new studio in Grand Rapids (Michigan expansion play)

  
  

The US remains one of the largest long-term live-casino opportunities.

Latin America

Growth here has been strong.

Brazil’s new regulatory framework is helping formalise the market, and Evolution even highlighted an opportunity to acquire a competitor’s studio in Argentina after that player exited.

This is classic Evolution—entering early, scaling rapidly.

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Product pipeline: The Hasbro partnership

One of the most interesting developments in 2025 was Evolution’s exclusive partnership with Hasbro.

Announced on 1 July 2025, this multi-year deal enables Evolution to develop live casino and slot content based on major IPs such as MONOPOLY.

Launches are expected from January 2026 onwards.

If executed well, branded content tends to drive:

• Higher engagement

• Better monetisation

• Stronger operator demand

  
  

So this could become a meaningful growth lever.

Galaxy Gaming acquisition: Strategic but delayed

Evolution is also acquiring Galaxy Gaming for $85 million.

The deal is progressing but is facing regulatory delays in Nevada.

Expected completion: July 2026.

Strategically, this strengthens Evolution’s table-game IP and licensing capabilities — especially in North America.

2026 Outlook: Expansion mode continues

CEO Martin Carlesund remains optimistic.

Key guidance:

Growth

• Aim to grow at least in line with market rates

  
  

Margins

• EBITDA margins expected to remain in line with 2025 (~66%)

  
  

Product Roadmap

• 110+ new games launching in 2026

• Management calls the pipeline “nothing short of spectacular”

  
  

Geographic Focus

1. USA

2. Latin America

3. Innovative game formats

   
   

Europe remains essential — but investment will be “slightly less aggressive.”

My fundamental take: Still strong, but cracks are emerging

When I ran Evolution through my usual framework—ROIC, margins, cash flow—it still passed almost every test.

This remains a high-quality, cash-generating machine.

But one metric stood out:

Net income declined.

This is the first year of contraction.

Now, one year isn’t a trend.

But if net income declines again by the end of 2026, the narrative shifts from “temporary friction” to “structural slowdown.”

So this becomes a key monitoring point.

Intrinsic value update

I’ve updated my intrinsic value to $115, down from $117 previously.

Not a huge drop.

Free cash flow actually improved.

But my confidence in forward growth assumptions has moderated—especially given regulatory headwinds and regional volatility.

Valuation is as much about confidence as it is about cash flow.

Portfolio decision: Watching, not buying

Yes, the stock price has pulled back.

But price alone doesn’t make something attractive.

Because my conviction in near-term growth has softened, I’m not adding at this stage.

Instead, I’ll be watching three things over the next four quarters:

1. Net income trajectory

2. European regulatory stabilisation

3. Execution of the US & LATAM expansion

If growth re-accelerates, I’ll reassess.

If not, capital may be better deployed elsewhere.