Shares in Evolution AB plunged more than 5% on Wednesday after the Swedish online casino supplier disclosed first-quarter results that missed EBITDA forecasts. Europe revenue, the company's biggest market, tumbled to its lowest level since the second half of 2022, signaling persistent headwinds in a core region. This setback underscores regulatory pressures challenging the live casino sector's expansion.

EBITDA Miss Highlights European Weakness

EBITDA fell 2% to €335.3 million from €342.0 million a year earlier, falling short of the Bloomberg consensus of €338 million. The EBITDA margin slipped to 65.4%, below both the expected 65.9% and last year's 65.7%. Net revenue dipped 1.5% to €513 million, matching estimates, with constant-currency growth at 6.8% offering some offset.

Europe revenue declined 12% year-on-year and 5.9% from the prior quarter to €345.3 million. CEO Jens von Bahr described the region as the quarter's clear disappointment, attributing it to regulatory volatility and self-imposed ring-fencing measures that limit player activity despite long-term benefits. These restrictions, designed to promote responsible gaming, impose short-term costs on operators.

Regional Divergences Shape Mixed Picture

Latin America stood out with €64.4 million in revenue, a 29.3% year-on-year increase, while North America grew 10.1% in euro terms to €75.5 million, or 21.4% in local currency. Asia revenue edged up to €16.9 million from €16.3 million in the fourth quarter, marking two straight quarters of sequential gains, though instability persists through 2026.

Live game revenue dropped to €434.9 million from €448.7 million, but RNG revenue rose to €78.2 million from €72.3 million. Mobile devices drove 76% of operator gross gaming revenue, up from 72%, reflecting a shift toward handheld play.

Financials and Regulatory Trends Signal Caution

Operating profit decreased 3.6% to €292.6 million, with the margin contracting to 57.0% from 58.2%. Net profit edged down 1.1% to €251.9 million, though earnings per share improved slightly to €1.26 from €1.24. Cash reserves strengthened to €1.098 billion from €969.2 million, bolstering the balance sheet.

Regulated market revenue climbed to 48% from 45%, a positive amid scrutiny. Morgan Stanley, rating the stock equal-weight with a SKr 680 target, noted Europe's revenue at levels unseen since late 2022 and flagged meagre 2026 profit growth alongside regulatory uncertainty. The board proposed no dividend for 2025, prioritizing resilience over payouts as the industry faces evolving compliance demands across jurisdictions.