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Evolution Gaming: The House Always Wins, And Now You Can Be The House
There's a company that's been a 45-bagger since going public in 2015.
Not because of some revolutionary technology breakthrough, but by solving a problem most of us didn't even know existed: Live Casino Gaming.
The company? Evolution Gaming.
Evolution is a Swedish company founded in 2006.
It is the creator and provider of online Live Casino Games.
They bring brick & mortar casino experiences directly to your very own devices.
They offer many classic casino games like Blackjack along with proprietary developed games that they license to online casino operators (but carry the responsibility of running the games themselves). These games can either service a single casino operator, or many.
You can learn more about their games here: YouTube Video: Evolution Games
In my opinion, Evolution is a Stage 3 Maverick, a market leader with a 60% market share.
The "Picks and Shovels" of Online Gambling
Imagine you're an online casino operator.
You need dealers, games, slot machines, analytics, security, and compliance tools.
You could build all this yourself for millions, hire thousands of employees, navigate complex regulations across multiple countries...
OR
You could just pay Evolution 10-20% of your winnings and focus on what you do best: marketing and customer acquisition.
Sound like a pretty good tradeoff?
It is.
Evolution has done an excellent job of positioning itself as the essential infrastructure provider for online casinos.
Think of it this way, during the Gold Rush, the people selling picks and shovels made more consistent money than most miners.
Evolution is selling picks and shovels to the online gambling gold rush.
Evolution’s Superior High Margin Business Model
Evolution doesn't own casinos:
They’re in the content business.
They live-stream their games from purpose built Studios around the world.
As you can imagine, studio overhead is much cheaper than casino real estate
It can service multiple geographies
It is cheaper to expand
It serves a larger number of players than physical casino tables
It has lower real estate occupancy and upkeep costs
And there is no need for player perks like free drinks, or hotel room upgrades etc
Evolution doesn't take gambling risks:
Say John Smith loses $100 playing Blackjack, Evolution will get $10-20 of that.
On the other hand, if John Smith wins $100, Evolution isn’t on the hook for any of this money. The casino operator is.
Evolution operates B2B:
This means they have minimal customer acquisition costs
Casino operators fight tooth and nail to acquire new customers, and once they do, they funnel these players to Evolution’s games. Evolution didn’t pay anything for servicing this increasing demand.
As a result, their position in the value chain lets them capture upside from newly acquired players across the whole ecosystem.
Not only that, if players switch operators, it is not uncommon for players to continue playing Evolution’s games (because of Evolution’s high market share).
Evolution also often shares the cost of constructing Game Studios with their casino operator clients.
All of this leads to a superior business model with far more attractive unit economics compared to those of physical casinos.
Is Competition A Threat?
As of last year, there were >40 Live Casino Providers worldwide.
But are they a threat to Evolution?
Last year, Todd Haushalter, Chief Product Officer at Evolution was asked, how “Evolution could get disrupted.”
Below is his answer.
I think he pretty much outlines the investment case right here.
I would encourage you to watch a few minutes of this video from the 34:50 minute mark, or read the transcript below where he outlines how tough it would be to disrupt Evolution (I've tried my best to remove all the filler words he used!).
“It was easier to disrupt Evolution four years ago than today.
Because to show up and have a competitive live product in 2025 let's say, the cost is so high. It's extremely expensive and just to have a sufficient live offering, and most people don't want to take those costs.
We're up against 40ish live providers in the rest of the world.
I don't think that's by accident, just look at the economics of the market.
It's a tough road ahead and so even if you build a good live offering, it's a little bit maybe like if you build a really great soda.
If you and I come up with some fantastic Cola that does great blind taste tests, now you have to get the distribution, and go get shelf space.
Coca-Cola is not going to give that away.
Even if we can get shelf space, why are customers going to pull it off the shelf? They like Coca-Cola already and we've got a couple of coca-colas you know.
We've got Crazy Time and the Lightning Franchise and Evolution itself is a brand.
People have played a lot of rounds and they trust it.
They trust the company.
Maybe you've had a day where you had a 500x win on Lightning roulette? Or you had a big win on some other game.
Well that makes you trust the blackjack at evolution more in the same way you don't want to switch from Coca-Cola to something else.
People just don't like change.
And then you got to fight against the other 39 studios.
You got to go and compete against the other 39 that are fighting to be great and a lot of them are great.
And so it's tough.
And then in the States you got to do it all in New Jersey then again in Michigan and then again in Pennsylvania.
Then you've got to combine three businesses which is really hard:
(1) The software business is hard enough right - that's what you click on your screens and all that, and that's got to be great, and we got to have great video and it's got to work and it's got to work on different browsers on different devices, all that…
(2) Then in our case we have to run this 20,000 some person operation so it's a casino. You got to run a casino! Caesars MGM Sands they can tell you how hard that business is and that's really hard. And then everything's happening on camera so there's mistakes and stuff like that and you have to have mistake resolution systems, and then you've got card counters. All the normal stuff that comes with running a casino you got people who have written software to predict where the roulette ball is going to fall you got DDOS attacks all that.
(3) And then you have a hardware piece of the business. At Evolution we've got our own Hardware. We have a machine shop where we're milling our own stuff to build the game shows. We bought Digi Wheel giant spinning digital wheel and Equipment support and all that sort of stuff.
And it breaks all the time.
And so you've got to do all that to support everything.
You have to have training academies, you have to have a system and then after you have to have good ideas for the next breed of games.
And even if you get it all right why again why do the players want to come over?
Why do they want to switch?
What are you offering them?
You can't take the zeros off of the roulette wheel to compete on price because operators won't allow it.
Would you take roulette with a zero house Edge?
No, so they can't compete on house Edge.
They don't have Brands.
It's a terribly difficult business to take on.
Coca-Cola, it's easier.”
I loved this answer.
Yes, there is some arrogance in this answer when comparing Evolution to Coca Cola, but at the same time, there is also just a lot of confidence because of a very strong moat in place.
Let’s discuss Evolution’s competitive advantages next.
Evolutions Competitive Advantages
Best In Class, Focused Execution and First Mover
Evolution is widely considered the industry leader with the best proprietary game IP. This is because Evolution has largely focused only on developing live casino games, for almost 20 years now.
They are customer obsessed. The question they keep asking themselves is: What does the player want? It would probably have been a much easier road if they had succumbed to the wishes of their casino operator clients.
As a result, they have built a unique portfolio of immersive, interactive fun games, and take pride in their Product Gap To Competition.
“our mission to ever increase the gap to competition. It takes hard work in all areas; staying ahead in the ever-changing regulatory landscape, being an attractive employer around the globe, moving our technology to the cutting edge and offering the best product in the world. “
Because of this, there is career risk for an operator who chooses a different provider than Evolution. Why? Because if the alternative provides a worse experience than Evolution’s, there is real risk that players switch to a different online competitor.
Network Effects
Evolution’s long operating history and high market share means they have significantly more traffic and data. This helps Evolution better understand player behavior, and as a result, offer better games and experiences to them.
Better games then naturally lead to more players.
More players leads to more revenue, which in turn supports more investment, which leads to more studios, more traffic and more data.
It's a beautiful flywheel.
Scale Advantages
With Evolution’s model, dealer salaries and other expenses are a fixed cost which can be leveraged across several potential concurrent players instead of just a few players at a traditional casino table.
Similarly, because of their scale, Evolution can outspend their competitors when developing new IP, and still have a lower per-user cost of development. This gives them a better chance of further growing their IP advantage over time.
Evolution offers hundreds of games and utilizes their global network to manage capacity and utilization (eg: high volume of tables, 24/7 access, games in numerous languages, etc)
To compete with Evolution you need a global studio presence, a unique and extensive library of games that will draw an audience, and the ability to offer games in multiple languages.
A company without scale has to overcome the chicken and the egg problem, of either having too few tables and game offerings, which leads to bad experiences like not having enough dealers or games, or not having enough availability during certain hours of the day/days of the week etc vs overinvesting in capacity that won’t be used.
High Switching Costs
Evolution games like "Crazy Time" or the Lightning Franchise are proprietary. If a casino wants to switch providers, they lose access to the games their customers love most.
Remember that switching costs for players is low, they will simply go where their favorite games are.
This gives Evolution leverage.
As you can see, the company possesses some very Strong advantages.
Runway For Growth
Evolution is riding multiple secular trends
Legalization wave: Country after country is legalizing online gambling for tax revenue.
Digital transformation: Physical casinos moving online.
Mobile adoption: Gambling moving from PCs to smartphones globally.
Better camera and streaming technology coupled with improved broadband and latency.
The TAM is expanding quickly
The US is Evolution’s fastest growing market, and is virtually a monopoly already. That said, if/when more states legalize online casino games, the U.S. alone could significantly increase Evolution revenues.
Also let’s not forget about Asia and their huge population. The Asia market is currently 33% of revenue, despite this being a market Evolution entered late. Also, their Philippines Studio, which is their first in Asia, just started this year. Evolution has a lot of opportunity in this fragmented Asian market.
Other regions, for example LATAM, are greenfield opportunities as well. Brazil also has a new Studio. Brazil is transitioning towards regulating their online gambling market, and hence will be an important growth vector for Evolution.
Firstly, the online gambling market is about ~25% of the total gambling market.
Live Casinos make up about 20% of the online gambling market.
Therefore, Live Casinos = 5% of the total gambling market.
That doesn’t seem saturated at all.
Why can’t Live Casinos represent the majority of the gambling market? That’s the case in the UK, where online gambling generated £4B while physical casinos generated only £2.5B.
Of course, we can’t assume all markets will end up like the UK market. But, with only 5% share, online casino market share penetration could have significant upside left.
What Are The Risks?
Regulatory Risk
This is the big one.
Evolution operates in a heavily regulated industry (for example, the country might limit certain types of games, or they might restrict advertising, or perhaps have gaming specific fees etc).
Recent regulatory pressures have impacted growth. For example, the company had to "ring-fence" certain markets, leading to slower growth in 2025.
The process of obtaining gaming licenses can be expensive and time consuming, and operators with a poor reputation or new entrants without a reputation can have a hard time getting a license.
However, longer term, this higher operating cost of compliance means higher competitive barriers to entry, a net positive for Evolution.
Revenue/Customer Concentration
With their B2B model, this is something to be expected. However,
As the company expands globally, this concentration should lesson.
And second, we have seen from the competition and competitive advantage discussion above how Evolution can in fact have higher negotiation leverage compared to casino operators.
ESG Concerns
Evolution enables gambling, and hence, ESG-focused investors might avoid the stock.
Prediction Markets and Financial Markets:
Will online gambling tilt towards non-casino “games” like sports betting, or betting on prediction markets? It’s unclear.
Retail trading in stocks, options, and crypto can also be considered a legitimate gambling substitute.
At the moment, physical casinos are still going online, many states are converting “black market gambling” into regular markets, so despite the above concerns, the live casino market still feels poised for growth ahead.
I mean, just look at the Asian market, which represents a large fragmented and growing market opportunity. Evolution just opened their very first studio in Asia (Philippines) only this year, yet they were already taking market share over the past few years.
The Valuation Question
Since April 2021, the stock is down ~55%.
Initially, there were concerns that Evolution was enabling online gambling in jurisdictions where it was illegal. However, this KYC “Know Your Customer” responsibility lies with the casino operators, not Evolution.
Lately, revenue growth has slowed due to two main issues:
regulation (ring fencing impact)
cybercrime (the hijacking of their live video streams in Asia)
That said, revenue growth at constant currency in Q2 2025 was still 8.8 percent. And Asia’s revenue is also back to growth.
The stock currently trades at low double digit P/E.
For an almost monopoly-like business with 60% operating margins, and a long runway ahead, despite regulatory unknowns, that price seems more than reasonable.
Imagine you owned this market leading business as a private company, would you sell it at such a price? Probably not.
But Mr. Market is letting us buy in at this price.
A double from current prices wouldn’t even take us back to all time highs.
I bought this stock in Coffee Can 15 in June and it is already up almost 20%.
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Conclusion
Evolution pioneered live game shows and have a strong track record of innovation.
As a result, they are the dominant leader in a global secular growth market and have a very strong moat.
They are riding multiple secular trends which will continue to lead to TAM expansion.
And the company is available at a reasonable valuation due to temporary concerns.
To me, it’s a BUY.
What do you think? I'd love to hear your thoughts.
Disclaimer: This is not Financial Advice, of course…
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