Evolution AB: Assessing the $85M Galaxy Acquisition as a Strategic Catalyst for US Market Dominance

The acquisition of Galaxy Gaming by Evolution AB in 2024 has been a pivotal move in the company's strategy to solidify its position in the North American market. With the US online gaming sector still in its early growth phase, Evolution's $85 million investment in Galaxy-a developer and distributor of innovative casino table games-has been framed as a catalyst for expanding its product portfolio, deepening regulatory relationships, and enhancing operational scalability. However, the path to value creation has not been without challenges, as margin pressures from increased personnel costs and regulatory delays have tested the company's ability to balance growth with profitability.

Strategic Rationale: Strengthening US Market Position

Galaxy Gaming's 131 global licenses, including 28 in U.S. states, have provided Evolution with a critical foothold in a market where regulatory approvals are both a barrier and an opportunity. According to a report by StockOpine, the acquisition is expected to "strengthen Evolution's relationships with U.S. regulators and expand its offerings in live dealer and RNG games." This alignment with regulatory frameworks is particularly valuable in a fragmented market where state-by-state compliance is essential for long-term success.

The strategic value of the acquisition is further underscored by Galaxy's expertise in table games, which complements Evolution's existing strengths in live dealer and RNG (random number generator) solutions. In Q3 2025, Evolution reported a 6.6% year-on-year growth in RNG revenue to €74.4 million, indicating that the integration of Galaxy's technology is beginning to bear fruit. Meanwhile, live casino revenue in 2024 reached €459.4 million, reflecting the company's ability to leverage its expanded portfolio to capture market share.

Operational Efficiency and Cost Optimization

Despite the promise of the acquisition, Evolution has faced operational headwinds, particularly in managing costs. Operating margins in Q2 2024 dipped to 61.2%, the lowest in recent years, due to accelerated headcount growth and investments in new studios. However, the company has taken steps to address these pressures. By Q3 2025, operating expenses grew at a slower rate (5.3% year-over-year) compared to the previous quarter's 10% increase, signaling improved cost discipline.

A key driver of this efficiency has been Galaxy Gaming itself. As noted in a Beyondspx analysis, Galaxy's SG&A expenses declined by 35.80% in Q3 2025, a significant achievement that highlights the potential for cross-portfolio synergies. Evolution has also reduced its full-time equivalent (FTE) count from 16,311 to 16,094 by the end of Q3 2025, demonstrating a strategic reallocation of resources to prioritize high-impact areas.

Margin Resilience and Long-Term Outlook

Evolution's EBITDA margin resilience remains a cornerstone of its appeal to investors. In Q3 2025, the company maintained an EBITDA margin of 66.4%, within its full-year target range of 66% to 68%. This performance, despite challenges such as cyber-attacks in Asia and regulatory instability, underscores the scalability of Evolution's business model. Management has also reiterated confidence in sustaining margins within this range for 2025, supported by a strong balance sheet with €689 million in cash and cash equivalents as of Q2 2024.

A would provide investors with a visual reference of the company's margin stability and long-term performance.

The company's commitment to shareholder returns further bolsters its long-term value proposition. With €400 million approved for share repurchases up to the 2025 AGM, Evolution is signaling its ability to balance reinvestment in growth with direct value creation for investors.

Challenges and Regulatory Uncertainties

Not all is smooth sailing. The Galaxy acquisition, initially expected to close in 2024, has been delayed until mid-2026 due to regulatory hurdles. While this extension allows Evolution to navigate complex compliance requirements, it also introduces uncertainty about the full realization of synergies. Additionally, external factors such as geopolitical risks in Asia and competitive pressures in North America could test Evolution's operational flexibility.

Conclusion: A Calculated Bet on US Growth

The Galaxy acquisition represents a calculated bet on the US market's long-term potential. While short-term margin pressures and regulatory delays pose risks, Evolution's ability to drive operational efficiency, maintain EBITDA margins, and expand its product offerings positions it as a formidable player in the evolving online gaming landscape. For investors, the key question is whether the company can sustain its momentum as it navigates these challenges-and whether the US market's growth trajectory will justify the strategic investment.