Flutter's Q3 2025 Earnings Call: Contradictions Emerge on Prediction Markets, iGaming Strategy, and Tax Measures

Date of Call: None provided

Financials Results

• Revenue: Group revenue up 17% YOY in Q3; FY2025 revenue guidance $16.69B at midpoint (now -$570M vs prior), +19% YOY at midpoint
• EPS: Adjusted EPS up 29% YOY; reported loss per share $3.91 vs $0.58 in Q3 2024 (driven by non-cash and one-off items)

Guidance:

• Updated FY2025 midpoint revenue $16.69B and adjusted EBITDA $2.915B (group revenue -$570M; adjusted EBITDA -$380M vs prior)
• Q3 trading and customer-friendly sports results in Sept/Oct reduced FY outlook; increased Q4 US sportsbook investment
• FanDuel Predicts launch invest: incremental EBITDA cost $40–50M in Q4 2025 and $200–300M in 2026
• Cessation of real-money India operations and Illinois wager fee tax impact included
• Q1 2026 share buyback program up to $250M continuing capital returns

Business Commentary:

* Revenue and Adjusted EBITDA Growth: - Flutter Entertainment reported a 17% increase in group revenue and a 6% rise in adjusted EBITDA for Q3. - The growth was driven by excellent organic iGaming performance and the benefits from recent acquisitions.

• U.S. Market Performance:
• The U.S. division saw a 9% rise in revenue, with a notable 44% increase in iGaming revenue and a 27% market share.
• This growth was supported by strong iGaming performance, new games, and exclusive content.

• Sportsbook and Competitive Dynamics:
• Sportsbook revenue declined by 5%, impacted by customer-friendly sports results and heightened competitor generosity during the NFL season.

• The company maintained discipline, focusing on best pricing for customers despite competitive pressures.

• Regulatory Challenges and Strategic Investments:

• Flutter faced a $556 million non-cash impairment charge due to regulatory changes in India and a $205 million payment to Boyd for improved US market access terms.
• The company is excited about expanding into prediction markets with FanDuel Predicts, expecting it to open a significant incremental addressable market.

Sentiment Analysis:

Overall Tone: Neutral

• Management cites strong operational momentum (Q3 revenue +17% YOY; adjusted EBITDA +6%), major strategic launch (FanDuel Predicts) and international strength, but also reports a $789M net loss driven by a $556M impairment and $205M one-off Boyd payment; guidance was revised downward with quantified impacts.

Q&A:

• Question from Jeff Stantial (Stifel): On the $200-$300M planned investment next year for FanDuel Predicts, how are you underwriting returns — similar CAC/LTV thresholds to sports/casino or different given higher uncertainty; do you factor strategic cross-sell into LTV?
  Response: Management: Maintain disciplined CAC/LTV monitoring, expect to factor cross-sell and future sports legalization into returns, will invest meaningfully but track payback dynamics closely.

• Question from Jeff Stantial (Stifel): How widespread was the elevated competitor generosity at NFL season start and what’s the risk of a broader irrational spending/prisoner's dilemma?
  Response: Management: Elevated, uneven generosity occurred; they stayed disciplined (didn't match uneconomic offers), expect this to moderate over time and believe product quality/pricing will prevail.

• Question from Paul Tymms (Davy): Color on US trading in September and into Q4; and will the next-year prediction market investment cover the entire unregulated states rollout?
  Response: Management: September saw some share volatility but 47% NGR share in Sept and strong momentum into Q4 with record AMPs; investment sizing will be clarified after December launch and early traction—back-end loaded and scalable based on returns.

• Question from Ed Young (Morgan Stanley): Detail on engagement with regulators/tribes for prediction markets and does that suggest faster state liberalization; and what underpins improved NBA performance vs last year?
  Response: Management: Extensive constructive stakeholder engagement supports broad access plans and could accelerate legalization; NBA improvement driven by stronger engagement, improved parlay mix, viewing uplifts, and product/partnership (e.g., Amazon) enhancements.

• Question from Jordan Bender (Citizens): Does prediction-market investment change confidence in previously stated 2027 EBITDA/margins (27 targets) and will FanDuel traders be used for market-making?
  Response: Management: No 2027 update; prediction markets could enhance TAM and upside if returns justify higher investment; market-making is being evaluated but immediate focus is B2C launch.

• Question from Jason Tilchin (Canaccord Genuity): How are Betfair learnings being applied vs US-specific prediction-market features?
  Response: Management: Leveraging Betfair-exchange expertise and FanDuel consumer insights to launch a locally tailored product with fast-follow features, targeting market leadership by Q2 next year.

• Question from Sean Kelly (Bank of America): How are you underwriting prediction-market revenues/fee structures and price sensitivity assumptions?
  Response: Management: Prediction markets are commission-based (less sensitive to sports-result variance); early launch will feed LTV models and inform disciplined acquisition economics.

• Question from Bernie McTernan (Needham & Company): What product will you launch in December and what major improvements by Q2 will make it market-leading?
  Response: Management: Launching a robust initial product with a clear roadmap of fast-follow features (e.g., player-prop-like offerings) and iterative upgrades through early 2026 to reach leading proposition.

• Question from Barry Jonas (Truist Securities): Nevada surrendered gaming license due to Predicts—ramifications and further state license risks?
  Response: Management: Nevada license surrender was procedural (no B2C ops there); they engaged stakeholders and view this as manageable while proceeding with Predicts rollout.

• Question from Clark Lampen (BTIG): iGaming growth drivers beyond exclusives and rewards; outlook for iGaming mix long term?
  Response: Management: Exclusive content, rewards, jackpots and platform capabilities drive differentiation; sharing global best practices will sustain iGaming momentum and mix expansion.

• Question from Jed Kelly (Oppenheimer): Any change to underlying earnings power into next year excluding prediction markets (promo velocity, taxes)?
  Response: Management: No material changes to 2026 outlook; prediction investments are incremental, and international transformation initiatives support EBITDA growth.

• Question from Brandt Montour (Barclays): Is Q4 sportsbook investment NFL-only or NFL+NBA, and if returns are good will you sustain higher investment?
  Response: Management: Investment is agile across events (NFL/NBA); they will stick to disciplined ROI/CAC thresholds and scale investment where returns justify it.

• Question from Ben Shelley (UBS): Early learnings from Illinois wager fee measures and impact on player behavior; how does that inform response to tax hikes?
  Response: Management: Illinois shows fewer bets but higher handle per bet; it'll be another tool to mitigate high-tax impacts and part of the toolkit for addressing taxes elsewhere.

• Question from Ryan Sigdahl (Craig-Hallum): Will initial Predicts launch include Parlay/prepackaged liquidity features?
  Response: Management: Parlays will not launch in December but will be fast-followed early next year.

• Question from John DeCree (CBRE): Any aggressive promotional behavior in US iGaming similar to sportsbook?
  Response: Management: iGaming lacks the same seasonality-driven promos; focus remains on exclusive content and product execution—AMPs up 30% YOY evidences momentum.

• Question from Robert Fishman (MoffettNathanson): Will ESPN/DraftKings partnership change dynamics; pursuing other media partnerships and update on FOX relationship?
  Response: Management: They evaluate media deals opportunistically, are pleased with Amazon partnership execution, and believe superior product quality is the differentiator; no material change to strategy disclosed.

• Question from Joe Stauff (Susquehanna): Viability of Parlays on Predicts and using them to hedge sportsbook concentrated bets?
  Response: Management: Parlays are hard to implement and will be limited in depth; they don't expect Predicts parlays to be a practical hedge for sportsbook concentration.

• Question from Chad Beynon (Macquarie): Thoughts on rapid regulatory change in India—is parliament hostile or protecting consumers; could market reopen later?
  Response: Management: Disappointed by swift Indian law change; maintaining free-to-play JungleE while pursuing legal/lobbying options and hopeful for longer-term clarity enabling return.

• Question from Estelle Weingroup (JPMorgan): Current UK market dynamics—sportsbook comps and iGaming slowdown; outlook assuming normalized sports results?
  Response: Management: Comps are tough due to prior-year Euros; Sky Bet migration to Flutter UKI platform and new products (SuperSub, SquadBet) support confidence for 2026 recovery.

• Question from Monique Pollard (Citigroup): Why was parlay mix lower at NFL start and update on 'Your Way' outcome-based pricing?
  Response: Management: Early-season uneconomic SGP offers compressed parlay mix; moderation followed and parlay mix recovered; 'Your Way' (outcome-based pricing) rollout broadens live product choice, improves pricing speed/latency and boosts engagement.

Contradiction Point 1

Prediction Market Strategy and Investment

It involves the company's strategic approach to prediction markets, which could have implications on future investments and revenue expectations.

Can you explain the return algorithm for FanDuel Predicts and how it compares to sports and casino payback thresholds? - Jeff Stantial (Stifel)

2025Q3: We'll maintain a disciplined approach with cautious customer acquisition, focusing on achieving great returns. The investment will be significant in December and expected to grow into the football season. - Peter Jackson(CEO)

Can you explain the drivers of efficiencies and leverage in U.S. marketing? What is Flutter’s stance on prediction markets? - Edward Young (Morgan Stanley)

2025Q2: We're not speculating on the risks and opportunities of prediction markets. - Jeremy Peter Jackson(CEO & Executive Director)

Contradiction Point 2

U.S. iGaming Growth and Competitive Dynamics

It demonstrates differing views on the growth and competitive dynamics of U.S. iGaming, which affects Flutter's strategic positioning in the market.

How do you view iGaming product differentiation and its impact on revenue? - Clark Lampen (BTIG)

2025Q3: Exclusive content and reward programs drive iGaming growth. We consistently improve product offerings, successfully applying US strategies globally. - Peter Jackson(CEO)

Why is U.S. iGaming growing strongly despite maturity concerns and macro impacts? How is Flutter positioned relative to peers? - Ed Young (Morgan Stanley)

2025Q1: Flutter's iGaming is performing strongly due to unique content and customer engagement initiatives like on-play jackpots and reward mechanics. The team is focused on delivering a superior product to competitors, enhancing the overall customer experience. - Peter Jackson(CEO)

Contradiction Point 3

Promotional Spending and Market Normalization

It highlights differing perspectives on promotional spending and industry normalization, which are crucial for understanding Flutter's competitive strategy and market positioning.

Can you provide more details on trading in September and into Q4 in the US? Will the prediction market investment cover all unregulated states by 2026? - Paul Tymms (Davy)

2025Q3: We saw heightened competitor action at the NFL season's start, but performance has improved into October. - Peter Jackson(CEO)

Will industry promotions normalize this year, and could a slowdown in handle impact market growth? - Jed Kelly (Oppenheimer)

2025Q1: Flutter maintains a disciplined stance on promotions. Net revenue is the key metric, not handle growth. The current market is in its early stages with growth potential and penetration opportunities. - Peter Jackson(CEO)

Contradiction Point 4

Customer Acquisition and Payback Periods

It involves the company's strategy and performance in customer acquisition, which is crucial for future revenue growth and market share.

Can you explain FanDuel Predicts' return algorithm and how it compares to sports and casino payback thresholds? - Jeff Stantial (Stifel)

2025Q3: We'll maintain a disciplined approach with cautious customer acquisition, focusing on achieving great returns. - Peter Jackson(CEO)

Can you discuss the $90 million investment losses in new states and the customer acquisition environment? Also, what is your view on prediction markets as an opportunity? - Ed Young (Morgan Stanley)

2024Q4: Customer acquisition remains strong with payback periods under 18 months. - Peter Jackson(CEO)

Contradiction Point 5

Illinois Tax Measures and Transaction Fees

It involves the company's stance on and expectations from Illinois tax measures and transaction fees, which could impact financial performance.

What early insights from Illinois tax measures guide your tax hike strategy? - Ben Shelley (UBS)

2025Q3: Illinois tax measures reduced bets but increased handle per bet. This is another tool to mitigate taxes in high-tax jurisdictions. - Peter Jackson(CEO)

How do you underwrite the risk of investing in prediction markets amid potential political changes? Is the Illinois surcharge based on the state or the company? - Jordan Maxwell Bender (Citizens JMP Securities, LLC)

2025Q2: We're disappointed in the tax increase, which hurts recreational customers and risks fueling the black market. The fee introduced is to mitigate this impact, and we expect Illinois to remain an outlier in this tax approach. - Jeremy Peter Jackson(CEO & Executive Director)