Swedish gaming company Evolution AB (EVVTY) reported a 5.4% drop in Q1 profit as it moved to shut down access to its games in unlicensed markets and grappled with cyberattacks across Asia.
The crackdown follows a December review by the UK Gambling Commission, which found Evolution content being offered by operators without a license.
While the UK accounts for just 3% of Evolution’s total revenue, the company said the regulatory fallout is hitting broader European markets where so-called “channelisation” — the transition from illegal to legal gambling — remains low.
“We’ve taken proactive and self-initiated actions in February to ring-fence additional regulated markets in Europe,” CEO Martin Carlesund said in the Q1 earnings report.
“The effects have varied, with the largest negative revenue impact in markets where channelisation is low.”
Carlesund previously said Evolution was using “all technical tools available” to ensure that games are only accessible via licensed operators.
He added that the company held “constructive dialogues” with major European regulators during the quarter
Cyberattacks and damaged credibility stalled growth
In Asia, revenue growth slowed sharply to 2% in Q1, down from 11% in Q4. Carlesund blamed the slowdown on persistent cybercrime in the region and said the company is implementing new technical defenses.
Across Europe, revenue declined 1% in the quarter compared to 9% growth the previous quarter.
Evolution is sticking to its full-year guidance of an EBITDA margin between 66% and 68%, but its Q1 margin slipped to 65.6% from 69% last year.
Regulus Partners, an advisory firm focused on the gambling sector, said Evolution had “effectively switched off some black-market revenue it should not have been making in the first place.”
“It will be remembered that Evolution was investigated by the Gambling Commission late in 2024 because its content was found on black market sites available in the UK,” Regulus said in a note this week.
“It has since been on a rapid charm offensive to other regulators.”
Despite the disruptions, the company says the game pipeline remains on track.
Evolution plans to release 110 new games this year and has already opened two new studios, with three more expected in the second half of 2025.
“Despite the effects from the ring-fencing and the cyber-attack countermeasures, the underlying potential in both Europe and Asia remains solid,” Carlesund said.
Investors weren’t convinced. Evolution’s stock plunged 19% on Wednesday and is down 9.3% over the past 12 months.
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