Flutter Entertainment

The industry's regulatory environment is evolving. In September, Brazil's president signed an order to ban online gaming, which followed a halt in India, and hesitancy to legalize online betting in states like Ohio. Also, the legality of predictive sport wagers have seen split court decisions.

Why it matters: The growth potential of online gaming remains attractive. That said, we are applying an updated probability methodology tied to trends in the legislation landscape to account for the lack of visibility around timing of new legalizations in the US and changes in overseas opportunities. We still expect a handful of states to launch sports and online gaming by 2030. This drives our updated 2030 industry online gaming sales estimate of $48 billion versus $50 billion previously, up meaningfully from $27 billion in 2025. For Flutter, we are removing its Brazil business (about 4% of total sales) and increasing the company's cost of capital estimate to 8.9% from 8.2% to account for elevated uncertainty in international regions. This cost of capital change better harmonizes with DraftKings' 9.2% level.

The bottom line: We have decreased our fair value estimates to $187 ($220 previously) and $39 ($45), respectively, for narrow-moat-rated Flutter and DraftKings. Investors are pricing in a dire environment, which could cap shares until a ruling on predictive sports is served by the US Supreme Court in 2027. We now model Flutter's 2026-35 revenue growth to average 6.3% (6.6% prior) with 2035 EBITDA margins of 24.1% (25.1%). Our 2026-35 sales growth and EBITDA margins for DraftKings are 8.1% (9.6%) and 24.9% (25.4%). We think shares currently price in flat US sales and low-20% margins. We see predictive markets expanding the gaming opportunity for online firms, as evidenced by DraftKings' core sportsbook producing double-digit handle growth in recent months. That said, shares have not responded, driving our view that investors could await court rulings for clarity.

After reviewing recent regulatory and legislative updates, we have lowered our fair value estimate to $187 per share from $220 to account for lower revenue and EBITDA growth. Our valuation implies a 16 times 2027 enterprise value/adjusted EBITDA multiple. Key drivers of our intrinsic value forecast are revenue growth in Flutter's US and international regions, as well as consolidated marketing, technology, and general and administrative expenses.

The industry's regulatory environment is evolving. In September, Brazil's president signed an order to ban online gaming, which followed a halt in India, and incremental hesitancy to legalize online betting in states like Ohio. Also, the legality of predictive sport wagers have seen split court decisions.

The growth potential of online gaming remains attractive. That said, we are applying an updated probability methodology tied to trends in the legislation landscape to account for timing and visibility uncertainty around new legalizations in the US and changes in overseas opportunities.

We are removing the company's Brazil business (about 4% of total sales) and increasing the cost of capital to 8.9% from 8.2% to account for elevated uncertainty in international regions. This cost of capital change better harmonizes with DraftKings' 9.2% level.

We now model Flutter's 2026-35 revenue growth to average 6.3% (6.6% prior) with 2035 EBITDA margins of 24.1% (25.1%).

During the next 10 years (2026-35), we expect Flutter's US region to see the strongest revenue growth, averaging 8% annually as more states legalize sports and i-gaming and existing states already offering wagering see more users and revenue per user growth. We estimate 47% of Flutter's total sales to come from the US in 2030. We expect international revenue growth to average 5% over our 2026-35 forecast, aided by acquisitions in Italy.

We think Flutter will leverage its leading revenue scale and risk management platform to reduce marketing, technology, and general and administrative costs. We forecast marketing expense to reach 16.5% of revenue by 2035, down from 23% in 2025; technology costs to amount to 5.6% of sales in 2035, down from 6% in 2025; and general and administrative outlays at 8.8% of revenue in 2035, down from 13% in 2025. We estimate a total operating margin of 16% in 2035, up from 0% in 2025.

Although Flutter has an acquisitive history, we don't forecast future deals in our model, given the uncertainty around such transactions.

We believe Flutter has a narrow Morningstar Economic Moat Rating driven by a brand intangible asset that is buoyed by its technology and product expertise. We think this is fostering enduring industry-leading revenue share and economic profits despite competition and regulation, and we expect its edge will persist for at least the next 10 years.

Flutter’s in-house product development and risk management expertise are one to two decades ahead of its peers', allowing it to gain hard-to-replicate critical mass in gaming markets throughout the world. We believe that having a vertically integrated technology platform is important for competitive positioning in the industry, as it offers companies more control in leveraging customer data and launching new product offerings, helping feed brand intangible advantages and an emerging network edge. As Flutter builds new wagering products ahead of the competition, it generates a superior user experience for the punter (bettor), which encourages more volume on the platform, leading to increased data that boosts the company’s industry-leading risk management and marketing abilities, further enhancing the product and creating a positive virtuous cycle that buttresses its brand prowess.

One example of Flutter’s product development advantage is the construction of a parlay product for its Australian business in 2016, which the company then rolled out years ahead of the competition in the US online sports betting market in 2019. Such product launches have aided its share of total US sports betting revenue (offline and online), which increased to 25% in 2025 from 22% in 2021, the first year the company provided a breakout of its regional sales. In addition to leveraging its product development leadership across the globe, Flutter can take its in-house risk management technology and quickly integrate it into newly acquired brands and markets, as it did with its Australian Sportsbet acquisition, helping it gain and retain the number-one online sports betting revenue share in the country.

Flutter’s decades of expertise in product development and risk management have led to top revenue share in gaming markets throughout the world and consistent growth and improvement in the company’s hold rate (the amount of wager the operator keeps), users, and marketing efficiency. Flutter holds the number-one gaming revenue share across all its key regions of the US, UK, Australia, and Italy, and the top spot in many other countries. Additionally, innovative products and an ever-improving risk management algorithm have led to increasing hold rates, with the US increasing to 8.6% in 2025 from 6.4% in 2021. Meanwhile, Flutter’s users have continued to grow across all geographies (total user growth was 26% in 2022, 20% in 2023, 13% in 2024, and 14% in 2025), despite the maturation in the UK and Australian gaming markets, illustrating a brand that is resonating with bettors. Despite initial promotional investments in US state sports betting launches, Flutter’s cost of customer acquisition has trended down as it leverages user data, with marketing as a percentage of revenue at 23% in 2025 versus 34% in 2021. We think it can reach a mid-teens percentage early next decade.

We expect Flutter to hold its leading US revenue share even with the emergence of predictive sports betting competition, as it has launched a platform in late 2025, and offers a superior experience with custom products like live in-game and parlay bets across its traditional sports betting platform that are hard for predictive exchanges to replicate because of liquidity barriers. We believe a portion of predictive sports betting volume is likely from underaged 18- to 20-year-olds and in unregulated states like California and Texas, which do not have state-approved platforms.

Peers with smaller digital scale have folded as the hurdles to replicating Flutter’s brand edge prove too challenging. In 2025, Penn Entertainment announced it would focus its investments on states that offered both i-gaming and online sports betting. While smaller peers are falling by the wayside, Flutter’s competitive and financial position is allowing it to acquire emerging digital gaming operators in various international markets, which it is then integrating into its leading product and risk management tools. One recent example is the 2022 acquisition of Sisal, Italy’s leading lottery and i-gaming operator.

While the threat of regulation in the gaming industry persists, we don’t think it will preclude Flutter’s ability to generate excess returns. Rather, we think it could strengthen its competitive position relative to peers lacking scale. We see the UK gaming market as a good proxy for the US, given a similar competitive profile, tax structure, and propensity to gamble. The UK market is implementing several regulations that are headwinds to operators and paint a picture of what eventually could be introduced in the more nascent US gaming market. These include slot betting and marketing limitations, adding a tax to fund education toward gambling addiction, increasing i-gaming and online sports betting taxes, and instituting safeguards to help identify problem wagering (flagging losses, doing credit checks). In our view, such restrictions make it harder for smaller competitors to invest in their still-developing brands. Our outlook is bolstered by Flutter’s 20-plus years of risk management experience in the UKI market. We expect its UK and Ireland EBITDA margins to settle in the 20s long term, while it retains its leading revenue share, adding credence to our view of a brand advantage lasting in the region.

Even if the US gaming market institutes regulatory policies similar to those in the UK over the next several years, we see Flutter maintaining a brand advantage. This stance is buoyed by our expectation for Flutter’s US EBITDA margins to expand to 28% by 2035 from 13% in 2025.

Flutter holds a leading revenue share in many countries, giving it the scale to invest behind risk management tools, product offerings, and efficient marketing.

A first-mover advantage in fantasy sports and parlay products has allowed Flutter to launch such offerings into new territories ahead of the competition, helping drive strong user growth and revenue share.

Flutter's strong financial and brand position is an advantage when entering new regions and markets like predictive betting.

Regulation changes to marketing, betting limits, taxes, and market access can affect Flutter's financial returns. Political agendas could help approve new markets like predictive sports betting.

US states and international countries might be reluctant to legalize sports and i-gaming due to gambling addiction and cannibalization of physical casino concerns, which could reduce the market opportunity.

Competitors could increase promotional activity to gain user share, stifling Flutter's revenue share and profitability.