TKO Group (NYSE:TKO) Delivers Explosive Growth as Cash Engines Fire Across UFC and WWE
Earnings Momentum Builds as Q2 Forecast Sets High Bar
TKO Group (NYSE:TKO) is preparing to report its Q2 2025 earnings on August 6 with expectations already soaring. Analysts forecast quarterly revenue of $1.27 billion and EBITDA of $496 million. If met, this would reflect an acceleration from Q1, which saw revenue hit $1.3 billion and net income bounce to $165.5 million, flipping from a $234.5 million loss the year before. Adjusted EBITDA jumped 23% YoY in Q1 to $417.4 million, as WWE and UFC both posted double-digit growth. These aren’t outliers — they’re part of a sustained trend. For full-year 2025, consensus calls for $4.55–$4.6 billion in revenue and $1.53 billion in EBITDA, underpinned by blockbuster events, streaming wins, and robust live attendance.
WWE and UFC Are Now Margin Machines With Global Reach
The WWE’s live events surged 52% YoY, breaking records in attendance and gate revenues, while UFC’s Fight Nights shattered viewership benchmarks from London to Sydney. UFC’s Q1 EBITDA margin came in at 63%, while WWE delivered a 50% margin. The combined business has now guided to $50–100 million in annual cost synergies, enhancing its margin leverage further. These efficiencies are not hypothetical — they’re embedded in its performance. WrestleMania 41 alone broke company records for ticket sales, merchandise, sponsorships, and total attendance. UFC also locked in its largest-ever sponsorship with Monster Energy and has pushed into VR and AR via a Meta Platforms partnership.
Streaming and Licensing Now Core Growth Engines
The 10-year, $5 billion WWE-Netflix deal that began in January 2025 provides exclusive rights to RAW, SmackDown, and archival content. This recurring, high-margin revenue stream complements legacy broadcast contracts and materially reshapes cash flow predictability. On top of that, TKO has partnered with Fanatics Betting and Gaming to launch WWE-branded casino games, scheduled to debut in late July, aligning with SummerSlam. These digital expansion plays broaden TKO’s monetization channels beyond gate receipts and TV rights, tapping into interactive entertainment and sports betting.
Cash Flow, Debt, and Buybacks Signal Shareholder-First Strategy
Free cash flow hit $136 million in Q1 2025, with a 65% conversion rate from operating cash flow. Capital expenditures were only $22 million. For the trailing twelve months, free cash flow per share has climbed to $7.84, up from $6.25 the year before — a 25% increase. TKO ended Q1 with $471 million in cash and $2.7 billion in gross debt. However, with EBITDA forecast above $1.5 billion this year, net leverage sits comfortably near 2x, allowing room for strategic allocation. In Q1, TKO returned $75 million via dividends and has authorized a $2 billion share buyback set to begin in H2 2025, reinforcing its capital discipline.
Insider Activity: $9.3 Million Sale by Director Nick Khan Raises Eyebrows
While operational performance is undeniably strong, insider activity must be acknowledged. On July 21 and 22, director Nick Khan sold 54,687 shares of Class A stock worth $9.3 million, with transactions priced between $166.47 and $170.82. Although part of these were to cover taxes via a 10b5-1 plan, the size and timing ahead of earnings merits close attention. Khan still retains 146,975.179 shares. Full details of insider activity can be tracked here, and the stock’s real-time chart is live here.
Valuation Still Supports Upside Despite Strong Run
TKO has rallied 57.6% over the past 12 months, far outpacing the S&P 500’s 13.4% and Communication Services ETF’s 26.2%. Despite this outperformance, forward valuation remains attractive when viewed through 2026–2028 metrics. EPS is projected to rise from $2.83 in 2025 to $5.38 in 2026, a 90.1% YoY jump, then grow to $6.41 and $7.01 in 2027 and 2028, respectively. That equates to a forward P/E of 30.6 in 2026 and just 25.0 by 2028, positioning TKO below premium entertainment peers. A discounted cash flow model using 9.1% WACC and 10% FCF growth (both conservative) yielded a fair value estimate of $210.44, suggesting TKO is materially undervalued from current ~$170 levels.
Balance Sheet, Margins, and Scale Set It Apart From Peers
The company’s dual-brand strategy fuses combat sports intensity with theatrical spectacle, giving it unmatched negotiation power with cities, venues, and broadcasters. Unlike Formula 1 or the NFL, which sit inside larger conglomerates, TKO is a direct play on live global sports entertainment, with built-in superfans and IP that monetize across TV, streaming, gaming, toys, and apparel. Margin profile is elite. EBITDA margins already exceed 30%, and cost leverage is far from tapped. With over 500 global events annually in 210+ countries, TKO is not a media stock — it’s a sports-tech cash machine.
Risks: Media Rights, Event Shocks, and Integration Gaps
Despite bullish fundamentals, risks remain. Integration of UFC and WWE operations could hit friction, especially across legacy systems and management teams. Media rights remain the crown jewel — failure to land price increases in renewals would crimp future growth. Macroeconomic softening could impact ticket sales and discretionary spending. Live events also carry performer risk: injury to a headliner can upend pay-per-view revenues. These factors don’t derail the thesis but introduce volatility.
Verdict: Buy — TKO’s Cash Firepower, Brand Leverage, and Growth Path Are Still Undervalued
TKO’s business model is generating consistent top-line and bottom-line beats, with structurally high margins, a generous shareholder return policy, and underappreciated digital licensing momentum. Even after a 58% rally, the data supports continued upside. With EPS doubling in 2026, high free cash flow, a $2B buyback, and $5B+ streaming deals in motion, TKO (NYSE:TKO) is a Buy into earnings and beyond.
