Svenska Spel Q3 Revenue Rises as Operating Profit Falls

Key Points

• Net gaming revenue rose 1%, topping SEK1.898 billion, but that still managed to drag operating profit down by 9%, to SEK656m.
• Higher gaming taxes explained about 42% of that 9% fall, while its external costs were the real culprits, they rose a whopping SEK69m.
• Online sales slowed right down from 14% in the last quarter to 4% in this one, and that was during the World Cup final.

Svenska Spel: Sales Up, But Did Sales Really Pay Off?

A state-owned gambling operator managed to eke out a sales rise but still found itself staring at a near 10% collapse in operating profits. How is it that happens in a period that, on paper, looks like a rip-roaring success? The third-quarter report from Svenska really gives us a clearer picture of what we need to take away from this.

The net gaming revenue rose a paltry 1% to SEK1.898bn, but the operating profit tanked by a full 9% to SEK656 million. We were told that was down to higher costs for its strategic investments by the company.

CEO Anna Johnson was as chirpy as you might expect when presenting the report. “The Swedish gaming market is growing modestly, but the competition is hotter than ever,” she said. “That is why I call Svenska Spel’s gain in market share a “sign of strength”. But is that really fair when we are seeing these kinds of figures? The answer starts with the operating margin, which tells a nastier story than just revenue.

The Margin Tells a Tougher Story Still

The operating margin plummeted from 38.6% to 34.6%, a drop of four full percentage points in just one year. In percentage terms, the headline numbers show a 35% margin against 38% a year earlier. Last year’s third quarter will be a tough comparison point, with revenue up 7% to SEK1.874bn and operating profit hitting SEK718m.

But things looked a little better if you went a bit further down the numbers, with pre-tax profit coming in at almost SEK716m, just 3% lower. Subtract the SEK152m in tax and profit from continuing operations came in at SEK565m, also 3% lower. Discontinued operations added a paltry SEK1m to the mix, so the total stayed more or less the same.

Tax Is Just The Tip of the Iceberg

Gaming tax jumped up by SEK26m, or 42% of that SEK62m fall in operating profit. Other external costs and expenses went even higher, leaping from SEK391m to SEK460m, an increase of SEK69m or around 18%. And to make things worse, revenue only rose by a paltry SEK24m, so the cost lines moved a lot faster than the sales growth.

Direct gaming costs rose by SEK4m and people costs actually went down a bit by SEK1m while depreciation nudged up by SEK1m. The company is laying this loss of profit at the door of investments in the brand, AI & cloud-based services. But, these numbers still don’t tell us where the money went.

The sponsorship deals also still have a while to run, like the ice hockey deal with the SHL and SDHL that runs all the way out to 2031.

World Cup Boost, and Now Slowdown

Just three months ago, Svenska Spel reported its best second quarter result since 2019, when revenue was up by 7% to SEK1.96bn. Revenue from sports betting surged by 135% in June, and the number of new customers at Sport & Casino increased by more than 340%.

But the tournament lasted until July and the company met its targets. “High customer activity all the way to the final,” according to Johnson. Sport & Casino still showed a 6% increase to SEK516m, compared to 11% in Q2.

Online revenue increased by 4% to SEK1.274bn (67% of revenue), compared to a 14% increase in Q2. It can’t be said that the World Cup alone can explain the slowdown. Without the tournament, Q4 will be a clearer indicator of demand.

Tur, the lottery division, continues to be the engine at SEK1.32bn, up 1%. Lotto and Triss contributed to it, while Eurojackpot attracted fewer customers due to smaller jackpots. The gaming machines division Vegas declined by 15% to SEK67m, which is aligned with the expectations of the management. Retail sales dropped by 2% to SEK558m, while the revenue from restaurants and bingo halls declined by 14% to SEK67m.

This Cost Pressure Is Familiar to This Company

Cost pressure has come to Svenska Spel previously, and the experience should be recalled. The revenue of the company declined by 9.2% in Q3 2024 due to an increase in gaming tax from 18% to 22% of gross gaming revenue. But a year later the revenue rebounded by 7%, while the share of digital sales rose from 59% to 65%.

Now the online sales account for 67% of revenue, but the growth rate slowed. Digital sales became the core of the business, therefore any slowdown here matters more than a decline in retail revenue.

And digital sales also determine the future of the company. When the results of the year are released, two indicators will define the story. Growth in online sales needs to rise above the Q3 level of 4%, and the margin needs to stay close to the nine-month level. Otherwise, the strategic expenses will be under much tougher criticism than they are today.

Nine Months Look Good, with a Twist

For nine months, revenue stood at SEK5.74bn, increasing 3%, and operating profit grew by 2% to SEK1.93bn. Profit doubled by 33% to SEK1.918bn – a pretty impressive figure. At the same time, SEK288m was generated in discontinued operations, namely through the sale of the former Casino Cosmopol in Stockholm.

Profit in continuing operations increased by 6%, reaching SEK1.630bn from SEK1.536bn. Headlines, mentioning only the figure of 33%, would ignore that nuance.

What Market Data Tells

The market share statement made by Johnson relates to the first half of the year, so the second quarter market data should be the right comparison. According to data from Spelinspektionen, licensed operators posted turnover of SEK7.4bn in Q2, with an increase of 5.1%. Online gambling and betting generated SEK4.96bn, which is slightly above 7% growth.

In the second quarter, Svenska Spel increased its online revenue by 14%, surpassing the online market segment. This is the proof for Johnson’s statement about the first half of the year, although not entirely covering lotteries.

Expert Analysis: Strength or an Expensive Bet?

In our opinion, “a sign of strength” corresponds to the first half of the year better than to the third quarter. While revenue increased by 1%, all other costs have gone up about 18% and the margin decreased by four percentage points. In our opinion, Svenska Spel should disclose the total cost of its brand, AI and cloud solutions. The separate total cost for those investments wasn’t seen in the reviewed numbers.

The state owner is also interested in it because they were paid SEK 1.8 bn during January-September, compared to SEK 1.6 bn. This amount has already been paid and depends on the 2025 profit. The owner expects at least 80% of annual after-tax profit as dividend. In accordance with this policy, lower 2026 profit will probably reduce payments for the following year.

We understand readers’ disagreement and the objection is a reasonable one. The competition is tough, as Johnson mentioned, and spending on brand and technology can secure market share for many years ahead. The nine-month margin of 34% also remains above the owner’s long-term target of 30%, so patience can be justified. However, any defence is better with numbers and total cost will settle the dispute.