AI And Digitalization Will Expand Global Sports Betting

Key Takeaways

• Rapid expansion into new markets and high-profile contracts, combined with advanced AI-driven products, positions Kambi for stronger recurring revenue and higher-margin growth than expected.
  
• Advanced AI investments and flexible technology stack support scalable operations, margin improvement, and significant opportunities for value creation and strategic capital deployment.
  
• Regulatory tightening, client losses, rising competition, and industry consolidation are compressing margins, eroding pricing power, and threatening Kambi's long-term revenue growth and scalability.

Catalysts

Provides sports betting technology and services to the betting and gaming industry in Europe, the Americas, and internationally.

• Analyst consensus expects gradual growth from new markets and key contracts such as OLG and Brazil, but this may underestimate Kambi's momentum; early signs point to a rapidly accelerating ramp-up, with OLG's state lottery contract running through 2032, broadening Kambi's platform reach to over 10,000 retail locations and significantly expanding recurring regulated revenues.
  
• Where analysts view Odds Feed+ as a driver mainly for operator diversification and margin uplift, the extraordinary product-market fit-with unique, high-liquidity, AI-driven odds-has begun to attract Tier 1 and Tier 0 operators previously satisfied with in-house solutions, unlocking access to a much larger, higher-margin B2B client pool and accelerating both top-line growth and gross margins far beyond current forecasts.
  
• The accelerating convergence of regulated sports betting, media, and entertainment-combined with Kambi's modular, flexible tech stack and newly-won Nevada license-positions Kambi to become the de-facto infrastructure partner for large, omni-channel US and international media-sports giants, potentially driving a step-change in contract wins and long-term, sticky recurring revenue.
  
• Kambi's ongoing investments in proprietary AI and automation, including the multi-year AI-first retooling of trading and risk management, are set to fundamentally reshape the cost base and operational leverage of the company, providing a scalable margin structure and enabling faster expansion into new markets with limited incremental costs, supporting sustainable margin expansion and EBIT growth.
  
• The company's share buyback authorization, strong net cash position, and continued strong operating cashflow give it both downside protection and significant optionality to deploy capital into high-ROI acquisitions or continued buybacks, supporting per share value creation and de-risking long-term earnings power.

Kambi Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Kambi Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Kambi Group's revenue will grow by 3.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 7.4% today to 14.5% in 3 years time.
• The bullish analysts expect earnings to reach €28.4 million (and earnings per share of €0.99) by about July 2028, up from €13.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, down from 27.1x today. This future PE is about the same as the current PE for the SE Hospitality industry at 19.2x.
• Analysts expect the number of shares outstanding to decline by 3.56% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.68%, as per the Simply Wall St company report.

Kambi Group Future Earnings Per Share Growth

Risks

• Expanding regulatory pressure, such as increased gaming taxes and stricter deposit limits in key markets like the Netherlands, Sweden, and Colombia, is materially reducing Kambi's addressable market size and increasing compliance costs, which in turn is likely to limit revenue growth and compress net profit margins over time.
  
• The ongoing departure or loss of major clients, as seen with the exit of Kindred from the U.S. and customer churn in Shape modules, illustrates persistent revenue concentration risk and makes future top-line growth and earnings more volatile and uncertain.
  
• Profitability is exposed to intense price competition from larger operators developing their own proprietary technology and new B2B entrants, which may force Kambi to lower prices on renewals and increase investment in R&D, thereby reducing future net margins.
  
• Larger technology firms and vertically integrated gaming giants are advancing in AI-driven automated odds-making, and although Kambi is investing in AI, the risk remains that platform features become commoditized, ultimately diminishing Kambi's ability to differentiate and extract premium pricing-posing a risk to future profitability.
  
• Increasing industry consolidation and operators' shift towards first-party sportsbook solutions (noted in delayed or lengthy negotiations with many "Tier 0, Tier 1" operators) could shrink Kambi's partner pool, thus slowing recurring revenue growth and hampering long-term scalability and EBITDA trajectory.

Valuation

• The assumed bullish price target for Kambi Group is SEK194.65, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Kambi Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK194.65, and the most bearish reporting a price target of just SEK112.22.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €196.0 million, earnings will come to €28.4 million, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of SEK138.2, the bullish analyst price target of SEK194.65 is 29.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.