TKO Group Holdings (TKO) Q3 2026 earnings review
TKO raises its profit outlook, but wrestling ticket sales slip
TKO's television contracts and World Cup hospitality packages lifted profits, even as wrestling ticket sales slipped. The owner of UFC and WWE grew sales 21%, while Adjusted EBITDA — operating profit before depreciation, stock pay and legal settlements — climbed 54%. President Mark Shapiro raised the full-year outlook again, and by our math the new plan points to fourth-quarter operating profit nearly doubling from a year ago.
| Revenue | $1.360B +21% from a year ago |
|---|---|
| Adjusted EBITDA | $555.7M +54% from a year ago (41% margin) |
| Full-year revenue outlook | Raised $10M middle of the range: 22.7% growth |
| Full-year Adjusted EBITDA outlook | Raised $15M middle of the range: 45.4% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because sponsorship growth proved durable without a one-off event and third-quarter profit cleared the bar needed for the second-half ramp. UFC and WWE sponsorships both grew nearly 30%, easing worries that last quarter's gain was a one-time blip. One caution: WWE ticket sales fell at its flagship SummerSlam show, unpaid customer bills passed $1 billion, and TKO plans to borrow more money for share buybacks.
The question now is how much of IMG's profit jump came from temporary World Cup hospitality versus repeatable tennis and soccer deals. If the agency's new deals carry the weight, TKO can absorb next year's gap between the 2026 World Cup and the 2028 Olympics; if World Cup packages did most of the work, 2027 profit growth will slow. Management's first 2027 outlook in February will settle it.
🐂 Bull Case
New TV Deals and Lower Overhead Lifted Margins
TKO runs Ultimate Fighting Championship (UFC), a mixed martial arts league, and World Wrestling Entertainment (WWE). Its main profit measure is Adjusted EBITDA, which is operating profit before depreciation, stock pay and legal settlements. That margin jumped nine percentage points to 41% as UFC's "new distribution agreement with Skydance" took hold.
- UFC media rights, production and content sales: $332.8 million, up 66% from a year ago
- UFC live event and hospitality sales: $79.6 million, up 83% on the "record-setting performance of UFC 329" and "higher financial incentive package revenue" (site fees paid by host cities)
- Direct operating costs (the cost of staging events and paying athletes): 36.0% of revenue, down 3.3 percentage points
- Selling, general and administrative overhead: 29.5% of revenue, down 4.4 percentage points
- Depreciation and amortization: 6.8% of revenue, down 4.7 percentage points
This matters because broadcast fees and city site fees carry very little extra cost, so revenue growth drops straight into profit. Standard operating margin also climbed 12.4 percentage points to 27.8%.
What to watch: fourth-quarter Adjusted EBITDA margin, implied by the full-year outlook at 42.1% by our math. Hitting that target would prove the margin gain holds during a seasonally smaller quarter.
World Cup Hospitality Doubled IMG Profit Margin
The IMG division combines a sports marketing agency with On Location, a business that sells high-end ticket and travel packages for major sporting events. Segment sales rose 16.2% to $391.3 million, and its Adjusted EBITDA climbed 88.8% to $115.9 million.
The profit jump came from "FIFA World Cup 2026 hospitality sales at On Location" for matches played in July, alongside "new marketing deals at the IMG business for tennis and soccer". At the same time, direct operating costs fell because the division did not repeat last year's high-cost Ryder Cup golf tournament, lifting the segment margin from 18% to 30%.
What to watch: IMG fourth-quarter sales and profit when the World Cup boost is gone. A profitable fourth quarter would show that new tennis and soccer deals can support the agency before the 2027 World Cup gap.
Sponsorships Grew Without a One-Off Event
TKO sells sponsorship and marketing packages across its combat sports and entertainment properties. Last quarter, critics worried that a jump in UFC sponsorships came only from a one-time June event at the White House, while WWE sponsorship growth had slowed for two straight quarters.
Third-quarter results eased both worries. UFC partnership and marketing sales rose 29.0% to $91.3 million on new sponsors, higher renewal fees and two extra events. WWE partnership sales grew 27.8% to $51.0 million even though the wrestling league staged three fewer major events than a year ago.
What to watch: full-year partnership revenue at year-end against TKO's $1.2 billion target for 2030. Keeping growth above 20% in the fourth quarter would show multi-year sponsor deals are compounding on schedule.
Positives this quarter didn't test
Two standing positives in our team's thesis could not be checked from the earnings release alone because their disclosures live in the quarterly filing or the conference call.
- Contracted multi-year revenue backlog (remaining performance obligations, which stood at $16.0 billion in June): the quarterly filing's footnote will show how much new tennis, soccer and sponsor deals added.
- Management's argument that live sports are safe from artificial intelligence: the conference call transcript will show whether executives still centre their pitch on this theme.
🐻 Bear Case
SummerSlam Ticket Sales Fell as Legal Costs Stayed High
"Our third quarter performance reflects the secular tailwinds powering live events and experiences around the world, and TKO’s assets sit front and center of that premium ecosystem," president and chief operating officer Mark Shapiro said. Yet WWE's own ticket desk showed a softer picture.
WWE live event and hospitality revenue dropped 30.1% to $57.7 million. TKO blamed the drop on staging three fewer major events and "lower sales for SummerSlam", its flagship summer wrestling show. Meanwhile, the company recorded another $34.6 million of legal costs for UFC fighter antitrust lawsuits and WWE shareholder suits, bringing nine-month legal charges to $128.9 million.
This matters because softer ticket demand at a flagship show tests pricing power with fans, while ongoing courtroom bills drain cash that TKO excludes from Adjusted EBITDA.
What to watch: On Location combat-sports package volume and event attendance tables in the third-quarter 10-Q filing. Another drop in packages sold per event would confirm that high ticket prices are hurting fan turnout.
TKO Plans More Debt to Fund Buybacks
TKO has returned more than $1.6 billion to shareholders so far this year through dividends and share buybacks, which supporters view as a major positive given its long-term television contracts. However, the company has leaned on borrowed money to pay for those repurchases.
Long-term debt on the balance sheet rose to $4.573 billion from $3.724 billion at the end of 2025, pushing net interest expense up 37.6% from a year ago to $69.9 million. TKO bought back $85.5 million of stock in the third quarter and $73.4 million in October, and said it plans to buy the remaining $936.0 million on its authorization, which it will "fund primarily from additional debt and cash on hand".
What to watch: the size and interest rate of any new debt facility disclosed on the call or in the 10-Q. Borrowing more will raise annual interest bills further just before 2027's tougher event comparisons.
Unpaid Customer Bills Nearly Doubled as Cash Conversion Dropped
TKO measures cash generation using free cash flow conversion, which is the share of Adjusted EBITDA that turns into free cash flow after capital spending. In the third quarter, that share fell to 81% from 111% a year ago, as free cash flow grew 12.8% against a 54.3% rise in Adjusted EBITDA.
The gap sits on the balance sheet. Accounts receivable — money owed by broadcasters, sponsors and partners for revenue already booked — climbed 79.6% over the first nine months of 2026 to $1,002.7 million, absorbing $436.0 million of operating cash. Nine-month cash flow was propped up by $604.0 million of World Cup advance payments held in restricted escrow.
What to watch: accounts receivable and deferred revenue balances at year-end. If unpaid bills keep rising faster than sales, TKO will convert less of its new television contracts into spendable cash.
Risks this quarter didn't answer
Four standing risks in our analysis remain open after the third-quarter release.
- The 2027 revenue gap at IMG after the 2026 FIFA World Cup and Winter Olympics end: management's initial 2027 outlook in February will show how much profit drops before the 2028 Los Angeles Olympics.
- Middle East event reliance: TKO noted its full-year plan assumes it "stages all live events, including those in the Middle East region, as currently planned" in the fourth quarter.
- Fighter antitrust lawsuits (Johnson, Cirkunovs and Davis): the 10-Q legal footnote will update whether settlement talks or court dates have moved.
- Controlling-shareholder governance and the lawsuit over the Endeavor asset purchase: the 10-Q related-party footnote will track ongoing legal exposure.
👓 Other Themes
Macro Tailwinds Keep Consumer Demand Steady
Shapiro said macro trends are in TKO's favor and every part of sports consumption is rising. Outside the ticket drop at SummerSlam, consumer merchandise and video game royalties backed his view: licensing sales grew 50.5% at UFC to $15.5 million and 13.0% at WWE to $34.8 million, helping offset broader economic worries for discretionary leisure spending.
💲 Other KPIs
Free cash flow — operating cash flow minus capital spending — rose 12.8% from a year ago, rebounding from a 6.7% drop in the second quarter. Only $0.9 million of the quarter's cash flow came from World Cup escrow pre-payments, down from $11.5 million a year earlier, as capital spending stayed low at $22.2 million.
By our math, gross debt of $4,647.0 million minus unrestricted cash of $630.9 million leaves net debt of $4,016.1 million. That is down slightly from $4,066.5 million in June as third-quarter cash flow covered dividends and buybacks, but remains more than $1.0 billion higher than at the end of 2025 after March's term loan borrowing.
Weighted average basic shares fell 10.3% from a year ago and 2.3% from the second quarter after TKO completed its $800 million accelerated share buyback in July and bought another 451,377 shares in the open market. The lower share count helped lift basic earnings per share to $1.35 from $0.50 a year ago.
🔮 Guidance
Raised. The middle of the range moved up $10 million to $5.810 billion, or 22.7% growth for the year. By our math, that leaves $1,305.9 million for the fourth quarter, up 25.8% from a year ago. It is the second raise this year, and smaller than August's $75 million lift; the plan assumes all Middle East events go ahead.
Raised. The middle of the range rose $15 million to $2.305 billion, or 45.4% annual growth. By our math, the outlook leaves $549.6 million for the fourth quarter — nearly double last year's $281.2 million, at a 42.1% margin against 27.1% a year ago. The second raise this year follows August's $25 million increase.
❓ Key Questions
Why did accounts receivable jump 80% this year?
Unpaid customer bills rose by $436 million over the first nine months to pass $1 billion. Investors need to know how much of that balance is tied to the back-end payment schedule on UFC's Skydance deal and when it turns into cash.
What caused lower ticket sales at SummerSlam?
WWE blamed its 30% live-event revenue drop on having three fewer major shows and lower sales for SummerSlam. Management should explain whether SummerSlam suffered from lower attendance, weaker ticket pricing, or a smaller host-city site fee.
How much did World Cup hospitality add to Q3 IMG profit?
IMG Adjusted EBITDA rose $54.5 million in the quarter, helped by July World Cup matches. Knowing the exact World Cup profit contribution is essential to work out the baseline for 2027, when neither the World Cup nor the Winter Olympics occurs.
How much new debt will TKO raise for buybacks?
TKO plans to buy back the remaining $936 million on its authorization using additional debt and cash on hand. With gross debt already at $4.65 billion and interest costs up 38%, management should state its maximum leverage ceiling.
What were actual site fees and cost savings in Q3?
The release credits higher financial incentive packages for UFC live-event growth, while the Endeavor integration cost-savings program reaches its year-end deadline next quarter. Neither dollar figure was disclosed in the release.