Earnings Call
Flutter Entertainment plc (FLUT)
Earnings Call Transcript - FLUT Q4 2025
Operator, Operator
Thank you for your patience. My name is JL, and I will be your conference operator today. I would like to welcome everyone to the Flutter Entertainment Fourth Quarter 2025 Earnings Call. I will now hand the conference over to Paul Tymms, Group Director of Investor Relations. You may begin.
Paul Tymms, Group Director of Investor Relations
Hi, everyone, and welcome to Flutter's Q4 update call. Joining me today are CEO, Peter Jackson; and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational performance in the quarter, and then Rob will update on our Q4 financials and new 2026 guidance. We will then open the lines for Q&A. Some of the information we are providing today constitutes forward-looking statements that involve risks, uncertainties and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our results materials and our SEC filings. All forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statements, except as required by law. Also, in our remarks or responses to questions, we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today, and I will now hand you over to Peter.
Peter Jackson, CEO
Thank you, Paul. I'm pleased to share our strong fourth quarter results and reflect on our strategic progress in 2025. Flutter is the world's leading online sports betting and iGaming company with unique advantages delivered through the Flutter Edge and a proven track record of delivery. 2025 was another transformative year for the company, marked by our strategic execution, continued market leadership and disciplined investment, delivering group revenue up 17% and adjusted EBITDA 21% higher. In the U.S., we maintained our clear leadership position in both online sports betting and iGaming. We also launched FanDuel Predicts in Q4 to capitalize on the emerging prediction market opportunity. In our international business, we strengthened our portfolio with strategic acquisitions in Brazil and Italy, extending our positions in high-growth and exciting markets. We made significant progress on our transformation and efficiency programs, and we are well on track to deliver the anticipated revenue growth and cost efficiencies. Our swift disciplined responses to regulatory changes in India, where sudden legislative change forced the cessation of real money gaming, and to higher U.K. gaming taxes underscored our scale benefits and business agility. We entered 2026 in a strong position, and I've never had more conviction in our ability to capitalize on the long growth runway ahead. Turning to the fourth quarter. Our Q4 group performance was strong with revenue up 25% and adjusted EBITDA up 27%. In the U.S., revenue growth was 33% with adjusted EBITDA 90% higher, lapping the significantly unfavorable sports results in the prior year. We delivered another superb iGaming quarter. Revenue grew 33%, driven by 18% AMPs growth and an increase in player frequency as our successful content strategy and rewards scheme resonated well with our customers. FanDuel sportsbook Q4 revenue growth was 35%. However, Q4 sportsbook trends across the market diverged from expectations. High gross revenue margins were offset by moderating handle performance. As a business, we always consider net revenue as our core revenue KPI, and we, therefore, always consider revenue and handle trends together in conjunction with customer activity levels. This was particularly important this quarter as adverse recycling was a key driver of the lower handle growth with persistently high gross revenue margins leading to lower levels of customer engagement. In addition, the second half of the NFL season saw less compelling content with fewer popular teams and favorite players making the playoffs this season, adversely impacting customer engagement. These market trends were far more pronounced for FanDuel for two reasons. First, our significant structural revenue advantage resulted in a greater impact from adverse recycling as FanDuel recorded persistently high NFL gross revenue margins throughout November and December. Overall, we finished the NFL season 100 bps ahead of our expected margin at 19%. Second, our standard generosity playbook proved less effective in Q4 as our investment phasing did not sufficiently align with the pattern of sports results during this period. As a result, we saw a higher churn within our customer base and loss of market share. We also don't believe prediction markets are having a meaningful impact on our business. As you'd expect, we've undertaken a comprehensive review and found no evidence of material cannibalization on our existing business. And this finding is reinforced by our Missouri launch, where customer acquisition trends exceeded expectations, reaching 5% of the population within the first 30 days, making Missouri one of our best state launches to date. Moderated market handle trends have continued into the start of 2026. We believe these trends reflect the halo impact of the factors evidenced in Q4, and we continue to monitor trends closely. And as set out in our shareholder letter, we have a clear U.S. strategy for 2026. Our market-leading, highly profitable U.S. position is driven by product superiority, enabled by our exceptional pricing capabilities, combined with highly disciplined customer acquisition. This has allowed FanDuel to deliver an estimated 70% share of market EBITDA. However, recent trends have led us to take additional actions to strengthen these capabilities to reinforce our leadership position. We will leverage our scale, proprietary technology and data advantages to deliver experiences competitors cannot easily replicate, including more intuitive bet building, smarter personalization and richer live engagement. In addition, we're enhancing how customers feel recognized and rewarded with more engaging reward experiences, including the launch of a new loyalty program, extending a core part of our casino success into sport. I'm confident that the ongoing improvements to our sportsbook product and generosity strategy will harness our scale and structural advantages, driving a sequential improvement in our performance throughout 2026 and deliver market share gains. Let me now update you on prediction markets and how we're going after this opportunity. We believe that prediction markets will accelerate state regulation of online sports betting and iGaming. This, in our view, is the most valuable long-term opportunity in the U.S. In the meantime, the near- to medium-term growth potential on prediction markets for FanDuel is significant. There is new TAM to go after. Prediction Markets will enable us to acquire new sports and entertainment first customers into the FanDuel ecosystem ahead of potential regulation. We can deliver attractive returns by providing sports markets to the 40% of the U.S. population who cannot currently access online regulated sports books. We are exceptionally well positioned to harness this opportunity, and we launched our own offering, FanDuel Predicts, in Q4. Early signals have been encouraging with most activity focused on sports and with average volume per customer in line with expectations. We are also actively pursuing options to leverage our world-class proprietary pricing capabilities for market-making services, and we'll share further details in due course. Rob will update you on our predictions market financial guidance. But as outlined in our Q3, we'll invest meaningfully with ambition to deliver a leading position in this space. The opportunity across prediction markets is certainly far bigger than any potential cannibalization of existing sports. Moving on to our international business. International revenue grew 19% in Q4 and adjusted EBITDA increased 6%. We are making excellent progress on our strategic transformations and integrations, building a strong platform for future revenue growth and delivering cost savings. In the UKI, the Sky Bet sportsbook migration has delivered the expected cost savings, and we are now accelerating customer-facing investment to restore momentum. In SEA, Flutter regained the Italian online market leadership position in Q4. And the results of the PokerStars migration in Italy have been very encouraging with revenue growth of 13% and new customer volumes more than doubling in Q4. PokerStars migrations will continue at pace into 2026 following the successful precedent we have now created in Italy, driving further growth and delivering planned cost savings. The Snai business integration is progressing well. Customer acquisition initiatives, including Sisal's retail sign-up model and restructured generosity to boost cross-sell and reactivations drove all-time record iGaming AMPs and ensured Snai finished the year in revenue growth. The planned platform migration in Q2 will further accelerate this growth by providing Snai access to a vastly expanded product suite, including Sisal's leading products such as My Combo. In Brazil, improved casino and digital marketing capabilities drove a surge in customer acquisition, up 51% since the start of the year. We believe the Brazilian market presents a significant and compelling growth opportunity for Flutter and that the 2026 FIFA World Cup represents a unique moment in a soccer-obsessed market to take market share. As a result, we expect to invest more. And while extending our investment timeline shifts the phasing of profitability, we have strong conviction that disciplined near-term investments will build a larger, more profitable and sustainable business over the long term. Looking ahead to 2026, I'm confident in our strategic positioning. We have compelling plans in place to strengthen our leadership, unlock future value and deliver sustainable growth. I'll now hand you over to Rob to take you through the financials.
Rob Coldrake, CFO
I'm pleased to present another quarter of strong financial delivery. Group revenue increased by 25% and adjusted EBITDA grew 27%, driven by a good year-on-year performance across both segments and the successful integration of our recent acquisitions. As Peter noted, we are making excellent progress on our strategic transformations and integrations, and we are firmly on track to achieve our targeted $300 million cost savings by 2027. We're embedding rigorous cost discipline across the business, identifying new efficiencies and optimizing opportunities to protect margins and fund strategic growth investments. In the quarter, group net income was $10 million compared to $156 million in the prior year as the strong adjusted EBITDA performance was offset by higher interest costs relating to the financing of our strategic M&A and increased tax expense, reflecting the significant step-up in U.S. profitability year-over-year. Earnings per share and adjusted earnings per share declined by $0.50 and $1.20, respectively, reflecting these factors. The group's net cash provided by operating activities declined by $224 million to $428 million, primarily reflecting the cash impact of these increased expenses and a $128 million adverse impact from a lower level of customer deposits year over year. Free cash flow declined by $335 million to $138 million, including the impact of M&A and increased investment in capital expenditure. The higher CapEx was driven by phasing of Italian concession payments and investment in future revenue-enhancing and cost efficiency projects such as our PokerStars transformations. We completed $245 million in share repurchases during Q4, bringing full year 2025 repurchases to $1 billion, in line with our guidance. Our disciplined capital allocation policy provides the flexibility to respond effectively to evolving market conditions and emerging opportunities. We remain committed to our long-term policy of returning capital to shareholders. We now expect to commence returning $250 million in H1 2026, and we'll provide guidance on our future buyback cadence as the year progresses, preserving our flexibility to invest in the business and strengthen our balance sheet. We ended the year with a leverage ratio of 3.7x. Strong profit growth and cash generation will continue to drive leverage reduction throughout 2026, moving us towards our target ratio of 2 to 2.5x over the medium term. Moving now to our outlook for 2026. In the U.S., we expect revenue of $7.8 billion and adjusted EBITDA of $1.05 billion, translating to year-over-year growth of 12% and 14%, respectively. This includes new state investment of $70 million in adjusted EBITDA as we expect to launch Alberta in Q2. The guidance also reflects current trading where the impact on our customer base from the very high gross revenue margins achieved in the second half of Q4, alongside a less compelling end to the NFL season has driven lower customer engagement levels into 2026. Outside of NFL, year-over-year trends improved in February. Although we believe that these market trends are largely transitory, we have taken a measured view of how these trends will progress, including when market handle growth rates will recover from the Q4 recycling impact. We also expect a sequential improvement in FanDuel's relative performance to the market due to improvements to our sportsbook product, generosity strategy and the launch of our new loyalty program during the year. We now expect that our prediction markets investment will be towards the upper end of the previously guided range, closer to $300 million to reflect the significant opportunity we believe exists to drive customer acquisition. While it's still very early days, our view remains that the shape of the profit ramp for prediction markets should be similar to new sportsbook state launches. In International, we expect revenue of $10.6 billion and adjusted EBITDA of $2.23 billion revenue at the midpoint, representing year-over-year growth of 13% and 1%, respectively. We are really pleased with the underlying momentum in the first two months of the year, particularly in SEA, where we have extended our online market leadership in Italy. The guidance incorporates an investment in Brazil of approximately $70 million to grow our market position and the previously guided impacts from the U.K. tax increases and the Indian market switch off. We expect our unallocated corporate costs to be $310 million; a $30 million increase compared with the prior year. This reflects an increased 2025 base driven by investment in shared technology, talent and costs associated with our U.S. listing, which will continue in 2026. To conclude and reiterate Peter's conviction, we are excited for the year ahead and look forward to another year of strong execution. With that, Peter and I are happy to take your questions. I'll hand you back to JL to manage the call.
Jordan Bender, Analyst
Peter, I want to start with one of the quotes from the press release where it says it's difficult to be definite as to when market growth rates will recover from the impact in Q4 recycling. I guess what I'm trying to figure out here is, do you think any of this what's going on could be structural in nature? And do you ever see this type of phenomenon happen across any of your other sports markets globally? And I guess the second or the follow-up question to that is your sportsbook AMPs were up 4% for the year. The story around increasing penetration into existing states is something that you've spoken to in the past. So I'm curious where you think you stand in terms of net new customers to support this environment where we are seeing handle flow.
Peter Jackson, CEO
Let's start with your question about handle and how it compares to other markets we operate in. It's important to recognize that the time frame we're discussing in the U.S. for Q4 coincides with the football season. I've mentioned before the high levels of volatility associated with football in the U.S. When I compare this to other markets, such as soccer-driven markets in the U.K. or Italy, and racing in Australia, we generally observe less volatility and fewer extended periods of very positive sports results. I recall this time last year discussions about the football season raised concerns about whether we could see positive results in football. This season, however, we've experienced strong outcomes. As I mentioned earlier, we've achieved a margin of 19% for the entire football season. Comparing that to last year and noting the significant increase in margins year-over-year suggests we would anticipate a corresponding decline in handle; it's just the way it calculates from the customer activity perspective. This pattern of recycling and the influence margin has on the growth of stakes is a phenomenon we've encountered before. Regarding your second question about AMPs, it's crucial to note that our sportsbook AMPs in our pre-2025 states also saw growth in Q4. In our combined sports and iGaming business, we recorded mid-single-digit growth, indicating that we are still experiencing AMP growth across all core cohorts.
Paul Ruddy, Analyst
I wanted to follow up on the structural hold aspect, which appears very strong. Has there been any change in strategy regarding a more positive approach to handling your passive strategies? Additionally, could you provide any estimates of the year-on-year impact on handle from that recycling effect?
Peter Jackson, CEO
One thing I want to highlight regarding this NFL season is the quality of the teams that reached the later stages of the competition. There were noticeably fewer key marquee players involved, which significantly affected us due to our reliance on the parlay market. I believe we experienced lower levels of parlay penetration compared to what we might have seen if the matchups had been similar to last year. However, our approach hasn't changed; we've simply observed a substantial series of favorable sports results. Over 10 out of 11 weeks, we experienced above-average margins, with several weeks exceeding 30%, which positively influences customer sentiment at those levels. As for the impact of this on our handle, it's difficult to determine with certainty, as it's a complex relationship influenced by various factors, including the generosity context. Therefore, making a comprehensive assessment is challenging for us.
Barry Jonas, Analyst
Can you maybe talk a little bit about the prediction product today and how you see that improving moving forward? And then maybe as a follow-up, curious to get your thoughts on the probability of more U.S. state tax increases here. And is there any scenario where you might exit OSB in any uneconomically viable state to focus more on FanDuel Predicts?
Peter Jackson, CEO
We are pleased to have introduced our prediction market product in 18 states where we currently cannot offer our regulated online sports betting. This presents a significant opportunity for us that we previously couldn't explore. We have plans to enhance the variety and quality of our offerings throughout the year. With the World Cup approaching, we have an important opportunity to demonstrate the strength of our soccer product to both the portion of the country in states with regulated online sports betting and those who will depend on our Predicts product. Soccer ranks as the fourth most popular sport for us based on gross gaming revenue, and we are excited about that. We believe we have substantial global expertise in this area and can leverage the quality of the FanDuel brand alongside our experience from the Betfair Exchange to drive success. Additionally, we have several product enhancements planned for the year ahead, especially before the start of the NFL season.
Rob Coldrake, CFO
From a tax perspective, we're clearly at the outset of the year and moving into legislative season. As ever, there will be some noise and soundings about tax increases in certain states. I mean on the positive front, actually, just before coming on this call, we've had positive news already, getting a license in Arkansas, which is a positive move for us. And ultimately, if we do see any tax increase, there aren't any that we see with high degree of certainty at the moment. But as a scale operator, we're very well placed to mitigate those as we've proven in the past, and we have levers at our disposal and costs that we will use to mitigate that and work through it.
Jeff Stantial, Analyst
Maybe starting off on the handle trends in Q4 and year-to-date. Peter, you talked to some market share loss, which is expected to moderate as the year goes on. But if you look at performance in the Missouri launch, there really doesn't seem to be much dilution to market share at all. So maybe could you just help us reconcile those two data points? And then for my follow-up, Rob, it looks like unallocated corporate is pacing well above the '27 targets that you introduced a few years back. Can you just frame for us maybe what's changed, if anything? And where do you go from here?
Peter Jackson, CEO
We've been very pleased with the launch in Missouri, and it's one of our most successful state launches to date in terms of population penetration. We're really happy about that. This success is thanks to our excellent new state playbook. Regarding the handle trends we observed in the fourth quarter last year, they connect to the strong and sustained high margins we experienced, along with less popular teams making it into the football playoffs. I think some of our customers may have paused their betting activities during that time. Moving forward, we need to reactivate those customers. We're excited about the product changes we will be rolling out this year, including the loyalty program and enhancements to our generosity offerings, along with the upcoming World Cup. There's a lot of great opportunities, especially with March Madness, to encourage these customers to return to our platform.
Rob Coldrake, CFO
From a corporate cost perspective, there's a couple of points to make. So we are slightly above our original guide. There's a couple of contextual points to this. The first is we obviously re-segmented the business at the start of 2025, and we saw some additional costs move into corporate as a result of that re-segmentation. The second point with regards to 2025 is we actually had some reduced revenue-driven cost allocations as part of the year-end closeout, which is just kind of left pocket, right pocket. We have been investing in cost in the center overall with the Flutter Edge, and we're seeing excellent payback in terms of the transformation, strategic transformation work that's going on across the group. And what I'd say lastly is actually we've just kicked off a comprehensive cost optimization program across the group, and we are looking to optimize further efficiencies as we go through 2026.
Brandt Montour, Analyst
So digging into U.S. revenue guidance for '26, low teens growth expectations. I think we kind of got a sense now for sort of some conservatism around handle. Have you guys changed your philosophy around how you guide for sport outcomes or for structural hold within that guide?
Rob Coldrake, CFO
I will take over from here. We have not altered our philosophy. To summarize for 2026, we have adopted a sensible and measured approach to our guidance, which includes 12% revenue growth and 14% EBITDA growth in the U.S. We are not factoring in any revenue from prediction markets for now, as we prefer to observe the situation before making any projections. As Peter pointed out, the relationship between handle and gross revenue margin is quite complex, which is why we focus on revenue as our primary key performance indicator and provide guidance solely based on revenue. We have not discussed iGaming yet, but we expect its growth to remain in the high teens, along with double-digit sportsbook revenue growth. Overall, this approach feels reasonable and measured, and we anticipate some sequential improvement throughout the year as we implement various product and generosity initiatives mentioned in the shareholder letter.
Edward Young, Analyst
My question is around the less effective generosity playbook. You mentioned phasing, improved competitor offerings and elevated generosity in the market. So my question is, how should we square your commentary around your new generosity strategy, which you said you want to be sort of disciplined but also competitive? Is that you saying effectively that you need to make your scale count by keeping your generosity at higher levels? And then my follow-up is, the commentary is also about the improved competitor's offerings. So what's not worked on the product side to maintain sufficient leadership versus competition? And what sort of additional investment are you making or do you think you need to make to make that right?
Peter Jackson, CEO
On the topic of generosity, I believe it is very important. I've mentioned the increased margins we experienced. It's accurate to say that we didn't implement our generosity strategy as effectively as we should have. We started strong in the early part of Q4, but looking at the trend in gross win margins towards the end of Q4, we observed a sustained period where, as I mentioned earlier, we were above 30%. We should have been more generous during those times, but we missed the opportunity. This is an area we need to focus on and integrate into our future plans. It's not about increasing our spending; it's about utilizing our resources more intelligently. In our casino operations, we receive significant recognition for the generosity offered to our customers, thanks to our loyalty program. This program has contributed significantly to our casino success. We might be one of the few consumer businesses in the area without a loyalty program specifically for sports, which has proven effective for us in the casino segment. We plan to apply this experience to our sportsbook, which will be crucial moving forward. We will implement this in Q2 of this year. We are committed to being disciplined. After the unusual situation of the last couple of years, where we faced low margins in football, we noticed prolonged high margins, but we weren't equipped with the right strategies or tools to handle it.
Rob Coldrake, CFO
Regarding your question about products, we believe that while we haven't faced significant setbacks, there has been a slight reduction in the product advantage we've historically maintained. Moving forward, we aim to strengthen our previous product edge, focusing on various initiatives in both the U.S. and internationally. As mentioned in our release, we're concentrating on areas like differentiation, innovation, and enhancing our SGP offering. For instance, in Italy, our My Combo products have been performing very well and have helped us regain a leadership position there. We're also focusing on the rewards aspect that Peter mentioned, as well as improving the core journeys and personalizing the experience on the FanDuel site, which our team is actively working on. Additionally, we've spoken extensively about our outcome-based pricing, which underpins our product innovation and improvements. While it may take some time to fully implement these changes, we are optimistic that they will ultimately provide a substantial product advantage for us.
Shaun Kelley, Analyst
I wanted to follow up on Rob's comment about the double-digit growth you're seeing in sportsbook or you're expecting, I guess, embedded in the guidance. Just Rob, can you help us compare that to the run rates you're seeing in the business right now? I know current quarter is a little harder to comment on, but the market has been so dynamic. It's been a little hard to track. And while we can see handle numbers, it's harder to get that full NGR picture. So any color you could give us there to kind of square what you're seeing in the business with that outlook would be helpful. And then also, if you could just comment maybe high level on what you're seeing share-wise for the NBA because it feels like we've seen that as a product that Flutter has historically done extremely well in, but we've seen some competition ramp up there.
Rob Coldrake, CFO
So yes, in terms of current trading, we started off the year with a continuation of the trends that we observed late in Q4. So the closing stages of the NFL season, as Peter alluded to, including the playoffs and the Super Bowl saw some slightly less compelling player narratives and that drove continued low levels of customer engagement into the start of the year. But outside of the NFL, we started to see trends improving month-on-month into February, which is encouraging. We think some of the customer fatigue from the positive sports results persisted into January as well. As Peter said, we had 10 out of 11 positive weeks. We ended up the NFL season with a 19.3% margin on NFL, which is incredibly strong for a season overall. And in terms of February data based on the small sample that we have, the week-to-week volume trends are definitely improving, suggesting that part of this was potentially an NFL season-specific dynamic. But at this stage, it's still quite early. Visibility remains slightly limited on whether the current market dynamics will be short-lived or what we'll see over the next quarter or a few months. But we're quite confident about our Q1 guide, and we'll continue to monitor the trends very closely. We're confident that we have the right plans in place to continue improving our U.S. performance over the course of the year. And we've definitely seen a sequential improvement even over the last few weeks.
Peter Jackson, CEO
On the topic of NBA, this has always been significant for us. It comes down to factors like the quality of the players involved in the games and the strength of our parlay offering. There tends to be some overlap between customers who bet on both football and NBA. If they have experienced very high margins on football, it will likely affect their willingness to place bets on NBA.
Jed Kelly, Analyst
Just going back to your prediction markets. Do you feel like you potentially would want to acquire your own DCM license just to control your own destiny? Or can you just talk about how your JV with the CME is progressing?
Peter Jackson, CEO
We dedicated significant time to determining how to approach prediction markets, and I believe we have successfully launched our product. We are now operating in those 18 states where our regulated sports betting product is not available. We plan to make several product changes this year, and we are pleased with our partnership with the CME. We have a strong lineup of product enhancements on the way. Additionally, we are exploring opportunities in market making. There is a lot happening in this area, and we are committed to investing substantial resources. I look forward to sitting here in a year's time, having invested effectively and gained a significant number of customers on our platform.
Dan Politzer, Analyst
I want to go back on prediction markets, unsurprisingly, I guess. I guess what have you seen that justifies the incremental spend there? Because it sounded like things so far were tracking in line with your expectations. And along those lines, how do you think about the competitive landscape evolving if and when we do get perfect regulatory clarity here?
Peter Jackson, CEO
We've got experience of investing organically in our business. I mean I think about what we're doing in Brazil at the moment. I think about all the quarters we had post PASPA being repealed. But we've always taken a very disciplined approach when opportunities arise. And we will make sure that we acquire as much business as we can. Clearly, the phasing of our marketing will align with our sort of product roadmap and scale over the course of this year. This quarter is more about sort of test and learn to understand how we optimize our spend and drive conversion. We expect to invest heavily in the second half of the year. And look, given the opportunity we see, we expect to be towards the top end of the figures. But I reserve the right to spend more if we find opportunities are bigger.
Stefanos Crist, Analyst
This is Stefanos Crist calling in for Bernie. Just wanted to follow up on Arkansas. We understand there's a 51% revenue share. Just wanted to ask why launch now and maybe why not do Predicts instead of the traditional sportsbook.
Peter Jackson, CEO
I'm glad to take this on. What we've observed in Missouri with our new state strategy is a strong example of how providing customers with a range of choices, combining traditional online sports betting with our innovative approach, creates a more attractive offering. We're very enthusiastic about this direction; it's our core focus in the business. We would like to see more states adopt regulations for both online sports betting and iGaming. Currently, there are only two national players in this state. We're eager to implement our strategy and see what we can achieve here.
Benjamin Shelley, Analyst
Do you expect U.S. online sports betting market share to stabilize in 2026? And more broadly, what's giving you confidence in sequential improvement in your competitive position through the year?
Peter Jackson, CEO
We are confident in the quality of the products that we have in the market. We're excited about the introduction of our loyalty program. There is more work we're doing around generosity. And as Rob mentioned on the question earlier, there are enhancements that we're making to our products as well. So I'm very confident in our ability to execute. We have consistently done that. And I think that we will be able to hold our market share. And look, I'd like us to take more market share to the extent that we can get good returns on it, and we will spend that money.
William Lampen, Analyst
My questions are about the sportsbook loyalty program. I believe you mentioned that it will roll out in the second quarter and I want to confirm that. Additionally, could you share some insights on the impact when you introduced a similar offering for your iGaming business? Did it drive revenue or assist with promotions? There have been several questions about the promotional direction so I'm curious if this was beneficial for promotions or if it provided leverage for iGaming. Any details you can provide would be appreciated.
Peter Jackson, CEO
Our casino business has seen significant success due in part to our rewards program, which has been crucial for our growth. In the fourth quarter, we achieved a record market share of 28%. We are continually enhancing our loyalty initiatives, making further improvements and integrating more generous offerings into the program. Although we've made strides in the casino sector, there is still room for growth, similar to our parlay products where we are always seeking enhancements. We plan to introduce a loyalty program for our sportsbook, and one immediate benefit we've experienced in the casino is improved customer awareness of the rewards we offer. I anticipate similar results in our sportsbook. We refer to this as linking and labeling, and I believe this will lead to an increase in customer spending.
Ian Moore, Analyst
One on capital allocation. How would you rank, I guess, the different inputs you're weighing in deciding at one point you become more active on share repurchases through the year? And I guess, any update you're willing to give on progress toward resolution of the FOX option?
Rob Coldrake, CFO
Maybe I'll start on the capital allocation question. So as I mentioned in my prepared comments, the capital allocation framework remains consistent with what we outlined at our Investor Day in 2024, and we remain committed to the long-term policy of returning capital to our shareholders. As we often say, we are an and company. So we'll ensure our capital allocation decisions are balanced by the opportunities to invest for growth, but also to optimize for leverage over time. And our current approach really provides us with the flexibility to respond effectively to evolving market conditions and emerging opportunities. And in 2026, we'll prioritize significant capital deployment across both the organic investment in our core business which has historically yielded the highest returns, by the way, and strategic investment in the newly emerging prediction markets opportunity. So there's a lot to go after. We continue to generate a lot of cash in this business, and we can and will deleverage quickly, but there's lots of interesting and exciting allocation opportunities ahead of us through 2026, which we want to get behind.
Peter Jackson, CEO
There's nothing to say on the FOX option at this stage.
Robert Fishman, Analyst
Any more color you can provide? I think you said high teens growth that you're expecting for the U.S. iGaming in 2026. Just how sustainable do you think that is as we think about the years ahead?
Rob Coldrake, CFO
Well, if you think about the iGaming market in 2025, it grew around 26%, and our revenue growth was 33%. I think as the states mature, we'd expect some moderation of that growth, but we feel confident it's going to continue to be mid- to high teens. Therefore, we do expect continued strong growth, and we're excited about the product roadmap that we've got in iGaming. There's definitely still a long way to go on the penetration rates in iGaming. If you look at what we set out, I think it's 9.5% at the Investor Day, we're about 6.5%, I think, as we stand today. So lots to still go after there, and we're incredibly pleased, as I said earlier, with our iGaming performance.
Joe Stauff, Analyst
I wanted to ask a bit more about the generosity investments and their returns for FanDuel. It makes sense that in iCasino, you see a higher return with more betting events. However, do you also see a return from customers who may not cross-promote into OSB? It seems to me that the generosity investments in OSB do promote cross-promotion. Is this part of what we're trying to understand regarding the third and fourth quarters and your strategy, especially since you've focused on iCasino, which has been successful? I'm curious if this reflects how you're allocating capital and why the returns might be lower.
Peter Jackson, CEO
Yes, I think there's two things going on, and I just make sure I understand your question. I think effectively, we did not deploy our generosity efficiently in Q4. I mean, particularly when you think about the very long sequence of very high margins, particularly with some of those real peak weeks, we were not efficient and effective. We should have been deploying more generosity at those points there. I think separately, we have had lots of success with deploying our loyalty or rewards program into casino. In all of our businesses, we deploy a lot of generosity to customers. And one of the advantages of bundling up that generosity within a loyalty program is consumers understand better what's been going on. And I actually think one of the issues for us in Q4 was there's a bit of a whipsaw where generosity was on, it was off, it's on, and it's off. And particularly at a time when margins were running very hot, I think we're probably causing a bit of confusion amongst our customers, and we're just not deploying it effectively. So that's what we're going to address, get to a more efficient and effective distribution of generosity. And I think that's very important.
Chad Beynon, Analyst
With respect to the upcoming U.K. iGaming impact, has anything changed just in the current landscape in terms of how your competitors are maybe running their business, promos, marketing, et cetera? And could this potentially adjust how you're thinking about mitigation?
Rob Coldrake, CFO
Well, we obviously laid out our top-level plans for mitigation when the changes were introduced in Q4 last year. And to this point, we're not seeing anything different to what we'd anticipated in terms of activity. But it's actually early days because the tax changes don't actually hit until April. And what we expect will happen is that people will start to moderate behavior from that point onwards. If you think about the market share of iGaming in the U.K., there's a very long tail. So there's circa 30% of the market shares in the long tail with much inferior economics to us given our scale. And actually, we fully anticipate that there will be some changes in marketing and generosity and return to player dynamics as we move through the year. We were reasonably conservative in terms of our view in terms of what we recapture versus the tax increase, and we still remain confident in that.
John DeCree, Analyst
Peter, I wanted to circle back to a comment you made in the prepared remarks of your sentiment that we share as well, and that is prediction markets should accelerate OSB and iGaming regulation in the states. So curious if you could share any more color on that view and your perspective. You probably have as good of a view or better than anyone. And what kind of inputs help you feel confident that, that might come to fruition?
Peter Jackson, CEO
I believe we’re on the same page here. We see the buzz around prediction markets as an opportunity to attract customers ahead of potential state regulations. We think this will also speed up the regulation of iGaming and online sports betting. Our dedicated team is currently engaged in some productive discussions. Recently, we received positive news from Arkansas, and I'm eager to see which states will follow suit in embracing iGaming soon.
Monique Pollard, Analyst
Apologies if I missed this, but could you clarify how much was spent on FanDuel Predicts in the fourth quarter? I noticed that it was only available in a few states during Q4 before the broader launch in January. Additionally, I'm trying to understand how much of the guidance change for FanDuel Predicts in 2026 towards the upper end is simply a timing shift, and how much is due to insights gained from the Predicts customers acquired so far that suggest it's worthwhile to pursue this opportunity more aggressively in 2026?
Rob Coldrake, CFO
Yes, it's Rob here. We didn't actually confirm a number in the release, so you didn't miss anything. It is actually lower than the $45 million that we guided at Q3, so ended up spending slightly less than that in the quarter. I think Peter outlined earlier on very well what our intentions are for 2026. So we've now said that we're going to be towards the top end of the range. What I would say is that within that, we retain our right to have flexibility on that spend. It's a very fast-moving category, and our investment will ultimately be driven by the types of returns that we see. But ultimately, both of us would be delighted to be sitting here at the end of the year saying that we've actually invested at the top end or beyond that envelope because that will mean that we're really achieving traction in the prediction market space.
Ryan Sigdahl, Analyst
Peter, I understand your thoughts on the NFL playoffs and share the disappointment about the Vikings not making it. My question is regarding the noticeable slowdown in customer activity and the unfavorable recycling situation in the U.S., particularly when compared to your competitors. I'm curious about how the company plans to sustain your typically higher hold while also keeping a share of players' spending.
Peter Jackson, CEO
Ryan, I believe we've already discussed several of these factors. The main concern we noticed in Q4 wasn't our impressive 19% margin throughout the football season; we did well and aligned with our expectations for 2027. The real issue was how we managed our generosity. This is something we're addressing. It's crucial that our generosity strategy corresponds with market conditions. The 10 out of 11 weeks of consistently high margins, along with a few weeks reaching 30%, significantly affected our business. We need to consider how our approach to generosity relates to margin levels, especially since there can be lingering effects for a couple of weeks after those high margins. Personalized generosity is our solution, as even with high margins, averages fluctuate, and there are customers who perform well and those who don’t. Our team has extensive experience in this area in Australia, and we are applying that knowledge to our U.S. operations. The challenge isn't just about having high margins but ensuring we allocate our generosity wisely. We want customers to clearly understand the situation so we can avoid any inconsistencies, which can be unhelpful for them, especially during these periods of consecutive high margins.
Richard Stuber, Analyst
Just for me, a question on sort of credit cards. I did read somewhere that you now stop taking credit card deposits. I was wondering, have these credit card deposits been largely offset by the same customers using alternative payment methods? Or have those credit card customers broadly left? And is that sort of a similar thing which your competitors are doing in terms of credit cards?
Rob Coldrake, CFO
Yes, this is something that we have been anticipating for and also something that we've navigated in a number of our markets around the world, but we're actually anticipating a de minimis impact from this. It comes in at the start of March. It's within our plans, and we're not expecting it to have a material impact.
Peter Jackson, CEO
Okay. I think we are done with the questions. Thank you very much, everybody, for dialing in. Much appreciated.
Operator, Operator
This concludes today's conference call. You may now disconnect.