TKO Group Holdings: The Knockout Investment of 2025

WWE-UFC Merger: Right Combination for Global Knockout ...

TKO Group Holdings (TKO, Financial) could be the most exciting name in entertainment that you are not paying enough attention to. Growing from the merger between Ultimate Fighting Championship (UFC) and World Wrestling Entertainment (WWE), this sports-entertainment behemoth entered the new year swinging, with increasing revenue, expanding global audience, and a newly earned S&P 500 ticket.

But what makes it really interesting for the investors is the numbers. Earnings are whopping, margins are widening, and the big plays, such as Meta and Saudi Arabia's Sela, are queuing up at the door. Yes, it is overvalued, but scratch the surface and you will find a global empire in the making with muscle and momentum.

Let's jump into how it all adds up and why TKO may be a knockout investment in your portfolio.

Company overview

TKO Group Holdings is headquartered in New York and launched in 2023. The company is stirring the sports and entertainment scene with a powerhouse portfolio topped by WWE and UFC. These legendary brands power TKO's worldwide appeal with exciting live shows, reality programming, and digitally delivered content across platforms including UFC FIGHT PASS. Beyond the screen, TKO mines merchandising with games, apparel, and collectibles, and in collaboration with top names such as ESPN and Netflix (NFLX, Financial), broadens its global fan base. As a part of Endeavor Group Holdings (EDR, Financial), TKO is not just riding the wave, it's creating it.

TKO delivers knockout first-quarter performance

TKO started 2025 with solid performance, and to be honest, it's tough not to be impressed. First-quarter revenue for the company came in at $1.27 billion, a decent 4% increase year-over-year with both WWE and UFC demonstrating strong form. WWE was a star, up 24% to $391.5 million, due to increased SmackDown and hype before WrestleMania 41 in Europe. UFC wasn't that far behind either, increasing 15% to $359.7 million with the help of overseas events, increased fees in media, and new partnerships.

Adjusted EBITDA was strong at $417.4 million, up 23% with WWE and UFC both expanding their margins, WWE showing 50% and UFC a healthy 63%. Net income turned into the black at $165.5 million, a gargantuan improvement on last year's loss, largely because there was no $335 million UFC legal charge that dragged down the previous period.

Even with a few headwinds at IMG, where revenue was down 13% because of less desirable Super Bowl sites and loss of FA Cup rights, TKO is still bullish. The company has recently acquired IMG, On Location, and Professional Bull Riders (PBR) and brought them under its guidance. The full-year revenue projections now stand between $4.49 billion and $4.56 billion.

Some top growth catalysts

The company's current surge is due to a set of well-planned actions that may help it grow steadily on various levels. Below are the main factors that are boosting investors' confidence:

S&P 500 Inclusion:

Joining the S&P 500 is one of the biggest catalysts for TKO at this point. Being included in the index gives legitimacy in the larger market. Even if TKO comes in as stock number 496, it doesn't make a difference. S&P status allows passive purchase from the world's biggest funds, like Vanguard, BlackRock, State Street, all of which track the index. These funds now have to purchase TKO shares to remain in balance, representing a constant flow of demand. It won't happen overnight as rebalancing schedule is varied and the effect will be gradual. But after getting in, TKO now receives a positive effect of that ongoing, automatic flow of capital. It is the type of structural support that can help to support long-term price strength, something especially valuable in volatile markets.

Strategic partnership fueling tech and combat sports:

TKO is on an expansion streak and it's nailing it in tech, sports, and global reach. The UFC's new multiyear partnership with Meta is a highlight, not just a brand placement. It's a massive submergence of Meta AI, Quest headsets, and even smart glasses into the fan experience. Dana White says it is a game-changer and he could be right.

Live events and partnerships driving high-margin growth:

Meanwhile, TKO is entering the boxing ring, literally, with a new promotion that it has formed with Saudi Arabia's Sela, supported by the mighty Public Investment Fund. This move is a bold departure from UFC and WWE and leverages the existing fan base of TKO while cashing in on Saudi Arabia's deep pockets and eagerness for global sports. With Dana White and Nick Khan in the Executive team, the promotion is in safe hands. They both have a track record of success from the UFC and WWE, particularly in Saudi events. It's a coming venture that will change the world's perception of boxing and give TKO another avenue for success.

Add to that a big play in Australia, where Perth is becoming a hotbed for UFC and WWE events through 2026. Due to an expanded partnership with the Western Australian Government, the city will host five key events this year, including a UFC Fight Night at RAC Arena later this year. It's a clear indication that TKO is going big in international expansion, exporting its blockbuster shows to new global fans, and strengthening ties in one of the most important Asia-Pacific markets.

Media rights driving a recurring revenue engine:

WWE's flagship programs, RAW and SmackDown, are shows with huge weekly TV viewership and live audiences that can reach tens of thousands. These are the main events of WWE in which the top-tier talent performs. They are made possible by big agreements with top media houses, so they keep providing recurring revenue for years to come. UFC, too, has a prosperous deal with ESPN, that both monetizes its major events and helps the brand be promoted across ESPN's various platforms. Because interest in live sport and premium content is growing worldwide, TKO's collection of media rights is proving to be a versatile and profitable asset.

But WWE isn't stopping there. In March 2025, it rolled out Evolve on Tubi (FOX), and LFG on A&E (Disney), both platforms to put the spotlight on up-and-comers from the Indies (ID) and Next-In-Line (NIL) college athlete pools. Although ratings are not yet in, the move is evidence of WWE's efforts to control all stages of a wrestler's career, from an unknown hopeful to WrestleMania headliner. It is more about manufacturing stars as compared to just finding them.

Further talent development:

TKO is making big moves by expanding its WWE talent pipeline. WWE has been on top of the pro wrestling scene for decades, but its hold on talent development becomes stronger and smarter.

Below RAW and SmackDown sits NXT, the developmental league of the company. It is like AAA baseball, which is still a serious business, but more playing with raw talent. NXT airs once a week in front of a few hundred fans while hundreds of thousands watch online.

Beginning of a dividend:

Let's move to the next catalyst. Whether a company can pay a dividend, even a small one, has been one of the long-running litmus tests for many investors. It is a gesture of sound financial position and a vote of confidence by the management on the company's earning capacity. Although the current dividend yield is not that impressive at 0.95%, it is still a modest gesture. The company announced a quarterly dividend of $0.38, yielding an annual payout of $1.52 and a payout ratio of only 17.08%, which leaves a lot of room for growth if the management decides to do so. TKO started to pay a cash dividend on a quarterly basis, from its first ex-date on 14th March 2025, and first payment on 31st March. This is the equivalent of a $75 million payout from the firm, which is close to a little under 15% of their current treasury cash.

Stretched valuation poses concern but growth keeps the hope alive

Let's now discuss the company's valuation. TKO Group's valuation certainly catches the eye, although not necessarily and entirely in a good way. If you look at the numbers, the stock looks expensive. For the non-GAAP trailing P/E ratio, it is over 50 times when compared to a sector median of approximately 12. Even going forward, it remains up near 46. That is more than triple the price most of its peers are trading at. A similar situation is with GAAP earnings. The multiples are through the roof, which means that investors are making huge bets on future performance.

But then, here's the curveball. The PEG ratio based on non-GAAP forward earnings is a modest 0.16 times. That's quite a low number, and usually indicates the stock may be a bargain if the earnings growth really takes off. It's a big if, though, and that's the catch.

So overall, TKO is priced as a firm that has something to prove in a major way. However, the twist is that analysts believe that it just might. Earnings are expected to ramp up fast in the next few years as you will see in the next heading. This optimistic prognosis could be used to rationalize the current premium and pull those valuation multiples downto earth.

Analysts forecast strong growth for TKO

Notwithstanding its high valuation, the growth narrative of TKO is grabbing the attention of analysts, and the numbers through 2027 are encouraging. From 2025, earnings-per-share are projected to jump to $3.50, which is an astonishing 357.08% YOY increase, providing the post-merger benefit of IMG, On Location, and PBR. In the same year, the revenue is expected to rise to $4.47 billion, an increase of almost 59%. This is a solid indication that the market is confident in TKO's scaling ability and varied revenue streams.

Source: Consensus EPS estimates (Seeking Alpha)

This will rise to a further $5.75 by 2026, with revenue at $5.75 billion. Although the EPS growth retards to a healthy 14.63%, it indicates a ripening expansion phase in which the synergies from the acquisitions start to provide more sustainable profitability. Analysts are also expecting TKO's valuation to normalize as well with forward P/E falling from 47.05x in 2025 to around 24x in 2026.

Source: Consensus Revenue estimates (Seeking Alpha)

Going into the year 2027, the story changes slightly. EPS is expected to be fairly stable at $6.6, while the revenue is anticipated to drop slightly to $5.46 billion...