You may have heard that President Donald Trump is considering hosting an Ultimate Fighting Championship (UFC) event at the White House next July 4.
However, you might not know the company behind UFC. But as an investor, you probably should.
TKO Group Holdings (TKO +1.82%) owns two major sports media properties, and they're both on fire. Ultimate Fighting Championship (UFC) is the world's premier mixed martial arts organization, and World Wrestling Entertainment (WWE) is the largest and best-known professional wrestling promoter on the planet. Combined, they reach a billion households across 210 countries.
Image source: Getty Images.
In the second quarter, the company generated a profit of $98 million attributable to TKO Group Holdings on revenue of $1.3 billion. Those metrics were up significantly from a year ago. Revenue rose 10% and net income soared 66%. And the revenue and earnings per share both blew past analyst forecasts: Revenue exceeded analyst estimates by 6.2% and earnings per share were 7.5% higher than Wall Street expected.
But the best may be yet to come for TKO.
Two colossal deals
Sure, the White House event could be a hoot, but even more exciting for investors is that TKO just inked a colossal seven-year deal with Paramount for U.S. broadcast rights to its UFC content. Paramount will distribute UFC's 13 marquee events and 30 fight nights via its consumer streaming platform, with several slated for network television on CBS (a Paramount property).
The contract is expected to pay TKO an average of $1.1 billion annually for the life of the contract. Paramount says it's also thinking about acquiring the international rights to UFC.
And ESPN, which is owned by The Walt Disney Company, recently struck a deal to air all of TKO's WWE events for the next five years, beginning in 2026, which will reportedly pay TKO an average of $325 million a year. That's a huge increase over the $180 million per year that NBCUniversal was reportedly paying TKO for the WWE content.
Last year Netflix and TKO agreed to a 10-year, $5 billion agreement that gives the streaming channel rights to Raw, a Monday night professional wrestling event . The January 2025 debut episode of Raw in Los Angeles averaged 2.6 million households in the U.S., more than twice the average views in 2024.
New sales and profit expectations
By shifting most of its content from traditional pay-per-view to streaming services, TKO is boosting its visibility and reach and unlocking new revenue streams.
As a result, analysts on average expect TKO's revenue to grow 67.5% this year to $4.7 billion (from $2.8 billion last year) and another 26% next year to more than $5.9 billion. Earnings are expected to skyrocket from $0.02 a share last year to $2.21 a share this year and more than double that to $5.34 a share next year. If you believe that share prices ultimately follow earnings (as I do), it quickly becomes clear that there's quite a bit of upside for this stock.
No wonder it's up 31% year to date and 57% over the past 52 weeks.
NYSE: TKO
Key Data Points
TKO has been branching out beyond UFC and WWE content, too. Early this year it acquired three sports assets from Endeavor Group Holdings, a privately held sports and entertainment firm. Those properties include IMG, a global sports marketing agency; On Location, a sports hospitality firm that serves the NFL and FIFA's World Cup; and Professional Bull Riders (PBR), the world's premier bull riding organization.
There are synergies to be had between these various properties. In April, TKO took over the T-Mobile Center in Kansas City for five days to stage events by WWE, UFC, and PBR.
Critics might point to TKO's relatively high valuation -- its trailing price-to-earnings ratio is 75. But the strong earnings growth expected at TKO over the next two years may justify it.
You may or may not care for mixed martial arts or professional wrestling. But if you think sports entertainment will only get bigger, TKO is looking like a great way to play it.
