TKO (UFC + WWE): A Beat, A Raise — And 66% Of The Profit Isn’t Yours. Q2 2026

TKO Group Holdings, Inc. (TKO) Q2 2026 — Reported after the close on August 3 (three months ended June 30, 2026). Revenue $1,547.1M, +18.3%. Adjusted EBITDA $649.9M, +23.4%, margin 42% vs 40%. GAAP diluted EPS $1.34 vs $1.41 expected — a seven-cent miss. FY2026 guidance RAISED again, to $5.775-5.825B revenue and $2.275-2.305B EBITDA. UFC $535.7M (+28.8%), WWE $620.9M (+11.6%), IMG $354.7M (+15.7%). The stock closed at $183.91. The number nobody read: of the $303.9M TKO earned this quarter, $202.3M — 66.6% — went to NON-CONTROLLING INTERESTS. Only $101.6M belongs to the shares you can buy. TKO is an Up-C: 73.1M Class A plus 116.2M Class B paired 1:1 with TKO OpCo units, so the true economic count is 189.3M units and the real market cap is $34.8B — not the $13.8B screeners show. That error turns 17.0x forward EV/EBITDA into 7.8x. THE CALL: AVOID (3/5, A GREAT BUSINESS AT A PRICE THAT NEEDS EVERYTHING TO GO RIGHT) — base-case value ~$138.0 vs ~$183.91 today. KEY METRICS: - THE CALL: AVOID 3/5 - fair value ~$138 vs the $183.91 close (-25%); Street average $227.50 (17 buy / 2 hold / 0 sell, 19 analysts, range $210-$237, +24%), so we DIFFER and are far more CAUTIOUS. DCF GRID (bear/base/bull x 8.5/9.25/10.0%): $110-98-89, $152-134-120, $208-181-160. Probability-weighted 25/50/25 gives $137; even our BULL case ($181) misses today's price. Base case: FY26 guided adjusted EBITDA $2,290M midpoint, less ~$300M cash interest, ~$95M capex, ~$165M equity comp, ~$80M normalised legal, taxed 24% = ~$1,254M owner earnings = $6.63 per economic unit on 189.3M units. REVERSE DCF: $183.91 prices those units at $34.81B, demanding ~12% compound owner-earnings growth for nine straight years. - ANGLE 1 - THE MARKET CAP ON YOUR SCREEN IS 2.5x TOO SMALL. TKO is an Up-C: the 10-Q cover page (July 31, 2026) reports 73,111,098 Class A shares AND 116,158,615 Class B, each paired 1:1 with a TKO OpCo unit held by the Endeavor/Silver Lake side. Total economic units 189.3M; Class A owns 38.6%. That is why $202.3M of Q2's $303.9M net income went to non-controlling interests, leaving $101.6M and the $1.34 EPS. Vendors quote ~$13.8B (75.0M shares, Class A only); the real cap is $34.8B and the EV $38.9B. Wrong: 7.8x guided EBITDA. Right: 17.0x forward. - ANGLE 2 - 2026 IS A TRIPLE-STACKED PEAK. Paramount's $7.7B/7-yr UFC deal started in January, ESPN's WWE deal in September 2025, and the FIFA World Cup came to North America: IMG adjusted EBITDA +171% to $78.6M, margin 9% to 22%, 'primarily related to FIFA World Cup 2026 hospitality sales at On Location'. Precedent: in the 2024 Olympics year IMG did $1,970.2M of revenue and LOST $48.0M of adjusted EBITDA; in 2025 total TKO revenue FELL 3.1% to $4,735.2M. ANGLE 3 - THE LIVE GATE FELL 18%. UFC + WWE live events was $199.8M vs $244.2M: UFC Freedom 250 at the White House sold no tickets, and TKO says UFC's margin fall from 59% to 52% was 'entirely due to the financial profile' of that event. Q2 add-backs were $123.7M (19% of adjusted EBITDA), incl. $71.1M of legal costs vs $9.7M. And a $900M term loan funded an $800M buyback at $191.97 - above the close. What to watch: Bullish: UFC sponsorship holding its $144.8M pace (+69%) WITHOUT a White House event; FY2027 revenue guided above ~$5.9B; FCF conversion back over 70% → $180. Bearish: FY2027 EBITDA guided flat or lower; legal costs above $50M a quarter; more debt-funded buybacks above $190 → $110. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.