PlayStudios (MYPS) Q3 2025: Direct-to-Consumer Revenue Jumps 48% as Core Casino Faces -19% Topline Drop
MYPS’s Q3 exposed the double bind of deepening social casino headwinds and emerging growth bets. A 48% sequential surge in direct-to-consumer revenue and disciplined cost controls provided resilience, but category-wide DAU and ARPDAU declines forced a revenue and EBITDA guidance cut. Management’s focus is now squarely on sweepstakes and Tetris launches to offset legacy contraction, with operational discipline and optionality for M&A or partnerships in play for 2026.
Summary
- Sweepstakes and Tetris Block Party Anchor Growth Plan: Core casino erosion intensifies the pivot to new launches and web-based models.
- Direct-to-Consumer Channel Gains Traction: Off-platform monetization now comprises nearly 17% of in-app sales, up sharply from last year.
- Guidance Reset and Strategic Optionality: Leadership signals openness to M&A and partnerships as headwinds persist into 2026.
Performance Analysis
MYPS’s Q3 2025 results laid bare the structural pressure on the core social casino business, with total revenue down 19.1% year-over-year and adjusted EBITDA halved versus Q3 2024. The headline contraction was driven by a 25% decline in daily active users (DAU), especially acute in the casual segment, while the casino portfolio saw both DAU and average revenue per daily active user (ARPDAU) slip—except for MyKonami, which posted double-digit ARPDAU growth.
Amid these declines, direct-to-consumer (D2C) revenue surged 48% sequentially to $7.7 million, now representing nearly 17% of total in-app revenue, up from 9% a year ago. This was primarily enabled by Apple’s relaxed policy on off-platform payments, which MYPS leveraged through improved in-app merchandising and frictionless user experience. Despite these gains and $106 million in cash with no debt, leadership cut full-year revenue and EBITDA guidance below prior ranges, citing ongoing DAU softness and investment in new growth projects.
- Casual Segment Weakness: DAU declines in casual games were the primary driver of sequential audience loss, partially offset by ARPDAU gains in Brainium and Tetris Prime.
- Cost Structure Realignment: Last year’s reinvention program delivered $25–30 million in normalized cost savings, but revenue erosion offset much of the benefit.
- Liquidity Buffer: $106 million cash and an undrawn $81 million credit facility provide flexibility for organic and inorganic moves.
MYPS’s margin compression and topline reset reflect a business in transition, with operational discipline and new product bets aimed at restoring growth.
Executive Commentary
"Category headwinds have continued to pressure our core markets, Our valuation today sits only slightly above our cash position, and we know some investors are questioning our direction. As both the CEO and one of the company's largest shareholders, I understand these concerns and I share the urgency to reposition the business."
Andrew Paschal, Chairman and CEO
"Adjusted EBITDA for the quarter was 7.2 million, down 50.5% versus the third quarter of 24, resulting in a 12.6% operating margin compared to 20.5%. Year to date adjusted EBITDA was 30.5 million, down approximately 31% year over year. This contraction reflects reduced revenue scale and an increase in investment for new growth projects, partially offset by cost savings from last year's reinvention program."
Scott Peterson, Chief Financial Officer
Strategic Positioning
1. Sweepstakes Expansion and Regulatory Navigation
WinZone, MYPS’s sweepstakes initiative, is now live in 15 states and on track for a full rollout by year-end. Despite a 25% contraction in the overall sweepstakes addressable market due to regulatory tightening, MYPS sees a $3.5–$4 billion TAM in the remaining states. The phased approach—starting web-based, with plans for full portfolio integration and selective M&A—positions MYPS to capture both organic and inorganic upside. Management is keenly watching regulatory shifts, especially in California, where a sweepstakes ban could drive players back to traditional social casino products.
2. Tetris Block Party as a Franchise Bet
Tetris Block Party, a new mobile franchise, is in open beta with positive early signals in user acquisition, retention, and monetization. The Q4 go-to-market test is a critical milestone, with a broader launch planned for Q1 2026. MYPS’s thesis is that Tetris can be “super-scaled” on mobile, leveraging its brand equity with a deeper social metagame and community-driven features.
3. Direct-to-Consumer and Margin Leverage
D2C sales, meaning purchases made outside of app stores, now account for nearly 17% of in-app revenue. The shift is margin-accretive, as MYPS avoids platform fees and can tailor offers more directly. Management expects D2C and sweepstakes to further expand gross margin, though the relationship is not strictly linear due to mix and ad revenue dynamics.
4. Loyalty Platform and Player Retention
Play Awards, MYPS’s real-world loyalty platform, remains a key differentiator. The company streamlined the program to focus on higher-quality partners and digital rewards, with a notable sequential increase in retail value of rewards purchased. The MyVIP World Tournament of Slots, culminating in a $1 million live event, underscores the company’s commitment to bridging digital engagement with real-world experiences.
5. AI-Driven Operational Efficiency
AI adoption is reshaping MYPS’s development pipeline, from creative tooling to user acquisition modeling. While early, management sees meaningful long-term efficiency and gameplay innovation potential, aiming to accelerate live ops and production cycles.
Key Considerations
MYPS is at a strategic crossroads, balancing cost discipline, emerging product bets, and the realities of a shrinking legacy market. The next 2–3 quarters will be shaped by:
Key Considerations:
- Sweepstakes Scale and Regulation: Full rollout and marketing ramp hinge on stable KPIs and regulatory clarity, especially as more states consider bans or legalization pivots.
- Tetris Block Party Launch Trajectory: Success in the upcoming go-to-market test will determine the franchise’s ability to offset legacy declines.
- D2C and Margin Expansion: Sustained D2C growth could structurally lift margins, but mix effects and ad monetization variability remain wildcards.
- Optionality for M&A or Strategic Partnerships: Leadership is open to both organic and inorganic moves, including leveraging MYPS’s player database and content platform for iGaming partnerships if regulatory landscapes shift.
Risks
MYPS faces persistent category headwinds in social casino, with DAU and ARPDAU declines that may not stabilize absent a successful sweepstakes or Tetris launch. Regulatory risk remains acute, as sweepstakes legality is in flux in key states. Execution risk is elevated: delays or underperformance in new launches could prolong topline contraction and further pressure margins, while competitive intensity from larger operators remains high.
Forward Outlook
For Q4 2025, MYPS guided to:
- Sequential revenue decline in the core business, with upside tied to new launches.
- Adjusted EBITDA below prior guidance as investments in sweepstakes and Tetris ramp.
For full-year 2025, management lowered guidance:
- Both net revenue and consolidated adjusted EBITDA are now expected below the low end of previous ranges.
Management highlighted several factors that will shape the next quarter:
- Full sweepstakes rollout and marketing ramp depend on stable KPIs and regulatory environment.
- Tetris Block Party’s performance in the key marketing test will inform 2026 scaling strategy.
Takeaways
MYPS’s Q3 2025 was a reset quarter, with topline and margin declines forcing a guidance cut and sharper strategic focus on new growth bets.
- Legacy Contraction Accelerates Shift: Category-wide and MYPS-specific DAU declines are unlikely to reverse without new product success, making sweepstakes and Tetris Block Party critical for 2026.
- D2C and Liquidity Provide Cushion: Margin-accretive D2C gains and a strong cash position give MYPS time to execute, but not unlimited runway.
- Regulatory and Execution Risk Loom Large: The next two quarters will determine if MYPS can stabilize and return to growth, or if further restructuring is required.
Conclusion
MYPS is navigating a challenging industry reset, with disciplined cost management and promising new launches offsetting—though not yet reversing—legacy declines. The company’s ability to scale sweepstakes, capitalize on Tetris, and leverage its D2C and loyalty assets will define its 2026 trajectory.
Industry Read-Through
MYPS’s results reinforce the secular decline in traditional social casino and casual gaming, as regulatory shifts and player preferences migrate toward sweepstakes and web-based monetization. The direct-to-consumer surge highlights a broader industry move to bypass platform fees, a theme likely to accelerate as Apple and Google loosen restrictions. Operators with strong loyalty platforms and the agility to pivot toward regulated sweepstakes or iGaming partnerships will be best positioned, while those reliant on legacy app store models face mounting pressure. The next year will test whether new franchise launches and regulatory navigation can offset the structural headwinds facing the category.