Mobile game developer Skillz (NYSE: SKLZ) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 11.4% year on year to $27.37 million. Its GAAP loss of $1.14 per share was 3.6% below analysts’ consensus estimates.
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Skillz (SKLZ) Q3 CY2025 Highlights:
- Revenue: $27.37 million vs analyst estimates of $29.07 million (11.4% year-on-year growth, 5.8% miss)
- EPS (GAAP): -$1.14 vs analyst expectations of -$1.10 (3.6% miss)
- Adjusted EBITDA: -$11.76 million vs analyst estimates of -$7.54 million (-43% margin, 56% miss)
- Operating Margin: -59.4%, up from -85.5% in the same quarter last year
- Free Cash Flow was -$25.8 million compared to -$22.5 million in the previous quarter
- Paying Monthly Active Users: 155,000, up 34,000 year on year
- Market Capitalization: $97.19 million
“Skillz’s third quarter results reflect continued progress toward our goal of delivering consistent top-line growth and positive Adjusted EBITDA,” said Andrew Paradise, Chief Executive Officer of Skillz.
Company Overview
Taking a new twist at video gaming, Skillz (NYSE: SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Skillz’s demand was weak over the last three years as its sales fell at a 33.5% annual rate. This was below our standards and is a sign of poor business quality.
This quarter, Skillz’s revenue grew by 11.4% year on year to $27.37 million but fell short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 21.1% over the next 12 months, an acceleration versus the last three years. This projection is admirable and suggests its newer products and services will catalyze better top-line performance.
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Paying Monthly Active Users
User Growth
As a video gaming company, Skillz generates revenue growth by expanding both the number of people playing its games as well as how much each of those players spends on (or in) their games.
Skillz struggled with new customer acquisition over the last two years as its paying monthly active users have declined by 15% annually to 155,000 in the latest quarter. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Skillz wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
Luckily, Skillz added 34,000 paying monthly active users in Q3, leading to 28.1% year-on-year growth. The quarterly print was higher than its two-year result, suggesting its new initiatives are accelerating user growth.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track because it measures how much revenue each user generates, which is a function of how much paying users spend on its games.
Skillz’s ARPU fell over the last two years, averaging 4.3% annual declines. This signals its platform’s value is eroding when paired with its declining paying monthly active users. If Skillz wants to increase its users, it must either develop new features or provide some existing ones for free. 
This quarter, Skillz’s ARPU clocked in at $58.90. It declined 12.9% year on year, worse than the change in its paying monthly active users.
Key Takeaways from Skillz’s Q3 Results
We enjoyed seeing Skillz increase its number of users this quarter. We were also glad its number of paying monthly active users outperformed Wall Street’s estimates. On the other hand, its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 5.7% to $6 immediately following the results.
Skillz underperformed this quarter, but does that create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
