EPS of $-0.07 increased by 95.7% from previous year
Gross margin of 62.8%
Net income of -11.90M
"Fiscal 2026 is off to an excellent start, reflecting ongoing demand for our core franchises and the increasingly diversified successful nature of our business. Net bookings for the first quarter exceeded $1.4 billion, which was meaningfully above the high end of our expectations, led by the outperformance of several Mobile titles as well as the continued success of NBA 2K and the Grand Theft Auto series. We're optimistic about the year ahead, and we're raising our net bookings outlook for fiscal 2026 to $6.05 billion to $6.15 billion." - Strauss H. Zelnick
Take-Two Interactive Software, Inc. (TTWO) QQ1 2026 Results Analysis: Surging Net Bookings Driven by Mobile and GTA Franchises with a Robust Pipeline and Upside in FY2026
Executive Summary
Take-Two’s Q1 FY2026 results showcased blue-chip momentum across its core franchises and a surprisingly robust Mobile portfolio. Net bookings came in at $1.42 billion, materially above the guided range of $1.25–$1.30 billion, enabling management to raise the full-year net bookings outlook to $6.05–$6.15 billion (about 8% growth at the midpoint versus FY2025). GAAP revenue rose 12% year over year to $1.50 billion, with gross margin near 62.8%. Despite a modest operating profit of $21.6 million and a negative net income of $11.9 million, EBITDA was $280.4 million and the company reaffirmed its strategic emphasis on a high-quality, diverse release slate and strong long-term cash generation potential. Management underscored a multi-year pipeline (Mafia: The Old Country, NBA 2K26, Borderlands 4, Borderlands ecosystem, Red Dead Redemption, and continued Cyan/Toon Block Jam momentum) and highlighted accelerated growth in mobile and recurrent consumer spending, which accounted for roughly 83% of net bookings in Q1. The firm also signaled a disciplined capital allocation framework focused on organic growth, strategic acquisitions (Gearbox completed), and opportunistic share repurchases. In the near term, the company anticipates continued strength in NBA 2K, GTA Online, and Zynga’s portfolio, while planning capital expenditure around $140 million and operating cash flow around $130 million for the year. Management acknowledged macroheadwinds but positioned Take-Two as a quality-pendulum player in a potentially slower consumer environment, arguing the market will favor high-quality experiences and platforms open to fair competition.
Net bookings: $1.42 billion in Q1; recurrent consumer spending growth: 17% (vs guidance 7%), accounting for 83% of net bookings
Financial Highlights
Overview of key QQ1 2026 metrics and YoY/QoQ trends
- Revenue (GAAP): $1.50 billion, up 12.0% YoY, +4.0% QoQ; gross profit: $945 million, up 26.3% YoY, +17.6% QoQ; gross margin: 62.84% (0.6284)
- Operating income: $21.6 million, margin 1.44% (YoY and QoQ dynamics reflect operating leverage and mix)
- Net income: -$11.9 million, margin -0.79%; EPS: -$0.0658; weighted-average shares: 180.8 million
- EBITDA: $280.4 million; EBITDA margin: 18.65% (EBITDAR margin)
- Net bookings: $1.42 billion in Q1; recurrent consumer spending growth: 17% (vs guidance 7%), accounting for 83% of net bookings
- Cash flow: operating cash flow -$44.7 million; capex -$25.1 million; free cash flow -$69.8 million; net change in cash +$557.0 million; cash at end of period: $2.1162 billion; cash at beginning: $1.5592 billion
- Balance sheet: total assets $9.6842 billion; total liabilities $6.2033 billion; total stockholders’ equity $3.4809 billion; net debt $1.4819 billion; total debt $3.5069 billion; cash and equivalents $2.025 billion; long-term debt $2.8966 billion
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.50B
12.37%
-4.97%
Gross Profit
945.00M
22.55%
17.64%
Operating Income
21.60M
111.68%
100.57%
Net Income
-11.90M
95.46%
99.68%
EPS
-0.07
95.67%
99.69%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways and quotes from the earnings call, grouped by themes
- Strategy and pipeline: Strauss Zelnick highlighted a strong start to fiscal 2026 and a pipeline described as one of the strongest in Take-Two’s history, noting net bookings guidance raised to $6.05–$6.15 billion for FY2026 and expectations to reach record levels in FY2027. Quote: “Fiscal 2026 is off to an excellent start, reflecting ongoing demand for our core franchises and the increasingly diversified successful nature of our business. Net bookings for the first quarter exceeded $1.4 billion, which was meaningfully above the high end of our expectations, led by the outperformance of several Mobile titles as well as the continued success of NBA 2K and the Grand Theft Auto series. We're optimistic about the year ahead, and we're raising our net bookings outlook for fiscal 2026 to $6.05 billion to $6.15 billion.”
- Mobile and live services momentum: Lainie Goldstein commented on the outperformance in mobile and the importance of recurrent consumer spending: “Net bookings of $1.42 billion, which was significantly above our guidance range... Recurrent consumer spending grew 17% for the period, which was meaningfully above our guidance of 7% growth and accounted for 83% of net bookings.” Karl Slatoff noted NBA 2K25’s ongoing strength and the mobile portfolio’s trajectory, including WWE SuperCard’s continued success and NBA 2K25 Arcade Edition topping Apple Arcade charts.
- Capital allocation and balance sheet discipline: Strauss reaffirmed a three-pronged capital allocation framework (organic growth, selective accretive acquisitions, and shareholder returns via buybacks) and emphasized maintaining a conservatively geared balance sheet (net leverage ~1.2x, cash balance around $2.0B). Quote: “There are really 3 uses of our capital, first to support organic growth... Secondly, selectively and on an accretive basis only, to support inorganic opportunities… And third is returning capital to the shareholders, which we've done regularly over the years, typically in the form of buybacks, which are opportunistic.”
- Market structure and distribution: Strauss addressed open distribution dynamics following Android app store rulings, emphasizing collaboration with app stores while pursuing open and fair market access; “What’s good for the consumer is open distribution.”
- Competitive stance and pricing discipline: Strauss articulated Take-Two’s value-first pricing philosophy, focusing on delivering more value than price and leveraging a mix of upfront pricing and post-launch monetization. Quote: “Our goal is to vastly exceed expectations... delivering more value than what we charge for.”
Fiscal 2026 is off to an excellent start, reflecting ongoing demand for our core franchises and the increasingly diversified successful nature of our business. Net bookings for the first quarter exceeded $1.4 billion, which was meaningfully above the high end of our expectations, led by the outperformance of several Mobile titles as well as the continued success of NBA 2K and the Grand Theft Auto series. We're optimistic about the year ahead, and we're raising our net bookings outlook for fiscal 2026 to $6.05 billion to $6.15 billion.
— Strauss H. Zelnick
Net bookings of $1.42 billion, which was significantly above our guidance range of $1.25 billion to $1.3 billion. This reflected better-than-expected performance from several Mobile titles, including Toon Blast, Match Factory!, NBA 2K All-Star and Color Block Jam, as well as NBA 2K and the Grand Theft Auto series.
— Lainie Goldstein
Forward Guidance
Outlook and risk assessment based on management guidance and industry dynamics
- FY2026 net bookings guidance raised to $6.05–$6.15 billion, implying approximately 8% growth at the midpoint versus FY2025, supported by NBA 2K, GTA, Toon Blast, Borderlands 4, Match Factory!, Red Dead Redemption, Color Block Jam, Empires & Puzzles, and Words With Friends. The largest contributors remain Zynga (mobile), 2K, and Rockstar Games.
- GAAP net revenue guidance of $6.1–$6.2 billion; cost of revenue of $2.55–$2.57 billion; total operating expenses guidance $3.84–$3.86 billion; management expects operating cash flow around $130 million and capital expenditures around $140 million for the year; this suggests a balanced approach to growth and profitability with a focus on long-term cash flow generation.
- Q2 guidance projects net bookings of $1.70–$1.75 billion and operating expenses of $1.02–$1.03 billion. Recurrent consumer spending expected to grow ~1% in Q2 (with low-single-digit growth for NBA 2K) and full-year recurrent spending growth guided around ~4% (vs prior flat). These figures imply a continuation of a high-quality pipeline with a cadence of major releases (Mafia: The Old Country, NBA 2K26, Borderlands 4) and meaningful monetization across Live Services.
- Assessability: The pipeline is broad and include several platform launches (Nintendo Switch 2, Meta Quest, etc.), which supports durability even amid potential macro headwinds. However, macro uncertainty remains a risk: consumer discretionary spending could soften, impacting non-essential entertainment purchases. Management signaled a “flight to quality” mentality among players in softer environments, which should favor Take-Two’s high-quality franchises and live-service monetization.
- Key factors for investors to monitor: (1) Execution and cadence of the FY2026/FY2027 release slate (Mafia: The Old Country, NBA 2K26, Borderlands 4), (2) trajectory of recurrent consumer spending (especially NBA 2K franchise and GTA Online), (3) contribution from Zynga in mobile monetization and user acquisition efficiency, (4) operating leverage through profitability as the pipeline scales, (5) working capital dynamics and cash conversion given negative near-term operating cash flow, and (6) capital allocation outcomes including potential additional acquisitions or buybacks.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
TTWO Focus
62.84%
N/A
N/A
N/A
ATVI
72.10%
33.60%
3.68%
22.70%
NTDOY
61.80%
22.10%
3.13%
31.22%
NTES
63.40%
28.40%
6.00%
15.01%
PLTK
72.00%
9.60%
-26.10%
15.86%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Take-Two presents a compelling growth thesis built on a diversified, high-quality release slate, strong live-service monetization, and a disciplined capital allocation strategy. The QQ1 outperformance in net bookings and the raised full-year guidance imply durability of demand for core franchises and the mobile ecosystem. The pipeline (Mafia: The Old Country, NBA 2K26, Borderlands 4) supports medium-term growth, while Zynga’s portfolio complements recurring revenue generation. However, investors should monitor macroeconomic sensitivity, platform policy dynamics, and execution risk around new title launches. If the company continues to translate its pipeline into material net bookings growth and improving recurrent spend while maintaining balance-sheet discipline, Take-Two could realize meaningful profitability uplift in FY2027 as pipeline maturity and Live Services leverage scale further.
Key Investment Factors
Growth Potential
Diversified, high-quality pipeline (Mafia: The Old Country, NBA 2K26, Borderlands 4) combined with strong live-service monetization (NBA 2K and GTA Online) supports durable revenue growth. Mobile remains a meaningful growth driver with Zynga and Rollic contributions helping to stabilize net bookings and recurrent spend. Expect continued expansion on Nintendo Switch 2 and other platforms, with potential upside from new IP and strategic M&A (inorganic growth).
- Long-term trajectory: Management targets record net bookings in FY2027, signaling a growth runway beyond FY2026 and potential margin expansion as the pipeline matures and live services scale.
Profitability Risk
Macro consumer spending sensitivity could temper growth if discretionary budgets tighten. Execution risk around new title launches (Mafia: The Old Country, Borderlands 4, NBA 2K26) and potential delays. Dependency on key franchises (GTA, NBA 2K) could pose concentration risk if performance diverges from expectations. Regulatory and platform distribution dynamics (open vs closed ecosystems) could influence monetization and CAC efficiency; FX fluctuations may affect reported results when translating international revenues. Competitive pressure from peers (Activision Blizzard, Electronic Arts) remains a perpetual risk in a crowded market.
Financial Position
Balance sheet remains solid with cash ~$2.12B and total debt ~$3.51B; net debt around $1.48B and net leverage ~1.2x. The company is cash-generative over the long term but faced negative Q1 operating cash flow due to working capital dynamics; management intends to deploy capital across organic growth, selective acquisitions, and opportunistic share repurchases. Capital allocation remains disciplined with a focus on maintaining liquidity while funding growth opportunities.
SWOT Analysis
Strengths
Iconic, diversified IP portfolio: GTA, NBA 2K, Borderlands, Red Dead Redemption, and a strong mobile ecosystem (Peak/Rollic, Zynga).
Leading live-service monetization with high recurring consumer spending; Q1 recurrent spend grew 17% and accounted for 83% of net bookings.
Strong momentum in GTA Online and NBA 2K with multi-year engagement and monetization improvements.
Robust pipeline with multiple major releases (Mafia: The Old Country, NBA 2K26, Borderlands 4) and platform expansion (Nintendo Switch 2, VR, Apple Arcade presence).
Solid capital allocation framework (organic growth, selective inorganic opportunities, and shareholder returns).
Weaknesses
Near-term profitability remains pressured by high operating costs and negative GAAP net income in QQ1; potential working capital volatility.
Concentration risk around blockbuster franchises; a single title performance can significantly influence results.
Near-term dependence on Zynga’s mobile success to sustain net bookings growth.
Opportunities
Expansion onto additional platforms (Switch 2, VR platforms) and continued mobile monetization upgrades.
Further cross-brand collaborations and partnerships (NBA/NBA PA/WNBA partners) to sustain engagement and monetization.
Open distribution trends may lower distribution costs and broaden consumer access.
Threats
Macro headwinds could dampen discretionary spending; opponents’ slate of new IP and live-service enhancements could heighten competition.
Regulatory and platform changes affecting app stores and monetization channels.
FX volatility impacting reported revenues and costs given international exposure.
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