EPS of $-21.08 decreased by 23.9% from previous year
Gross margin of 50.8%
Net income of -3.73B
"Grand Theft Auto VI began development in earnest in 2020 following the massive success of Red Dead Redemption 2, and the title is now the most anticipated entertainment property of all time." - Strauss Zelnick
Take-Two Interactive Software Inc (TTWO) QQ4 2025 Earnings Analysis: GTA VI Pipeline, NBA 2K Momentum, and Zynga Growth Amid Impairment Headwinds
Executive Summary
Take-Two Interactive reported a quarter that delivered net bookings at the top end of guidance ($1.58 billion) and full-year net bookings of $5.65 billion, underscoring the resilience of the company’s multi-label engine across 2K, Rockstar Games, and Zynga. The quarter was highlighted by strong performances from NBA 2K25, GTA Online, and Zynga’s mobile portfolio, with recurrent consumer spending representing 77% of net bookings and growing 14% year over year. However, GAAP profitability was materially affected by a one-time impairment charge of $3.6 billion related to goodwill and acquired intangible assets, primarily tied to Zynga’s legacy assets. Management emphasized ongoing cost-reduction initiatives and a robust product pipeline to sustain long-term growth. Looking ahead, Take-Two issued initial fiscal 2026 guidance, including net bookings of $5.9–$6.0 billion (roughly 5% year-over-year growth at the midpoint) and GAAP net revenue of $5.95–$6.05 billion, with operating expenses expected to increase modestly as marketing and development costs rise. Management also outlined a sizable development slate, including Mafia: The Old Country and Borderlands 4, plus a pipeline of approximately 38 titles through fiscal 2028, and reiterated optimism about GTA VI in fiscal 2027. The company also highlighted the potential upside from direct-to-consumer expansion and ongoing partnerships (e.g., Netflix) as growth accelerators, even as near-term profitability remains pressured by impairment charges and higher development costs.
Key Performance Indicators
Revenue
1.58B
QoQ: 16.38% | YoY:13.08%
Gross Profit
803.30M
50.76% margin
QoQ: 5.71% | YoY:19.57%
Operating Income
-3.78B
QoQ: -2 759.12% | YoY:-39.21%
Net Income
-3.73B
QoQ: -2 876.20% | YoY:-28.36%
EPS
-21.08
QoQ: -2 869.01% | YoY:-23.85%
Revenue Trend
Margin Analysis
Key Insights
Net bookings (quarter): $1.58 billion (top of guidance)
GAAP net revenue (quarter): $1.5825 billion, up 13% year over year; up approximately 16% quarter over quarter
Operating income (quarter): -$3.7769 billion; EBITDA: -$3.7141 billion; EBITDAR: -$2.347%
Net income (quarter): -$3.7262 billion; net income margin: -2.35%; EPS (GAAP): -$21.08
Financial Highlights
Quarterly performance snapshot (TTWO QQ4 2025)
- Net bookings (quarter): $1.58 billion (top of guidance)
- GAAP net revenue (quarter): $1.5825 billion, up 13% year over year; up approximately 16% quarter over quarter
- Cost of revenue (quarter): $779.2 million; gross profit: $803.3 million; gross margin: 50.76%
- Operating income (quarter): -$3.7769 billion; EBITDA: -$3.7141 billion; EBITDAR: -$2.347%
- Net income (quarter): -$3.7262 billion; net income margin: -2.35%; EPS (GAAP): -$21.08
- Cash flow: operating cash flow $279.0 million; free cash flow $224.9 million; cash at period end $1.471 billion
- Balance sheet: total assets $9.1807 billion; total liabilities $7.043 billion; total stockholders’ equity $2.1377 billion; cash and equivalents $1.471 billion; total debt $4.1059 billion; net debt $2.6349 billion; current ratio 0.779; gross goodwill $1.0573 billion; intangible assets $4.2286 billion
- Full-year (fiscal 2025): net bookings $5.65 billion (top of guidance); GAAP net revenue $5.63 billion; cost of revenue $2.6 billion; operating expenses $7.5 billion; cash flow from operations negative on a GAAP basis but cash outflows were reduced vs. plan; capital expenditures ~$169 million; free cash flow $224.9 million; recurring consumer spending grew ~7% and accounted for about 80% of net bookings.
- Growth/efficiency metrics: recurrent consumer spending growth 14% in Q4; NBA 2K grew high-teens for FY25; mobile revenue contribution remains strong within Zynga; net bookings mix by label: ~45% Zynga, 39% 2K, 16% Rockstar Games.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.58B
13.08%
16.38%
Gross Profit
803.30M
19.57%
5.71%
Operating Income
-3.78B
-39.21%
-2 759.12%
Net Income
-3.73B
-28.36%
-2 876.20%
EPS
-21.08
-23.85%
-2 869.01%
Key Financial Ratios
currentRatio
0.78
grossProfitMargin
50.8%
operatingProfitMargin
-239%
netProfitMargin
-235%
returnOnAssets
-40.6%
returnOnEquity
-174.3%
debtEquityRatio
1.92
operatingCashFlowPerShare
$1.58
freeCashFlowPerShare
$1.27
priceToBookRatio
17.14
priceEarningsRatio
-2.46
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the earnings call (themes and supporting quotes):
- Pipeline and long-term growth: Take-Two outlined approximately 38 titles through fiscal 2028 with 13 titles planned for fiscal 2026, including Mafia: The Old Country and Borderlands 4, plus the continued rollout of Civilization VII. Strauss Zelnick highlighted GTA VI as a monumental project with broad market anticipation and cross-platform reach, stating, Grand Theft Auto VI began development in earnest in 2020... and is now the most anticipated entertainment property of all time. 475 million views for Trailer 2 in 24 hours underscore Rockstar’s cultural reach.
- Mobile and Zynga momentum: Zynga’s live operations and the Peak/Toon Blast/MATCH Factory portfolio delivered meaningful net bookings growth; Color Block Jam has scaled rapidly and is highly profitable within four months of operation. Management emphasized the value of a large consumer database and cross-label sharing of best practices to accelerate mobile success.
- Direct-to-consumer and platform strategy: Management stressed the growing importance of DTC, aided by regulatory developments that facilitate direct consumer relationships; Netflix partnership continues to be a meaningful distribution/marketing channel, with potential for further IP collaboration, including film/TV opportunities.
- Margin dynamics and impairment: CFO Lainie Goldstein acknowledged a $3.6 billion impairment related to goodwill and acquired intangible assets, largely reflecting Zynga-related assets, and explained it as an annual/triggered impairment assessment driven by updated long-term forecasts. Despite impairment headwinds, Take-Two’s management signaled ongoing cost-reduction initiatives and a path to margin expansion as the company scales with a larger, more product-heavy pipeline.
- Short-term guidance and long-term outlook: Management provided fiscal 2026 net bookings of $5.9–$6.0 billion (midpoint +5% YoY) and 2026 GAAP net revenue of $5.95–$6.05 billion, with capex around $140 million and OCF around $130 million. The long-term view remains positive, with GTA VI in fiscal 2027 and a multi-year trajectory of growth in net bookings and profitability, assuming continued momentum in NBA 2K and Rockstar franchises.
Grand Theft Auto VI began development in earnest in 2020 following the massive success of Red Dead Redemption 2, and the title is now the most anticipated entertainment property of all time.
— Strauss Zelnick
We've always had variable pricing. And the rubric that we employ is delivering way more value to consumers than what we charge; Mafia: The Old Country is extraordinary and we want to get it into as many hands as possible.
— Strauss Zelnick
Forward Guidance
Take-Two’s forward-looking outlook centers on a strong multi-year pipeline and a meaningful upcoming GTA VI release. Key elements:
- Net bookings guidance for FY2026: $5.9–$6.0 billion, representing ~5% YoY growth at the midpoint, driven by NBA 2K, GTA series, Zynga titles, Borderlands 4, and other live-service offerings such as Match Factory and Empires & Puzzles. Recurrent consumer spending is expected to be flat to modestly positive, around 76% of net bookings.
- Revenue and margin framework: FY2026 GAAP net revenue guidance of $5.95–$6.05 billion; gross margin pressure from higher development costs is expected to be offset by ongoing cost-reduction initiatives and scale advantages. Opex is projected to grow around 3% YoY, largely due to marketing of upcoming titles.
- Cash flow and capital allocation: Operating cash flow is expected to be roughly $130 million, with capex around $140 million to fund game technology and office buildouts. Free cash flow generation is anticipated to improve as titles scale and live-ops efficiencies are realized.
- Short/near-term milestones: The Q1 FY2026 guidance implies net bookings of $1.25–$1.30 billion, supported by two Civilization VII offerings (including VR for Quest and Switch 2 launch), NBA 2K and GTA franchises, and Zynga titles.
- Long-run trajectory and risk factors: GTA VI is central to the long-run upside, with management noting the launch of GTA VI in FY2027 and the potential for substantial cash generation as the title scales post-release. Execution risk includes development costs, timing of major launches, and potential fluctuations in consumer demand or macroeconomic conditions. Investors should monitor: (i) progress of GTA VI development and pre-orders, (ii) Zynga monetization and churn improvements, (iii) efficacy of cost-reduction measures, (iv) DTC and platform partnerships (Netflix, Switch 2), and (v) regulatory or tax changes affecting cross-platform distribution and direct payments.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
TTWO Focus
50.76%
-2.39%
-1.74%
-2.46%
ATVI
69.60%
31.50%
3.20%
22.97%
NTDOY
69.30%
16.70%
1.53%
70.71%
NTES
60.80%
29.20%
6.32%
11.93%
PLTK
72.50%
8.50%
12.70%
-38.63%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Take-Two remains a leading diversified entertainment software company with a deep, monetizable IP portfolio and a meaningful multi-year publish-and-live-services slate. The near-term earnings trajectory is pressured by a substantial impairment charge, but the underlying business fundamentals remain intact, with robust recurrent spending, a strong NBA 2K franchise, and broad-based momentum in mobile through Zynga. The key driver of upside is GTA VI and the associated lifecycle monetization across GTA Online, GTA Plus, and the broader ecosystem, supported by a large-scale live-ops framework and direct-to-consumer monetization. Management’s FY2026 net bookings guidance implies ongoing growth, and the long-run view points to material upside as GTA VI scales into FY2027 and beyond. Investors should balance the near-term profitability headwinds with the durable growth characteristics of a diversified entertainment platform, while monitoring the execution of cost-reduction programs, the progression of the 2026–2028 title slate, and the evolution of DTC and platform partnerships.
Key Investment Factors
Growth Potential
Robust multi-label pipeline with 38 titles through FY2028; GTA VI tied to a potential multi-year uplift in net bookings and cash flow; growth in recurrent consumer spending led by NBA 2K and GTA Online; expanding mobile footprint via Zynga (Match Factory!, Color Block Jam) and ongoing live ops improvements; Switch 2 and Netflix distribution partnerships broaden addressable market and monetization channels.
Profitability Risk
Near-term profitability depressed by a $3.6B impairment related to Zynga assets; higher development costs pressuring gross margins; execution risk across a large title slate and integration of Gearbox; sensitivity to console/PC pricing and platform allocation; macroeconomic volatility affecting discretionary gaming demand and consumer spending.
Financial Position
Liquidity remains solid with $1.471B cash; operating cash flow of $279M in Q4 and $130M forecast for FY2026; total debt ~$4.11B and net debt ~$2.63B; current ratio ~0.78 signaling working capital pressure that could be mitigated as title slate converts into sustained cash generation; 77% of net bookings from recurrent spending supports durable revenue quality.
SWOT Analysis
Strengths
Diverse, high-quality IP across 2K, Rockstar Games, and Zynga with recurring consumer spend driving stability.
Strong near-term performance from NBA 2K, GTA Online, and Zynga titles, with recurrent spending accounting for a large share of net bookings.
Large, cross-label ecosystem and data assets enabling efficient growth, including a direct-to-consumer pathway.
Significant upcoming pipeline (38 titles through FY2028) including GTA VI and Borderlands 4, with multiple platform expansions (Switch 2, Netflix).
Weaknesses
Significant near-term earnings pressure due to a non-cash impairment of $3.6B, depressing margins and GAAP profitability.
Profitability is highly dependent on blockbuster franchises; variability in title performance can materially affect results.
Working capital constraints implied by a current ratio below 1.0; balance sheet leverage remains meaningful.
Opportunities
GTA VI monetization and engagement upside post-launch across GTA Online, GTA Plus, and recurrent modes.
Expansion of DTC and mobile monetization within Zynga and across the Zynga ecosystem.
Platform diversification (Switch 2, Netflix) and potential cross-media IP expansion.
Threats
Development risk and cost inflation could challenge margins if title performance falters.
Competitive dynamics from peers (Activision, EA, Nintendo) and shifts in consumer discretionary spending.
Regulatory or legal developments affecting digital distribution, pricing, and direct-payments.
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