EPS of $-0.71 decreased by 31.5% from previous year
Gross margin of 55.9%
Net income of -125.20M
""calendar year 2025 to be an inflection point for Take-Two Interactive Software, Inc. From the groundbreaking release of Grand Theft Auto VI to the unmatched pipeline that 2K is set to deliver. As we introduce hit products to our passionate communities of fans, we're confident that we'll usher in a new period of growth and returns for our shareholders."" - Strauss Zelnick
Take-Two Interactive Software, Inc. (TTWO) QQ3 2025 Earnings Analysis: NBA 2K Strengths, GTA VI Pipeline, and Zynga Synergies Amid Moderate Mobile Headwinds
Executive Summary
Take-Two delivered a solid Q3 FY2025 (quarter ended December 31, 2024) with net bookings of $1.37 billion, broadly within guidance, underscored by the outsized performance of NBA 2K that more than offset softer mobile trends. GAAP net revenue was $1.36 billion, while net income came in at a negative $125.2 million with EPS of −$0.71, reflecting ongoing investments, a shift of operating expenses into the fourth quarter, and a lack of near-term profitability on some growth initiatives. Management highlighted a multi-year, high-visibility pipeline anchored by GTA VI (Fall 2025), Sid Meier’s Civilization VII (February 2025 launch in early access), and a slate of marquee titles across Zynga and 2K, positioning Take-Two for a pronounced inflection point in calendar year 2025 and beyond.
The company reiterated its full-year net bookings guidance of $5.55–$5.65 billion and outlined a constructive longer-term outlook through 2026–2027, emphasizing sequential increases in net bookings and an expanding pipeline. Notably, NBA 2K delivered exceptional engagement with >7 million unit sales to date and meaningful improvements in daily and monthly active users. Zynga’s mobile portfolio showed resilience and continued progress, led by Match Factory, Tune Blast, and Merge with Friends, even as certain hyper-casual titles faced headwinds. Management cautioned that the fourth quarter could reflect continued mobile dynamics and a shift of operating expenses. They also signaled a capital allocation framework that prioritizes debt reduction while preserving optionality for acquisitions. Overall, TTWO’s risk-reward balance remains favorable given a diversified IP portfolio, a robust pipeline, and improving direct-to-consumer (D2C) capabilities, albeit offset by near-term profitability pressures and a higher investment cadence.
Key takeaways for investors: (1) The NBA 2K ecosystem and associated live services remain a durable growth engine; (2) GTA VI and Civ VII are meaningful catalysts with potential multi-year impact on bookings and engagement; (3) Zynga’s scale provides a valuable mobile growth vector, with Match Factory turning profitable toward year-end; (4) Balance sheet remains liquidity-rich but levered, with a plan to improve cash flow through cost controls and selective capex.
Key Performance Indicators
Revenue
1.36B
QoQ: 0.50% | YoY:-0.48%
Gross Profit
759.90M
55.88% margin
QoQ: 4.40% | YoY:12.06%
Operating Income
-132.10M
QoQ: 55.55% | YoY:-2.01%
Net Income
-125.20M
QoQ: 65.75% | YoY:-36.68%
EPS
-0.71
QoQ: 65.87% | YoY:-31.48%
Revenue Trend
Margin Analysis
Key Insights
GAAP net revenue: $1.3599B, flat to prior year (YoY -0.48%; QoQ +0.50%); gross profit: $759.9M (margin 55.88%), YoY +12.06%; operating expenses: $892.0M (+10% YoY; +8% on a management basis); operating income: -$132.1M (margin -9.71%), YoY -2.01% but QoQ +55.55% due to timing of costs; net income: -$125.2M; EPS: -$0.71 (Diluted). YoY EPS change: -31.48%; QoQ: +65.87%.
EBITDA: $142.8M; EBITDA margin: 10.50% (EBITDA ratio 0.1050).
Net bookings: $1.37B for Q3, within guidance of $1.35B–$1.40B; 79% of net bookings were recurring; recurring consumer spending up 9% YoY; NBA 2K growth >30% YoY, outpacing forecast.
Segment notes: NBA 2K delivered robust engagement (DAU up ~20%, MAU up ~10%), GTA Online declined (as anticipated), Tune Blast and Toy Blast posted double-digit growth, and Match Factory is on track to become Zynga’s second-largest title by net bookings by year-end. Mobile net adds were +6% YoY but below the company’s low-double-digit plan due to hyper-casual underperformance and Empires & Puzzles softness.
Cash at end of period: $1.309B; cash at beginning: $1.320B; net cash provided by operating activities: -$4.8M; free cash flow: -$48.2M; capex (investments in PP&E): -$43.4M; cash flow dynamics were influenced by the timing of marketing and other operating expenditures shifting into Q4.
Financial Highlights
Revenue and Profitability
- GAAP net revenue: $1.3599B, flat to prior year (YoY -0.48%; QoQ +0.50%); gross profit: $759.9M (margin 55.88%), YoY +12.06%; operating expenses: $892.0M (+10% YoY; +8% on a management basis); operating income: -$132.1M (margin -9.71%), YoY -2.01% but QoQ +55.55% due to timing of costs; net income: -$125.2M; EPS: -$0.71 (Diluted). YoY EPS change: -31.48%; QoQ: +65.87%.
- EBITDA: $142.8M; EBITDA margin: 10.50% (EBITDA ratio 0.1050).
- Net bookings: $1.37B for Q3, within guidance of $1.35B–$1.40B; 79% of net bookings were recurring; recurring consumer spending up 9% YoY; NBA 2K growth >30% YoY, outpacing forecast.
- Segment notes: NBA 2K delivered robust engagement (DAU up ~20%, MAU up ~10%), GTA Online declined (as anticipated), Tune Blast and Toy Blast posted double-digit growth, and Match Factory is on track to become Zynga’s second-largest title by net bookings by year-end. Mobile net adds were +6% YoY but below the company’s low-double-digit plan due to hyper-casual underperformance and Empires & Puzzles softness.
Liquidity and Cash Flow
- Cash at end of period: $1.309B; cash at beginning: $1.320B; net cash provided by operating activities: -$4.8M; free cash flow: -$48.2M; capex (investments in PP&E): -$43.4M; cash flow dynamics were influenced by the timing of marketing and other operating expenditures shifting into Q4.
- Balance sheet: Cash and cash equivalents plus short-term investments total $1.222B; total assets $12.680B; total liabilities $6.978B; total stockholders’ equity $5.701B; long-term debt $3.445B; total debt $4.103B; net debt approximately $2.897B.
Guidance and Outlook
- FY2025 net bookings guidance: $5.55–$5.65B (representing roughly 5% YoY growth).
- FY2025 GAAP net revenue guidance: $5.57–$5.67B; cost of revenue guidance: $2.41–$2.44B; total operating expenses: $3.77–$3.79B; management-expressed operating expense growth ~10% YoY (excluding incremental marketing and Gearbox addition, which would pull single-digit growth).
- Q4 FY2025 outlook: net bookings $1.48–$1.58B; GAAP net revenue $1.52–$1.62B; operating expenses $900–$920M; recurring spending expected to rise ~3% (with NBA 2K up in high-teens, offset by declines in mobile and GTA Online). The company also reiterated capex guidance of about $140M.
- Strategic outlook: 2025 is positioned as an inflection year with GTA VI launch later in 2025 and Civ VII in early 2025; management targets sequential net bookings growth into 2026–2027, supported by a robust pipeline (GTA VI, Borderlands 4, Mafia: The Old Country) and continued Zynga monetization gains.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.36B
-0.48%
0.50%
Gross Profit
759.90M
12.06%
4.40%
Operating Income
-132.10M
-2.01%
55.55%
Net Income
-125.20M
-36.68%
65.75%
EPS
-0.71
-31.48%
65.87%
Key Financial Ratios
currentRatio
0.83
grossProfitMargin
55.9%
operatingProfitMargin
-9.71%
netProfitMargin
-9.21%
returnOnAssets
-0.99%
returnOnEquity
-2.2%
debtEquityRatio
0.72
operatingCashFlowPerShare
$-0.03
freeCashFlowPerShare
$-0.27
priceToBookRatio
5.68
priceEarningsRatio
-64.69
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from the earnings call discussions and management commentary:
- Strategy and pipeline: Strauss Zelnick framed 2025 as an inflection year driven by GTA VI launch and a strong 2K and Zynga pipeline, with several high-profile releases in 2025–2026 including Civ VII, PGA Tour 2K25, WWE 2K25, Borderlands 4, and Mafia: The Old Country. “calendar year 2025 to be an inflection point” underscored the strategic emphasis on a refreshed pipeline.
- NBA 2K performance and engagement: Strauss highlighted NBA 2K as a major driver of outperformance, with unit sales exceeding 7 million, and engagement metrics (DAU up ~20%, MAU up ~10%, recurrent spending up >30%). Karl noted new gameplay features and modes (shooting/dribbling changes, badge progression, smaller city, Parks) as contributing to sustained engagement.
- Zynga and mobile dynamics: Lainie highlighted Zynga’s mobile expansion, including Match Factory and Tune Blast/Merge with Friends, with a 6% YoY mobile increase but below plan due to Empires & Puzzles and hyper-casual struggles; management reiterated belief in Match Factory turning profitable by year-end and emphasized breadth of IP in Zynga as a stabilizing force.
- Financials and guidance: Lainie reaffirmed FY2025 net bookings guidance and provided color on revenue mix; Strauss noted that Q3 results exceeded expectations but cautioned that Q4 would reflect continued mobile trends and expense shifts; the team signaled an ongoing emphasis on capital discipline and targeted investments, including about $140M capex.
- Distribution and partnerships: The executives referenced ongoing distribution flexibility (Nintendo Switch, Netflix for WWE 2K mobile) and the potential for partner ecosystems to broaden reach, while stressing economics and consumer benefit as the primary lens for platform decisions.
"calendar year 2025 to be an inflection point for Take-Two Interactive Software, Inc. From the groundbreaking release of Grand Theft Auto VI to the unmatched pipeline that 2K is set to deliver. As we introduce hit products to our passionate communities of fans, we're confident that we'll usher in a new period of growth and returns for our shareholders."
— Strauss Zelnick
"Match Factory towards the end of the year is gonna start to turn profitable. You know, the title is doing extremely well. We're continuing to do a lot of marketing for the title."
— Lainie Goldstein
Forward Guidance
Outlook and Key Assumptions
- Fiscal 2025 guidance remains intact: net bookings $5.55–$5.65B; GAAP net revenue $5.57–$5.67B; total operating expenses $3.77–$3.79B; cost of revenue $2.41–$2.44B; non-GAAP free cash flow expected to be negative around $150M, with capital expenditures around $140M. The guidance reflects a mix of strength in NBA 2K, a broad GTA portfolio, and ongoing investments in mobile and live-service titles, offset by a continued decline in GTA Online.
- Fourth quarter outlook: net bookings of $1.48–$1.58B; recurring consumer spending growth of ~3% (driven by a high-teens rise in NBA 2K; offset by declines in mobile and GTA Online); GAAP net revenue $1.52–$1.62B; operating expenses $900–$920M; management expects year-over-year operating expense growth to be low single digits excluding marketing and Gearbox integration, with cost reductions offsetting some spend.
- Mid- to long-term trajectory: TTWO anticipates sequential net bookings gains in fiscal 2026 and 2027, supported by GTA VI’s lifecycle, Civ VII’s ongoing trajectory, and Zynga’s mobile scalability. Management remains focused on monetization depth, direct-to-consumer optimization, and capital return discipline (debt reduction with optional acquisitions).
- Key factors investors should monitor: (1) GTA VI and Civ VII adoption, (2) Zynga’s Match Factory profitability ramp and mobile portfolio performance (especially hyper-casual headwinds), (3) marketing spend cadence and its impact on margins, (4) cash flow evolution and debt dynamics as capex and potential acquisitions play out, and (5) platform expansion opportunities (Switch, Netflix, and other distribution channels) and their economics.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
TTWO Focus
55.88%
-9.71%
-2.20%
-64.69%
ATVI
71.80%
27.20%
2.31%
33.41%
NTDOY
57.20%
29.10%
4.78%
20.98%
NTES
62.90%
27.30%
4.95%
16.16%
PLTK
72.90%
15.70%
-40.10%
18.75%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Take-Two remains an execution-focused, IP-rich gaming powerhouse with a diversified revenue base and a high-visibility pipeline. The QQ3 2025 results validate the durability of NBA 2K as a growth engine and underscore the potential of GTA VI to drive multi-year net bookings expansion, supported by Civ VII and WWE 2K25 launches. Zynga’s scale adds mobile optionality, though near-term profitability hinges on Match Factory ramp and continued monetization of live/mobile titles. The balance sheet offers liquidity to fund strategic investments and debt reduction while preserving optionality for acquisitions. The prudent path for investors is a constructive, but selective, stance: overweight on the pipeline and engagement metrics, with monitoring of mobile mix stability, efficiency of marketing spend, and the company’s ability to translate gross bookings into sustained free cash flow as capex stabilizes.
Key Investment Factors
Growth Potential
Diversified IP ecosystem (NBA 2K, GTA series, Red Dead, Borderlands, Civilization) coupled with Zynga’s mobile platform provides multiple, parallel growth levers. NBA 2K continues to drive engagement with new modes and MyTeam enhancements; Civ VII and WWE 2K25 broaden the core franchise reach; GTA VI represents a potential peak-cycle catalyst with long runway for live service monetization via GTA Online and related content; Match Factory’s profitability unlikely to be immediate but has substantial upside as mobile titles gain traction and additional hits land.
Profitability Risk
Near-term profitability pressure from elevated marketing and platform investments; mobile portfolio sensitivity to macro pacing and UA spend; dependence on hit mobile titles for near-term profitability; cyclical launch cadence risk tied to major releases; ongoing debt load and interest burden; regulatory and platform changes affecting monetization models; potential execution risk around transitioning leadership on specific titles (Ethos, etc.).
Financial Position
Liquidity remains robust with ~$1.22B in cash and equivalents and a total debt burden of ~$4.10B (net debt ~ $2.90B). Equity cushion (~$5.70B) supports a capital-allocation strategy balancing debt reduction and M&A optionality. The balance sheet shows significant goodwill and intangible assets (~$9.19B) and a large investment in capitalizable software (~$1.9B), indicating a substantial investment in future pipeline amortization and franchise development.
SWOT Analysis
Strengths
Rd strong IP portfolio: NBA 2K, Grand Theft Auto, Red Dead Redemption, Borderlands, Civilization
Diversified revenue mix across core, mobile (Zynga), and PC/console live services
Rising D2C capabilities and recurrent consumer spending (79% of net bookings in Q3)
Healthy liquidity position: cash and short-term investments around $1.22B
Strong NBA 2K performance supports overall profitability and engagement
Weaknesses
GAAP net income negative in QQ3 2025; near-term profitability pressure from investment pace
Mobile and hyper-casual underperformance in parts of Zynga portfolio
GTA Online decline impacting near-term recurring revenue and bookings
High debt load (~$4.1B total debt) and interest burden
Opportunities
GTA VI launch in Fall 2025; long runway for live services and monetization
Civ VII (Feb 2025) and WWE 2K25 pipeline expansion
Switch platform opportunities and Netflix collaboration potential
Zynga Match Factory profitability ramp and continued mobile hit titles (CSR 3, etc.)
Take-Two Interactive Software, Inc. (TTWO) QQ1 2026 Results Analysis: Surging Net Bookings Driven by Mobile and GTA Franchises with a Robust Pipeline ...