Mattel Acquires Full Ownership of Mattel163 from NetEase
Mattel (MAT) announced an agreement with its joint venture partner, NetEase (NTES) to acquire full ownership of the Mattel163 mobile games studio. The transaction is expected to be completed by the end of Q1, subject to customary closing conditions. Since its inception in 2018, Mattel163 has released four games based on Mattel IP, Uno!, Uno Wonder, Phase 10, and Skip Bo, with approximately 20M monthly active users and over 550M downloads worldwide. The transaction values Mattel163 at $318M, with a purchase price of $159M for NetEase's 50% interest. More than half of the purchase cost is expected to be funded from Mattel's share
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- Revenue Growth Overview: Mattel reported Q4 net sales of $1.77 billion, reflecting a 7% increase, although full-year sales declined 1% to $5.35 billion, indicating pressure and challenges in market competition.
- Strategic Acquisition Announcement: Mattel revealed an agreement to acquire NetEase's 50% stake in Mattel163 for $159 million, valuing the studio at $380 million, which will enhance its competitive position in the mobile gaming market and drive future revenue growth.
- Future Outlook and Investments: Management anticipates net sales growth of 3% to 6% for 2026, with adjusted gross margins projected at approximately 50%, while planning to invest $110 million in strategic initiatives, demonstrating confidence and commitment to future growth.
- Cash Flow and Shareholder Returns: Mattel ended the year with $1.24 billion in cash after $600 million in share repurchases, and the Board has authorized a new $1.5 billion share repurchase program, reflecting a proactive approach to capital allocation.
- Art and Toy Fusion: Mattel's launch of the Fisher-Price® Little People® x André Saraiva set reimagines classic toys as collectible art through the creative vision of renowned artist André Saraiva, priced at $70, targeting adult collectors.
- Limited Release: Exclusively available on the Mattel Creations platform, the set features four wooden figures—Mr. A, Mrs. A, Grumpy Boy, and Hervie—showcasing André's signature graffiti style and emphasizing the collectible value of toys.
- Cultural Integration: This collaboration reflects Mattel's connection with global artists, merging childhood toys with contemporary art, highlighting the potential of toys as mediums of expression and fostering cultural integration.
- Emotional Conveyance: André Saraiva stated that play itself is a form of art, and this collaboration allows him to convey emotions and humor through toys, further solidifying Mattel's emotional legacy in the toy industry.
Shift in Popularity: Kids and adults are increasingly engaging with Magic: The Gathering and Dungeons & Dragons, indicating a shift in play preferences.
Impact on Companies: This trend is beneficial for Hasbro, the owner of these games, while posing challenges for Mattel, which owns Barbie and Hot Wheels.
- Strong Employment Data: US nonfarm payrolls for January increased by 130,000, surpassing expectations of 65,000, indicating labor market stability, while the unemployment rate unexpectedly fell by 0.1% to 4.3%, which is likely to have a positive impact on economic recovery.
- Interest Rate Expectations Shift: Following the robust employment report, the market's expectation for a Fed rate cut next month dropped from 23% to 6%, with the 10-year T-note yield rising by 3 basis points to 4.17%, reflecting a cautious outlook on future monetary policy.
- Mixed Market Performance: The S&P 500 closed unchanged, the Nasdaq 100 rose by 0.29%, while the Dow Jones Industrial Average fell by 0.13%, highlighting a contrast between strong tech stock performance and weakness in software stocks.
- Optimistic Earnings Outlook: Over 78% of the 335 S&P 500 companies that reported earnings exceeded expectations, with Q4 earnings growth projected at 8.4%, indicating that sustained corporate profitability will support long-term stock market gains.
- Earnings Decline: Mattel's Q4 net sales rose 7% year-over-year to $1.8 billion; however, rising tariff-related costs led to a 4.8 percentage point drop in gross margin to 45.9%, directly impacting profitability.
- Inventory Management Challenges: The uncertainty surrounding tariff implementation complicated Mattel's ordering processes, forcing the company to offer discounts to clear excess inventory, which further compressed profit margins and resulted in a $35 million decrease in net income to $106 million.
- Disappointing Earnings Forecast: Mattel's adjusted earnings per share of $0.39 fell significantly short of Wall Street's expectation of $0.55, indicating severe challenges to the company's profitability in the current economic climate.
- Cautious Future Outlook: While Mattel anticipates sales growth of 3% to 6% in 2026, management warned that adjusted earnings per share could decline by as much as 16%, reflecting short-term profitability pressures despite strategic investments aimed at growth in 2027 and beyond.
- Software Selloff: After three consecutive days of gains, the iShares Tech-Expanded Software Sector ETF (NYSE:IGV) fell over 3% on Wednesday, indicating a decline in market confidence towards the software sector, which could impact investor sentiment towards tech stocks overall.
- Strong Jobs Data but Severe Revisions: Although January's nonfarm payrolls rose by 130,000, significantly exceeding economists' expectations of 70,000, the total U.S. job growth for 2025 was drastically revised down to just 181,000, highlighting the fragility of economic recovery and potentially raising concerns about future growth.
- Unexpected Drop in Unemployment Rate: The unemployment rate fell from 4.4% to 4.3%, which appears positive on the surface; however, this contrasts sharply with the downward revisions in job growth, possibly leading investors to question the economic outlook.
- Robinhood's Poor Market Performance: Robinhood Markets Inc. (NASDAQ:HOOD) saw its stock tumble 12% following a revenue miss and disappointing cryptocurrency trading results, reflecting market concerns about its future profitability and potentially undermining investor confidence.







