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01/10 16:57
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial metrics, including raised net bookings outlook and recurrent consumer spending growth. Management's confidence in new releases and strategic focus on quality content suggest positive sentiment. Despite a softer release for Borderlands, optimism remains for future launches. Analysts' questions indicate acknowledgment of strategic positioning and growth potential. Overall, the company's strong financial performance, ambitious pipeline, and positive analyst sentiment suggest a positive stock price reaction.
Net Bookings $1.96 billion, a significant increase year-over-year and the best second quarter in the company's history. This was driven by strong performance from NBA 2K26, Mafia: The Old Country, and several mobile titles like Toon Blast, Color Block Jam, and Match Factory!.
Recurrent Consumer Spending Increased 20% year-over-year, accounting for 73% of net bookings. Growth was driven by NBA 2K (45% growth), mid-teens growth in mobile, and a decline in Grand Theft Auto Online as expected.
GAAP Net Revenue $1.77 billion, a 31% increase year-over-year. This growth was attributed to strong top-line performance from key titles and mobile games.
Cost of Revenue Increased 27% year-over-year to $793 million, reflecting higher costs associated with the increased revenue.
Operating Expenses Increased 5% year-over-year to $1.1 billion. On a management basis, operating expenses rose 13%, driven by user acquisition investments and higher performance-based compensation.
Operating Cash Flow Raised to approximately $250 million, reflecting the strength in the business.
NBA 2K26 Sales Over 5 million units sold, representing a double-digit increase over NBA 2K25. Average selling prices reached an all-time high, driven by premium editions. Recurrent consumer spending for NBA 2K grew 45%.
Mobile Business Performance Toon Blast grew 26% year-over-year, Match Factory! grew 20%, and Rollic achieved a new net bookings record. Mobile recurrent consumer spending increased in the mid-teens.
NBA 2K26: Achieved record-breaking launch with over 5 million units sold, a double-digit increase over NBA 2K25. Daily active users grew nearly 30%, and MyCAREER daily active users grew nearly 40%. Recurrent consumer spending increased by 45%.
Borderlands 4: Received high critical praise and achieved the largest concurrent player count on Steam in franchise history during its opening weekend. Post-launch content planned to support the game.
Mafia: The Old Country: Surpassed internal expectations and received vast praise from critics and consumers. Demonstrated strong demand for premium, narrative-driven experiences.
Grand Theft Auto VI: Announced release date of November 19, 2026, with expectations of a record-breaking launch.
Mobile Business Expansion: Toon Blast grew 26% year-over-year and 90% over two years. Match Factory! achieved record net bookings with 20% growth. Rollic surpassed 3.8 billion lifetime downloads and achieved a new net bookings record.
International Growth: Implemented new technologies for direct transactions and payment mechanisms to support international growth, enhancing net bookings and margins.
Recurrent Consumer Spending: Increased by 20% in Q2, accounting for 73% of net bookings. NBA 2K grew 45%, and mobile increased mid-teens.
Operating Cash Flow: Raised forecast to approximately $250 million, reflecting strong business performance.
Long-term Pipeline: Includes Grand Theft Auto VI, Judas, Project ETHOS, CSR 3, Top Goal, and the next BioShock, indicating a focus on sustained growth and innovation.
Mobile Direct-to-Consumer Business: Focused on higher conversion through new offers, events, and enhanced personalization, driving growth in mobile portfolio.
Optimization and Performance Issues: Challenges with optimization and performance on PC for Borderlands 4 were noted, requiring updates to improve gameplay. This could impact user satisfaction and sales.
Decline in Grand Theft Auto Online Engagement: Grand Theft Auto Online experienced a decline in engagement as expected, which could affect recurrent consumer spending and overall revenue.
Incremental Marketing and Compensation Costs: Higher marketing expenses and performance-based compensation were reported, which could pressure operating expenses and margins.
Dependence on Key Franchises: The company’s financial performance heavily relies on a few key franchises like NBA 2K and Grand Theft Auto, making it vulnerable to underperformance in these areas.
Delayed Release of Grand Theft Auto VI: The release of Grand Theft Auto VI has been delayed to November 2026, which could impact revenue expectations and investor sentiment in the short term.
Soft Launch Performance of Borderlands 4: Borderlands 4 experienced softness in its initial launch, which could affect its long-term sales trajectory and profitability.
Cost of Revenue Increase: The cost of revenue increased by 27%, which could impact profitability if not offset by revenue growth.
Economic Uncertainty: General economic conditions and uncertainties could impact consumer spending on entertainment and gaming.
Net Bookings Outlook for Fiscal 2026: Raised to $6.4 billion to $6.5 billion, reflecting optimism for the fiscal year.
Grand Theft Auto VI Release: Scheduled for November 19, 2026, with expectations for a record-breaking launch.
Fiscal 2027 Projections: Anticipated record levels of net bookings and enhanced profitability.
Recurrent Consumer Spending: Expected to grow approximately 11%, representing 77% of net bookings, driven by NBA 2K and mobile titles.
Operating Cash Flow Forecast: Raised to approximately $250 million.
Capital Expenditures: Increased to approximately $180 million due to acquisition of an office building.
Fiscal Third Quarter Net Bookings: Projected to range from $1.55 billion to $1.6 billion.
Recurrent Consumer Spending for Q3: Projected to increase by approximately 8%, with low double-digit growth in mobile and mid-single-digit growth for NBA 2K.
The selected topic was not discussed during the call.
The earnings call highlights strong financial metrics, including raised net bookings outlook and recurrent consumer spending growth. Management's confidence in new releases and strategic focus on quality content suggest positive sentiment. Despite a softer release for Borderlands, optimism remains for future launches. Analysts' questions indicate acknowledgment of strategic positioning and growth potential. Overall, the company's strong financial performance, ambitious pipeline, and positive analyst sentiment suggest a positive stock price reaction.
The earnings call highlights strong financial performance, particularly in NBA 2K engagement and recurrent consumer spending. Despite slight deceleration in mobile growth guidance, other areas like Grand Theft Auto and Toon Blast show robust growth. Shareholder returns and capital allocation strategies are positive, with opportunistic buybacks. The Q&A reveals some uncertainties in advertising revenue and economic impacts, but overall sentiment remains positive due to strong product performance and strategic planning.
The earnings call presents a mixed picture: strong financial performance with increased net bookings and revenue, but significant goodwill impairment and high operating expenses raise concerns. The Q&A section reveals management's optimism but also avoidance of specific details on impairments and development costs. The ambitious GTA VI project poses risks, and no shareholder return plan was announced. Overall, the positive aspects are balanced by uncertainties and lack of clear guidance, leading to a neutral sentiment prediction for the stock price movement.
The earnings call presents mixed signals: strong net bookings and revenue growth, especially in key franchises, are offset by significant impairment charges affecting operating expenses. The Q&A session reveals management's optimism but lacks clarity on key issues like Zynga's impairment and post-GTA VI performance, suggesting potential concerns. The fiscal guidance aligns with expectations, yet the substantial goodwill impairment and increased operating expenses temper the positive financial metrics. The absence of a clear structural change explanation and cautious guidance on future performance contribute to a neutral sentiment.
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