TTWO Q1 Earnings Call: Revenue Misses Expectations, Guidance Highlights Mobile and Franchise Momentum

June 04, 2025 at 08:58 AM EDT

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Video game publisher Take Two (NASDAQ: TTWO) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 13.1% year on year to $1.58 billion. Its GAAP loss of $21.08 per share decreased from -$17.02 in the same quarter last year.

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Take-Two (TTWO) Q1 CY2025 Highlights:

Revenue: $1.58 billion (13.1% year-on-year growth)
Adjusted Operating Income: $252.8 million vs analyst estimates of $271.8 million (16% margin, 7% miss)
Revenue Guidance for Q2 CY2025 is $1.38 billion at the midpoint, above analyst estimates of $1.31 billion
EPS (GAAP) guidance for the upcoming financial year 2026 is $0.17 at the midpoint, missing analyst estimates by 82.3%
EBITDA guidance for the upcoming financial year 2026 is $535 million at the midpoint, below analyst estimates of $1.97 billion
Adjusted EBITDA Margin: 18.5%
Market Capitalization: $42 billion

StockStory’s Take

Take-Two’s first quarter results were shaped by a mix of new game launches across its core labels and ongoing strength in established franchises. Management credited the launch of Sid Meier’s Civilization VII, WWE 2K25, and PGA TOUR 2K25, as well as strong engagement from NBA 2K and Grand Theft Auto titles, for driving revenue growth. CEO Strauss Zelnick highlighted that NBA 2K25 saw a 7% year-on-year increase in units sold, with engagement metrics like daily active users and average games per user up significantly. The company also noted robust performance from mobile subsidiary Zynga, especially new titles like Match Factory and Color Block Jam, both of which contributed to higher recurrent consumer spending. CFO Lainie Goldstein attributed the quarter’s margin pressures to higher development costs for unreleased titles and noted a partial goodwill impairment charge tied to updated long-term expectations for one business unit.

Looking forward, management emphasized a pipeline of major releases and a continued focus on operating efficiency as key to future growth. Take-Two expects NBA 2K, Grand Theft Auto, and new launches such as Mafia: The Old Country and Borderlands 4 to be the primary drivers for the year ahead. Zelnick stated, “We expect sequential growth for both this year and next, even before Grand Theft Auto VI is released.” Goldstein pointed to a modest increase in operating expenses, mainly for marketing upcoming titles, but assured investors that expense growth is expected to lag behind revenue growth. Management also signaled that the share of direct-to-consumer revenue should expand, aided by recent court rulings, and cautioned that mobile trends may moderate due to the maturity of certain Zynga titles.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to strong franchise engagement, new title launches, and stabilization in mobile, while margin headwinds stemmed from higher development costs and a goodwill impairment.

NBA 2K engagement surge: NBA 2K25 outperformed internal forecasts, with unit sales up 7% over last year and significant gains in user engagement metrics; management credited improved features and a focus on core player demands.
Mobile titles drive growth: Zynga’s new games, including Match Factory and Color Block Jam, achieved profitability quickly and contributed to both net bookings and engagement; management cited the multi-studio approach as a competitive advantage.
Recurrent spending momentum: Recurring in-game purchases across NBA 2K, Grand Theft Auto Online, and mobile titles grew 14% year-on-year, now accounting for 77% of net bookings in the quarter, with NBA 2K’s in-game monetization up over 40%.
Cost and margin pressures: Operating expenses rose due to higher development outlays for games not yet released, with Goldstein noting that a $3.6 billion impairment hit operating margins, partly reflecting updated expectations for Zynga.
Direct-to-consumer channel expansion: The company highlighted growing direct-to-consumer sales, especially in mobile, and expects recent court decisions to further reduce third-party distribution costs and allow more direct customer relationships.

Drivers of Future Performance

Take-Two’s outlook is anchored by major new title launches, franchise strength, and a focus on cost control amid moderating mobile trends.

New game pipeline: Management expects Mafia: The Old Country and Borderlands 4, along with annual sports iterations, to drive sequential growth and maintain player engagement ahead of Grand Theft Auto VI’s release.
Operating efficiency initiatives: Cost discipline through a previously announced reduction program is intended to offset rising development and marketing costs, with management aiming for operating expense leverage as net bookings grow.
Mobile market headwinds: While Zynga’s recent hits support optimism, Goldstein warned that some mature mobile titles may see softer trends, potentially moderating overall mobile segment growth despite ongoing investment in new launches.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) player response and engagement metrics for new releases like Mafia: The Old Country and Borderlands 4, (2) the performance and monetization trajectory of Zynga’s recent and upcoming mobile launches, and (3) the ramp-up of direct-to-consumer initiatives as regulatory and legal changes unfold. Execution on operating efficiency and the lead-up to Grand Theft Auto VI remain key markers of progress.

Take-Two currently trades at a forward EV/EBITDA ratio of 19.4×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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