Take-Two Interactive FY2026 (ended March 31, 2026): Revenue Up 18%, Operating Loss Narrows Sharply on Absence of Goodwill Impairment

• Net revenue increased $1,023 million (18.2%) to $6,656 million, led by higher sales from NBA 2K (+$417M), Borderlands 4 (+$210M), Color Block Jam (+$207M), Toon Blast (+$122M), and Grand Theft Auto (+$115M). This growth reflects sustained engagement across both premium and free-to-play titles.

• Operating loss narrowed from $(4,391) million to $(104) million, driven almost entirely by the absence of a $3,545 million goodwill impairment recorded in fiscal 2025, combined with higher product sales. This represents a swing of over $4.2 billion year-over-year in operating performance.

• The company repaid $600 million of 2025 Notes in April 2025 and $550 million of 2026 Notes in March 2026, strengthened the balance sheet with a $1.2 billion equity offering in May 2025, and ended the year with $1,638 million in cash, up from $1,559 million at the prior year-end.

Take-Two reported net revenue of $6,656 million for the fiscal year ended March 31, 2026, an increase of 18.2% compared to $5,633 million in the prior year. The increase was driven by strong contributions from the NBA 2K franchise, the September 2025 launch of Borderlands 4, the November 2024 release of Color Block Jam, and recurrent consumer engagement in the Grand Theft Auto franchise. Recurrent consumer spending, which includes virtual currency, add-on content, and in-game purchases, represented 78.1% of net revenue and increased by $722 million year-over-year. Full game and other revenue rose $301 million and represented 21.9% of total revenue.

Gross profit margin expanded to 57.2% from 54.3%, primarily due to lower amortization of intangible assets (resulting from prior-year impairments) and lower product costs as a percentage of revenue, partially offset by higher amortization of capitalized software development costs tied to the timing of releases. Operating expenses declined sharply year-over-year, driven by the absence of a $3,545 million goodwill impairment recorded in fiscal 2025. Excluding this non-cash charge, operating expenses increased modestly, reflecting higher personnel costs and marketing for new releases. The company recorded an operating loss of $104 million compared to an operating loss of $4,391 million in the prior year.

Net loss for the year was $298 million, or $(1.62) per diluted share, compared to a net loss of $4,479 million, or $(25.58) per diluted share, in fiscal 2025. The tax provision was $100 million compared to a benefit of $12 million in the prior year, driven by changes in valuation allowances and geographic earnings mix. Net Bookings, a key operating metric representing the net amount of products and services sold during the period, increased 19% to $6,721 million.

The fiscal 2026 results demonstrate a fundamental shift in operational trajectory following the prior year's significant impairment charges. The 18% revenue growth reflects sustained execution across multiple franchises, successful new launches, and deepening monetization of recurrent consumer engagement. The 290 basis point improvement in gross margin to 57.2% indicates improving unit economics as the company benefits from lower amortization of previously impaired intangibles and a more favorable product mix, though development cost timing remains a variable.

The elimination of the $3.5 billion goodwill impairment that depressed fiscal 2025 results provides a clearer view of underlying performance. While the company remains in a net loss position, the magnitude of improvement - a swing of over $4.2 billion in operating income - underscores the non-recurring nature of the prior year's charges. The expansion of gross margin combined with stable operating expense ratios (excluding the impairment) suggests the business is operating more efficiently at scale.

The financial actions taken during the year - raising $1.2 billion in equity and repaying $1.15 billion in debt - reflect a strategic recapitalization. Outstanding debt declined to $2.5 billion from approximately $3.65 billion, reducing interest expense and improving financial flexibility ahead of the planned November 2026 release of Grand Theft Auto VI. The shift in capital structure, combined with positive operating cash flow of $624 million, positions the company with greater liquidity to support development investments and manage the capital intensity inherent in AAA game production.

Take-Two reported $6,656 million in net revenue for fiscal 2026, up 18.2% year-over-year, driven by the NBA 2K franchise, Borderlands 4 (released September 2025), Color Block Jam (released November 2024), and the Grand Theft Auto franchise. Net Bookings increased 19% to $6,721 million. The operating loss narrowed to $104 million from $4,391 million, reflecting the absence of a $3,545 million goodwill impairment recorded in the prior year. Gross margin improved to 57.2% from 54.3%, driven by lower amortization of intangible assets and improved product mix.

The company generated $624 million in operating cash flow and ended the year with $1,638 million in cash. During the year, Take-Two raised approximately $1.2 billion through an equity offering in May 2025 and repaid $600 million of 2025 Notes and $550 million of 2026 Notes, reducing total outstanding debt to $2,500 million. Recurrent consumer spending represented 78.1% of revenue, and digital online channels accounted for 97% of net revenue. Mobile games contributed 50.1% of revenue, console games 39%, and PC 10.9%.

Management disclosed that Rockstar plans to release Grand Theft Auto VI on November 19, 2026. The company stated that it is "continually innovating the design and development of our products, including by investing in artificial intelligence (AI) tools and technologies, in order to enhance game play, anticipate changes in consumer behavior, and evolve our business as new dynamics develop."

Management noted that it completed an underwritten public offering of common stock in May 2025, raising approximately $1.2 billion in proceeds, which was used to strengthen the balance sheet and support debt repayment. The company repaid the $600 million 2025 Notes in April 2025 and the $550 million 2026 Notes in March 2026.

Regarding tax matters, management stated that the One Big Beautiful Bill Act signed into law on July 4, 2025, "reduced our estimated U.S. cash tax liability" but "did not impact our U.S. deferred tax assets or liabilities since we continue to maintain a full valuation allowance against U.S. net deferred tax assets." Management continues to evaluate the impact of the legislation.

For fiscal 2027, management anticipates capital expenditures of $200 million. The company stated it "believes that our current cash and cash equivalents, short-term investments, and projected cash flow from operations, along with availability under our 2022 Credit Agreement will provide us with sufficient liquidity to satisfy our cash requirements for working capital, capital expenditures, and commitments on both a short-term and long-term basis."

Take-Two faces significant concentration risk, with its five largest customers accounting for 80.6% of net revenue during fiscal 2026, and three customers representing 22.7%, 21.0%, and 14.0% of gross accounts receivable as of March 31, 2026. The top five franchises accounted for 54.3% of net revenue, with Grand Theft Auto products alone representing 12.4%, creating reliance on a limited number of hit titles.

The company is highly dependent on third-party platforms, with console revenue (39% of total revenue) reliant on Sony and Microsoft, and 91% of mobile revenue derived from Apple and Google platforms. These platform providers control fee structures, distribution terms, and approval processes, and may change policies or pricing at their discretion, potentially increasing costs or limiting access.

The company recorded a $100 million tax provision despite a pre-tax loss, resulting in an effective tax rate of (50.8%), driven by $113 million in U.S. valuation allowance expense and $18 million in foreign valuation allowance expense. The company maintains a full valuation allowance against U.S. net deferred tax assets due to uncertainty regarding their realizability.

Take-Two disclosed cybersecurity incidents, including a September 2022 network intrusion at Rockstar Games in which an unauthorized third party illegally accessed and downloaded confidential information, including early development footage for Grand Theft Auto VI. The company also experienced an unauthorized access to a vendor platform used by 2K Games for customer support in September 2022. While described as immaterial, these incidents highlight ongoing cybersecurity risks.

The company faces regulatory and legal uncertainties, including evolving laws related to data privacy (GDPR, COPPA, state privacy laws), online safety, content moderation, loot boxes, virtual currencies, and potential gambling regulation. The filing notes that certain game mechanics in titles such as CSR Racing 2, Empires & Puzzles, NBA 2K, and others may be deemed "loot boxes," which are subject to increasing regulatory scrutiny in multiple jurisdictions, including Australia, Brazil, Spain, and Portugal.

Investors should monitor:

• Grand Theft Auto VI launch execution and commercial performance following the November 19, 2026 planned release date, given the franchise's historical contribution of 12.4% of net revenue and the company's significant development investment.

• Trajectory of operating profitability and whether the company can achieve sustained positive operating income in fiscal 2027 and beyond, following the $104 million operating loss in fiscal 2026.

• Evolution of gross margin beyond the current 57.2%, particularly whether lower amortization from prior impairments and favorable product mix can be sustained or improved as new development costs are capitalized and amortized.

• Platform fee structure changes or policy shifts from Apple, Google, Sony, and Microsoft, given 91% of mobile revenue and 39% of total revenue exposure to these partners, and the company's stated dependence on platform approval and distribution terms.

• Impact of evolving regulations on loot boxes, virtual currencies, and in-game monetization mechanics, particularly in jurisdictions such as Australia, Brazil, Spain, and Portugal, which have introduced or are considering restrictions on random digital item mechanics.