Take-Two Interactive Software - Earnings Call - Q4 2025

Executive Summary

• Q4 FY2025 net revenue was $1.58B (+13% y/y) and Net Bookings were $1.58B (+17% y/y), both at the top end of guidance; recurrent consumer spend drove 76–77% of mix.
• GAAP EPS was $(21.08) driven by a $3.55B goodwill impairment and $176.3M intangible impairments, overshadowing otherwise solid operating performance and a strong year for NBA 2K, GTA Online, Red Dead, and Zynga titles.
• FY2025 finished at the high end of guidance: Net Bookings $5.65B and GAAP revenue $5.63B; management introduced FY2026 guidance with Net Bookings of $5.9–$6.0B, EBITDA $508–$562M, and GAAP net loss per share of $(2.79)–$(2.45) as the company invests ahead of FY2027 (GTA VI).
• GTA VI’s release was confirmed for May 26, 2026 (FY2027), with unprecedented engagement (Trailer 2: 475M views in 24 hours), reinforcing the multi‑year bookings growth narrative; stock catalysts include the impairment headline and GTA VI timing clarity.
• The company raised ~$1.04B via an equity offering post‑quarter to enhance flexibility for debt repayment and acquisitions.

What Went Well and What Went Wrong

What Went Well

• Net Bookings of $1.58B (+17% y/y) and GAAP net revenue of $1.58B (+13% y/y) both landed at the top of ranges; recurrent consumer spend accounted for ~77% of bookings and ~76% of revenue.
• NBA 2K delivered near‑record performance: recurrent consumer spending growth of 42%, nearly 10M units sold‑in (+7% vs 2K24), and significant DAU/MyCAREER engagement gains; “We expect to achieve record levels of Net Bookings” heading into FY2026–27.
• Mobile momentum: Match Factory! and Toon Blast executed strong live‑ops and events, with Color Block Jam rapidly scaling to profitability and contributing meaningfully to mobile bookings.

What Went Wrong

• GAAP net loss of $(3.73)B and GAAP EPS of $(21.08) were driven by a $3.55B goodwill impairment and $176.3M intangible asset impairments; operating expenses rose 44% to $4.58B on these charges.
• Management expects FY2026 recurrent consumer spending to be flat y/y, with declines in mobile and GTA Online offset by NBA 2K, tempering near‑term momentum until FY2027’s GTA VI release.
• Q4 FY2025 EBITDA was $161.0M, below S&P Global consensus; management flagged higher development costs for titles “not technologically feasible” and elevated marketing as drivers of near‑term expense pressure.

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Take-Two Interactive Fourth Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press Star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. Thank you. I would now like to turn the call over to Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. You may begin.

Nicole Shevins (Senior VP of Investor Relations and Corporate Communications)

Good afternoon. Thank you for joining our conference call to discuss our results for the fourth quarter and fiscal year 2025 ends March 31st, 2025. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer, Karl Slatoff, our President, and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks. Before we begin, I'd like to remind everyone that statements made during this call that are not historical facts are considered forward-looking statements under federal securities laws. These forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to us. We have no obligation to update these forward-looking statements. Actual operating results may vary significantly from these forward-looking statements based on a variety of factors.

These important factors are described in our filings with the SEC, including the company's most recent annual report on Form 10-K and quarterly report on Form 10-Q, including the risks summarized in the section entitled Risk Factors. I'd also like to note that, unless otherwise stated, all numbers we will be discussing today are GAAP, and all comparisons are year-over-year. Additional details regarding our actual results and outlook are contained in our press release, including the items that our management uses internally to adjust our GAAP financial results in order to evaluate our operating performance. Our press release also contains a reconciliation of any non-GAAP financial measure to the most comparable GAAP measure. In addition, we have posted to our website a slide deck that visually presents our results and financial outlook. Our press release and filings with the SEC may be obtained from our website at taketogames.com.

I'll turn the call over to Strauss.

Strauss Zelnick (Chairman and CEO)

Thanks, Nicole. Good afternoon, and thank you for joining us today. We concluded our 2025 fiscal year with outstanding results, including fourth quarter net bookings of $1.58 billion, which was the top of our guidance range. Each of our labels contributed meaningfully to our performance. 2K posted a fantastic quarter with the successful launches of Sid Meier's Civilization VII, WWE 2K25, and PGA Tour 2K25. NBA 2K delivered one of its strongest periods on record, including recurrent consumer spending growth of 42%. Rockstar Games excelled once again, with the Grand Theft Auto and Red Dead Redemption series surpassing our forecasts, and Zynga continued to gain momentum, led by Match Factory, Tune Blast, and Color Block Jam. We're providing our initial financial outlook for fiscal 2026, including net bookings of $5.9-$6 billion, which represents 5% year-over-year growth at the midpoint of the range.

This outlook assumes a continuation of our current positive trends, including healthy mobile performance and ongoing strength in NBA 2K, as well as the release of several eagerly anticipated titles, including Mafia: The Old Country and Borderlands 4. Rockstar expects to release Grand Theft Auto VI on May 26, 2026, which is in our fiscal year 2027. I believe affording Rockstar additional time for such a groundbreaking project is a worthy investment. Grand Theft Auto VI began development in earnest in 2020, following the massive success of Red Dead Redemption 2, and the title is now the most anticipated entertainment property of all time. Consumer anticipation is unprecedented, with Trailer 2's cross-platform debut last week shattering records to become the biggest video launch of all time, with over 475 million views in 24 hours. This follows Trailer 1's record-breaking debut of 93 million views in 24 hours on YouTube alone.

Spotify streams of the track featured in the trailer, "Hot Together" by the Pointer Sisters, surged by 182,000%, once again proving Rockstar's ability to influence popular culture. The ambition and complexity of Grand Theft Auto VI is greater than any previous Rockstar title, and the team is poised to release another astonishing entertainment experience that will exceed players' expectations. Now I'll share more specific highlights from the quarter. NBA 2K25 posted near-record performance and exceeded our forecast. To date, the title has sold in nearly 10 million units, a 7% increase compared to NBA 2K24 during the same timeframe. Engagement grew significantly: daily active users, My Career Daily Players, and average games per user increasing 30%, 40%, and 80%, respectively. We're also pleased with the performance for our brand extensions for the franchise. NBA 2K25 Arcade Edition remains a top five performing title on Apple Arcade.

NBA 2K Online in China continues to hold its place as the number one PC sports game in the country, and our NBA 2K All-Stars mobile title, which we developed in partnership with Tencent and launched on March 25th, is maintaining the number one spot on the iOS sports game chart for both downloads and revenue in China. I'd like to thank Adam Silver of the NBA and Andre Iguodala of the NBA Players Association for their extraordinary partnership and support. 2K's release of WWE 2K25 was met with great critical acclaim, including a score of 84 on Metacritic for Xbox Series X, an all-time high for the series on that platform. Visual Concepts introduced new features, including The Island, a highly immersive WWE-themed world where players can explore, compete in live events, and earn rewards.

Consumer appetite for the franchise is growing, with recurrent consumer spending up to 20% during the quarter. This includes strong performance from WWE Supercard, which achieved near-record levels of net bookings in March. WWE 2K25 has been integrated regularly into WWE's televised programming and was also a co-sponsor of last month's spectacular WrestleMania 41. In addition, 2K is bringing WWE 2K to Switch 2 this summer, as well as bringing WWE 2K to mobile devices this fall in partnership with Netflix. I'd like to thank Nick Khan and his team at TKO for their immense support as we raise the bar for excellence for our beloved wrestling franchise. 2K and HB Studios successfully launched PGA Tour 2K25, which earned a Metacritic score of 80 on PlayStation 5 and is generating significant recurrent consumer spending growth compared to the prior iteration.

I'd like to thank our partners at PGA for helping us create another superb golf experience. During the period, 2K released Sid Meier's Civilization VII, the revolutionary new chapter in our esteemed strategy franchise. As stewards of the Civilization series, Firaxis Games strives to bring innovation with each new release. We're confident that the development team's ongoing efforts to update key areas of the game will deliver outstanding results over the franchise's typically long sales cycle. Our teams are pursuing opportunities to expand the audience, including the recent launch of Civilization VII VR for Meta Quest 3 and 3S, as well as the title's upcoming release on Switch 2, which will offer new mouse controls for a highly intuitive game experience. The Grand Theft Auto series once again exceeded our expectations, and to date, GTA V has sold in over 215 million units.

Recurrent consumer spending outperformed our forecasts, growing 5% year-over-year, led by an array of new modes, rewards, and vehicles for GTA Online, as well as ongoing demand for GTA Plus memberships. Rockstar Games continues to expand the possibilities for engagement with the series through ongoing development of its 5M Creator platform. Red Dead Redemption 2 also outperformed, with net bookings growing 23% over last year. Rockstar Games continues to support Red Dead Online with a series of rewards that engage their community further. Zynga outperformed during the period, and we're pleased that their momentum is continuing to fiscal 2026. Peak delivered fantastic results. Match Factory exceeded our expectations, driven by first-class live ops execution and the introduction of Mission Center, a limited-time event that drove significant player engagement. Net bookings grew meaningfully over last quarter, and the title is generating profits.

Net bookings for Tune Blast grew 7% over last year, primarily due to the introduction of the Canon Fest event. We're also thrilled that the title achieved its largest quarter of net bookings since Zynga acquired Peak in 2020. Rollic's newest, Color Block Jam, is scaling rapidly and is currently a top 10 downloaded game and among the top grossing titles in the U.S. Apple App Store. In just four months of operation, the title has become profitable and is making an impressive contribution to our mobile net bookings. We're encouraged to see stabilization in Empires & Puzzles. Small Giant improved the title's in-game economy to support faster player progression and developed fun new features based on player feedback, like Instant Power Summon, Hero Coach, and Visiting Outfitter. Zynga has numerous titles in development and soft launch that we're eager to bring to market worldwide.

Our direct-to-consumer business delivered record performance as our teams continue to launch new offers, events, and enhance personalization, which are driving better conversion. While we've been implementing D2C in our titles for some time, we do believe there's an even greater opportunity to expand this highly accretive channel given recent beneficial court rulings. As we approach the three-year anniversary of our acquisition of Zynga, we're extremely pleased that the label has become an integral part of our company. Zynga's core franchises are strong, and we're energized by the team's unique ability to launch hits in a highly competitive mobile market, demonstrating further the effectiveness of their multi-studio approach and continued excellence in live ops. In closing, with a player-first approach and a deep commitment to quality, we strive to create the best entertainment experiences for our global communities and to redefine our art form.

As we bring our exciting lineup to market, including Grand Theft Auto VI in fiscal 2027, we expect to achieve record levels of net bookings that will establish a new baseline for our business and set us on a path of enhanced profitability.

I'll now turn the call over to Karl.

Karl Slatoff (President)

Thanks, Strauss. I'd like to thank our teams for another strong quarter and for laying the groundwork for this exciting next chapter in our company's history. As Strauss mentioned, we are extremely optimistic about our upcoming pipeline, which includes approximately 38 titles through fiscal 2028. During fiscal 2026, we plan to release 13 titles, including four within the immersive core category. This includes Mafia: The Old Country, which 2K and Hangar 13 will introduce on August 8. This linear narrative-driven game is a premium experience in the vein of early Mafia titles, set against the stunning, authentic background of 1900s Sicily. Pre-orders are off to a strong start following the debut of the first official gameplay trailer at PAX East last week, and we're excited for its upcoming launch. Additionally, 2K and Gearbox will launch Borderlands 4 on September 12.

Last month, during the PlayStation State of Play, our team shared an extended look at the action-packed gameplay coming in the title. Players were treated to a first look at two of four new Vault Hunters as they tore a path through a secret black site in Terminus Range, showcasing the destructive power of an updated gear system. The Borderlands community reacted very positively, with the game trending on X and becoming one of the most wishlisted games on Steam. 2K and Gearbox will also release Borderlands 4 for the Switch 2 in the future. As always, we will release the next iterations of our industry-leading annual sports franchises, NBA 2K and WWE 2K.

We also plan to bring to market five mobile titles this fiscal year, including WWE 2K for Netflix in the fall, and we are launching four new iterations of prior releases, including the recent release of Civilization VII VR for Meta Quest 3 and 3S, as well as Civilization VII for Switch 2. Our labels will continue to provide new content and experiences that drive engagement and recurrent consumer spending across many of our key offerings. Looking ahead, we currently expect to deliver 25 titles throughout fiscal 2027 and 2028, including 17 immersive core releases, including Grand Theft Auto VI and five sports simulation games, four mobile games, and four new iterations of previously released titles. In closing, we look forward to delivering our groundbreaking titles, which we believe will enable us to achieve a period of meaningful long-term growth and shareholder returns.

I'll turn the call over to Lainie.

Lainie Goldstein (CFO)

Thanks, Karl, and good afternoon, everyone. We delivered an outstanding finish to fiscal 2025 with broad-based strength across our company. Throughout the year, we positioned our business for sustainable long-term growth by releasing new hit titles and experiences across our labels, advancing the development of many key releases we plan to launch in the coming quarters, successfully acquiring Gearbox, and continuing to implement our previously announced cost reduction program. Through these actions, we are setting our business up for a strong multi-year period of growth and enhanced profitability, and I'd like to thank our teams for their passion and dedication. Turning to our results, we delivered fourth quarter net bookings of $1.58 billion, which was the top of our guidance range of $1.48 billion-$1.58 billion.

This reflected better-than-expected performance from NBA 2K25, Zynga led by Tune Blast, our hyper-casual mobile portfolio, and Match Factory, the Red Dead Redemption series, and Grand Theft Auto Online. Recurrent consumer spending growth was phenomenal, increasing 14% over last year and accounting for 77% of net bookings. NBA 2K grew over 40%, while Grand Theft Auto Online and mobile both increased mid-single digits. All of these businesses greatly exceeded our forecast. During the quarter, we launched Sid Meier's Civilization VII, PGA Tour 2K25, and WWE 2K25. GAAP net revenue increased 13% to $1.58 billion. Cost of revenue declined 16% to $779 million, primarily due to lower impairment of acquired intangibles in the current year, as well as timing of development credits. Operating expenses increased by 44% to $4.6 billion due to an impairment expense of $3.6 billion related to goodwill and acquired intangible assets.

On a management basis, operating expenses rose 3% year-over-year, which was above our guidance due to higher development costs for titles not technologically feasible. For fiscal 2025, we achieved net bookings of $5.65 billion, which was also the top of our guidance range of $5.55-$5.65 billion. Recurrent consumer spending exceeded our outlook, growing 7% and accounting for 80% of net bookings. NBA 2K grew high teens, mobile increased mid-single digits, and Grand Theft Auto Online declined modestly. Operating cash flow was an outflow of $45 million compared to our forecast of an outflow of $200 million due to timing of tax payments and lower development costs. We spent approximately $169 million in capital expenditures, which was above our forecast of $140 million, primarily due to higher game technology expenses.

GAAP net revenue rose 5% to $5.63 billion, while cost of revenue decreased 17% to $2.6 billion, primarily due to lower impairment of acquired intangibles in the current year, as well as timing of development credits. Operating expenses increased 28% to $7.5 billion due to the impairment charges that I mentioned previously that we recorded during our fourth quarter. On a management basis, operating expenses rose 11% year-over-year, slightly above our guidance due to higher development costs for titles not technologically feasible. Today, we are providing our initial outlook for fiscal 2026. We project net bookings to range from $5.9 billion-$6 billion, which represents 5% growth over fiscal 2025 at the midpoint. Largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Tune Blast, Borderlands 4, Match Factory, Empires & Puzzles, Words With Friends, the Red Dead Redemption series, and Zynga Poker.

We expect recurrent consumer spending to be flat compared to fiscal 2025 and to represent 76% of net bookings. Our recurrent consumer spending forecast assumes high single-digit growth for NBA 2K and declines for mobile and Grand Theft Auto Online. We expect the net bookings breakdown from our labels to be roughly 45% Zynga, 39% 2K, and 16% Rockstar Games. We expect operating cash flow to be approximately $130 million, and we plan to deploy approximately $140 million of capital expenditures for game technology and office buildouts. We expect GAAP net revenue to range from $5.95 billion-$6.05 billion and cost of revenue to range from $2.52 billion-$2.55 billion. Our total operating expenses are expected to range from $3.78 billion-$3.8 billion. On a management basis, we expect operating expense growth of approximately 3% year-over-year, which is largely due to higher marketing expenses.

Now moving on to our guidance for the fiscal first quarter. We project net bookings to range from $1.25 billion-$1.3 billion compared to $1.22 billion in the first quarter last year. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Tune Blast, Color Block Jam, Match Factory, Empires & Puzzles, Words With Friends, the Red Dead Redemption series, and Zynga Poker. We project recurrent consumer spending to increase by approximately 7%, which assumes strong double-digit growth for NBA 2K, flat results for mobile, and a modest decline for Grand Theft Auto Online. Our release slate for the quarter includes two new offerings of Civilization VII, including its VR launch in April and its upcoming launch on Switch 2 in June.

We expect GAAP net revenue to range from $1.35 billion-$1.4 billion and cost of revenue to range from $544 million-$562 million. Operating expenses are planned to range from $908 million-$918 million. On a management basis, operating expenses are expected to grow by approximately 2% year-over-year, primarily driven by higher development costs. In closing, our core businesses are showing strength into fiscal 2026, and our long-term outlook continues to be positive. Fiscal 2027 represents a massive inflection point in our business that our teams have worked long and hard for, one that we believe will significantly enhance our multi-year financial profile. We are confident that this will be an exciting period for our many stakeholders, from our colleagues to our players, industry partners, and shareholders, and we appreciate all your support along the way. Thank you. I'll now turn the call back to Strauss.

Strauss Zelnick (Chairman and CEO)

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for delivering another outstanding year and for building an incredibly sound foundation creatively, financially, and culturally as we enter this new inflection point for Take-Two's growth and continued success. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator.

Operator (participant)

Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one if you would like to join the queue. Our first question comes from the line of Doug Creutz with TD Cowen. Your line is open. We did lose connection with Mr. Creutz. We will move to our next question, Eric Handler with Roth Capital. Your line is open.

Eric Handler (Managing Director and Senior Research Analyst)

Good afternoon. Thanks for the question. First, I thought it was very interesting with all the industry discussion that has been going on about maybe prices for games going up to $80. You chose a different path with Mafia and doing a $50, $60 price queue. Can you maybe talk about what went into that decision, and do you see future game releases sort of having variable pricing along a wide-range scale?

Strauss Zelnick (Chairman and CEO)

Thanks, Eric. We've always had variable pricing, and the rubric that we employ is one of delivering way more value to consumers than what we charge. That's our job. We aim to make the best entertainment on earth and bring that to all consumers wherever they are. We need to deliver value in so doing. That's really how we look at it. In the case of Mafia: The Old Country, we think it's extraordinary. It looks amazing, and we want to get it into as many hands as we possibly can. I think our view is that if you create a huge hit and everyone wants it and everyone buys it, the revenue is going to take care of itself.

Eric Handler (Managing Director and Senior Research Analyst)

Okay. As a follow-up for this, for Lainie, maybe a little about pounding. The $3.5 billion goodwill impairment, I assume, was related to Zynga in some form. I know it's mainly accounting issues here, but is there anything structurally changing with Zynga?

Lainie Goldstein (CFO)

Eric, we have not discussed which of our reporting units the impairment was from, but it was a partial impairment of one of our units, and it is a result of updating long-term expectations. That is something that we are required to test annually or whenever the indicators of the impairment arise. This is something that we would do all the time based on how our forecasts are updated.

Eric Handler (Managing Director and Senior Research Analyst)

Okay. Thanks.

Operator (participant)

Our next question comes from the line of Doug Creutz with TD Cowen. Your line is open.

Doug Creutz (Managing Directr and Senior Research Analyst)

Hey, sorry about that. I fat-fingered my first attempt. Just looking at it from a high level, the last period of peak performance for your business, you were able to reach low to mid-20% operating margins in the wake of the success of Red Dead 2 and into the pandemic. Just wondering if anything about the business or the industry has changed structurally such that when your current pipeline reaches fruition, you would not be able to reach those margin levels again. Thank you.

Lainie Goldstein (CFO)

There's no reason why we wouldn't be able to reach those margins. That is how we've been building the business and working on the cost reduction programs and being more efficient, working to move to those margins as we build our scale. As we've mentioned, the gross margins are definitely hampered by the increase in the development costs for the titles, but we've been doing a lot of structural things within the business to offset those costs. You'll see that in our expenses being reduced this year and seeing those margins coming down.

Doug Creutz (Managing Directr and Senior Research Analyst)

Great. Thank you.

Operator (participant)

Our next question comes from the line of Colin Sebastian with Baird. Your line is open.

Colin Sebastian (Senior Research Analyst)

Thanks. Appreciate the questions. Have a couple. I guess first, the mobile segment performance looks impressive relative to the broader mobile gaming space. Help me maybe drill down on that a bit in terms of what's working in this environment. That could be customer acquisition, retention, or game mechanics. Maybe some of the background of why the segment would not necessarily be positioned to grow again this fiscal year. Thank you.

Strauss Zelnick (Chairman and CEO)

You're right. The mobile gaming segment's a challenging one broadly. Creating new mobile hits is incredibly difficult. I think right now, Zynga is the only company in the space that is regularly creating new native mobile hits, most recently with Match Factory and Color Block Jam, both of which are profitable already. We feel really good about what's going on. How's that happening? It's happening because we have incredibly talented creative people, incredibly talented publishing folks, and very specifically, the team at Peak and the team at Rolic are doing a great job along with many other studios at Zynga.

Lainie Goldstein (CFO)

Given the outstanding results that we saw from a lot of our top titles in fiscal 2025, some of those are mature titles that have been out for many years. We expect that there may be some moderation of trends for those titles in fiscal 2026, and that's what's affecting that business into next year.

Colin Sebastian (Senior Research Analyst)

Okay. Thank you.

Operator (participant)

Our next question comes from the line of Chris Schoell with UBS. Your line is open.

Chris Schoell (Equity Research Analyst)

Great. Thank you. You mentioned a new baseline for the business on net bookings once GTA VI launches in fiscal 2027. In the past, I know you pointed to $8 billion of annual bookings and over $1 billion of cash generation once the pipeline scaled. Appreciate there's been a number of shifts since that guidance was given, but is it fair that your long-term assumptions for the business haven't changed? As you think about the sustainability of performance post-GTA VI's console release, can you help us think through some of the key drivers in your mind? Thank you.

Strauss Zelnick (Chairman and CEO)

I'll take a shot at it. However, we do issue annual guidance for a reason. The farther away we are from the results, the harder it is to predict because things can change, whether that's internal or external. However, in terms of both our hopes and our expectations, we're more optimistic than we were before. That optimism is reflected in our expectations for net bookings and our expectations for free cash flow. We just, in the normal course, would not typically guide to those numbers this far in advance. We have said that we expect sequential growth for both fiscal 2026 and 2027. The guidance we just gave, of course, in the absence of the release of Grand Theft Auto VI, still reflects meaningful year-over-year top-line growth and reflects a new record for net bookings for this company.

Chris Schoell (Equity Research Analyst)

Thank you. If I can just fit one more in. Going back to the first GTA VI trailer, I believe you saw a meaningful uplift in engagement and monetization for GTA Online with it. I appreciate it's early, but are you seeing similar uplift right now from the second trailer? Could that potentially drive some upside versus your expectations for declines at GTA Online in fiscal 2026? Thank you.

Strauss Zelnick (Chairman and CEO)

Remember, in the fourth quarter, actually, we saw better news than expected for GTA Online, Red Dead Online, and GTA Plus. In aggregate, GTA Online and Red Dead Online were down a bit in the full fiscal year. In terms of your specific question about the trailer, too early to say whether there was an immediate result. Frankly, we're not super focused on one-week or 10-day results. However, just as a reminder, and I think most everyone knows this, the trailer did set a record for views in its first 24 hours, 475 million. Essentially, once again, Rockstar Games broke the internet. We feel really good about that and what that means for the upcoming release of GTA VI.

Chris Schoell (Equity Research Analyst)

Great. Thank you very much.

Operator (participant)

Our next question comes from the line of Andrew Marok with Raymond James. Your line is open.

Andrew Marok (Analyst)

Hi. Thanks for taking my questions. Maybe first on the Nintendo Switch. Pretty exciting news with Borderlands 4 coming to the platform as well as Civ VII. As you've seen the reception and seen the technical specifications of that platform over the last little bit, how do you think, what are the boundaries of the Switch as a partner, a distribution partner for you? Is it something where the entire Take-Two lineup is eligible, or is it really just kind of an opportunistic thing for certain titles? I have a follow-up.

Strauss Zelnick (Chairman and CEO)

We're launching four titles with Nintendo Switch 2, and that's, I think, a bigger array of releases than we've ever offered before with a new Nintendo platform. Historically, being a third party in the Nintendo business has been a bit challenging. I think Nintendo's been very forthcoming in addressing that, and we're stepping up too because we have great optimism for the platform. In terms of what we would bring to any platform, we address it on a case-by-case basis. We obviously want to be where the consumers are, but we would not necessarily bring every title to every platform. There are also great catalog opportunities as well.

Andrew Marok (Analyst)

Understood. Thank you. Maybe one on the mobile side. Zynga, as you mentioned, on a little bit of a roll here. It seemed like Match Factory was one of the titles that kind of seemed like an inflection point. I guess the question I would have is how much of the Match Factory playbook is instructive to future Zynga releases and current successes like Color Block Jam? Again, how much of that is kind of idiosyncratic to the title being launched? Thank you.

Strauss Zelnick (Chairman and CEO)

I think we learn from every release. We learn on the dev side. We learn on the marketing side. Remember, Color Block Jam came from a different studio than Match Factory. Match Factory came from Peak. Color Block Jam from Rolic. I think Color Block Jam was really a reflection of an evolution of strategy at Rolic. However, all of our studios work together. That is the whole point of being one company. They have great creative independence. They do coordinate. They share best practices. Zynga itself obviously shares best practices with Take-Two, other labels at Take-Two. An example of that is our consumer database, which has many hundreds of millions of consumer records that we are able to address legally. We can make the consumer database available in certain instances cross-label when it makes sense. We think that gives us an enormous competitive advantage.

Another competitive advantage in launching a mobile title, of course, is that we have mobile customers. We can promote inside our ecosystem on a much more efficient basis than someone could outside of an ecosystem like ours. There are very few companies that are close to as large as we are in the mobile space. None of that matters if you do not make something consumers want. That is the trick. That is what is hard. That is hard in mobile. It is hard in console. It is hard in the entertainment business broadly. That is our job. Remember, our goal is to be the most creative, the most innovative, the most efficient company in the entertainment industry. All we care about around here is making big hits.

Operator (participant)

Our next question comes from the line of Matthew Cost with Morgan Stanley. Your line is open.

Matthew Cost (Executive Director in Equity Research)

Hi, everybody. Thanks for taking the questions. I guess just starting out on NBA 2K, I mean, another really strong quarter for that franchise, second in a row. I guess, is there anything that you would call out that's driving that continued strength and even the acceleration versus what you saw last quarter? Then separately on the mobile side, when you think about the impact the recent court rulings have had on the direct-to-consumer opportunity, will that allow you to execute the shift towards direct payments faster? Does it raise the ceiling long-term? I mean, how should we think about the financial impact of that? Thank you.

Karl Slatoff (President)

On the NBA side, look, I do not think there is anything specific that has been done in this quarter that would call out the performance of the NBA, which has been absolutely fantastic. I think it is more a reflection on the ongoing strategy and the ongoing strength of this particular iteration. The team at 2K and Visual Concepts put a significant effort every year. They put a significant effort into creating new innovations in the game, which is very tough to do when you are on a 12-month cycle. Particularly this year, the folks at 2K and Visual Concepts really listened to the consumer and focused on that core consumer, bringing back a lot of features that consumers are asking for or from the past, for example, the auction house and the My Team—excuse me—and the My Team mode, working on different dribbling mechanics, etc.

All these things add up to make the game just better and better. The focus is always on engagement. That's where the growth has really been, is that year-over-year, this game's engagement has gone up. I mean, the engagement in this particular quarter has just been fantastic. That's without regard to the increase of 7% on units year-over-year. That relentless focus on quality is really what's driving that success. I said specifically in the quarter, my team's having a fantastic quarter, so that helps a lot as well.

Strauss Zelnick (Chairman and CEO)

With regard to direct-to-consumer, we entered the direct-to-consumer business in mobile immediately upon closing the acquisition of Zynga. It has become a significant and indeed material part of our business, pretty much in just the way that we outlined in terms of the top-line and bottom-line effects. I have been saying for years that I expected the cost of third-party distribution to decline. I have also been saying for years that I believe the whole business would open up more than it has been. I do think the recent court rulings reflect a movement in that direction. It is early. However, these are all positive signs for us.

Operator (participant)

Our next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Eric Sheridan (Managing Director and Senior Research Analyst)

Thanks so much for taking the questions. Maybe two-parter, if I could. In terms of the partnership with Netflix, what continue to be some of the key learnings from scaling games via Netflix as a distribution partner? Do you think there's any scale for Netflix to become an increased partner of transforming some of your gaming IP into more mainstream media IP for their video formats over the medium to long term? Thanks so much.

Karl Slatoff (President)

Our partnership with Netflix has been fantastic. Obviously, the most attractive part of that is that, number one, they seem very serious about gaming and have shown that over and over at this point, which is great news for us. There are a lot of consumers. When Netflix gets together with the marketing power that they have with incredible content, which we have been able to offer, you know that is going to be a great recipe for success. We are very sanguine on that relationship. We have only done a few titles at this point. Obviously, we think that there is an opportunity, again, on a game-by-game basis for us to continue to bring titles to Netflix. I am not announcing anything at this point, but we do believe that they are a terrific partner.

In terms of other media, that's an area where we have done some deals in the past. We are doing a BioShock movie with Netflix. We are looking at things like that opportunity. I would not say that's driving the partnership. That's sort of a nice-to-have, not necessarily a must-to-have for the partnership. When you can bring that kind of synergy value to the table, obviously, that's always a strong consideration and a nice thing for us to do.

Eric Sheridan (Managing Director and Senior Research Analyst)

Great. Thank you.

Operator (participant)

Our next question comes from the line of James Heaney with Jefferies. Your line is open.

James Heaney (Research Analyst)

Great. Thanks, guys, for the questions. Just looking at your guidance for fiscal 2026, can you talk through some of the puts and takes just on operating expenses for the year? Is it fair to say that we should just expect mobile marketing expenses to remain elevated and then just anything on GTA-related marketing costs for the second half? Thanks.

Lainie Goldstein (CFO)

We expect operating expense growth of approximately 3% year-over-year, and that is largely due to higher marketing expenses. That is for our current-year marketing for our current-year titles and for future titles. We do expect to deliver operating expense leverage as our net bookings growth of 6% is planned to outpace our operating expense expansion.

James Heaney (Research Analyst)

Great. Maybe just a quick one on your bookings guidance for fiscal 2026. We did notice it is a more maybe narrow range than usual. Just interested to hear the reasoning behind that and what gives you conviction in a more narrow range. Thank you.

Lainie Goldstein (CFO)

It's not a more narrow range than usual. I mean, usually, for the full year, we give a specific type of range. And then on a quarter-by-quarter basis, it could be different, but it's not different than it usually is.

James Heaney (Research Analyst)

Thanks.

Operator (participant)

As a reminder, it is Star One if you would like to join the queue and ask a question. Our next question comes from the line of Michael Hickey with the Benchmark Company. Your line is open.

Michael Hickey (Senior Analyst)

Hey, Charles, Lainie, Karl, Nicole, congrats, guys, on a quarter and strong year. Just two questions from us. First, on GTA 6, can you talk about sort of the record excitement you're seeing for the game, what you think is driving demand to record levels for this franchise? Obviously, it's one of the biggest franchises in the world. How you're measuring this demand just besides trailer views? That's the first question. The second question was a follow-up on the software pricing. Microsoft, Nintendo both moving to 80. Do you guys anticipate adopting this price point across any of your upcoming games, and what is assumed in your guidance? Thanks, guys.

Strauss Zelnick (Chairman and CEO)

Hey, Mike. Thanks for your questions. Look, why do I think GTA VI is so widely anticipated? First of all, I can't tell you how much I appreciate the tenor of the question. We all do.

Look, Grand Theft Auto V has been the standard bearer not just for our company, but for the industry since it was launched. It's not only survived through three console generations. It's thrived. Here it is this many years later, and still the number one title. GTA V has sold in 215 million units and continues to sell. Grand Theft Auto Online just had a phenomenal quarter, and GTA Plus is doing great. Consumers are actively engaged with all things Grand Theft Auto. This is an ongoing business. Yet, in terms of a new iteration, it's been some time. There's enormous anticipation on the one hand. On the other hand, it's still fresh. It's still in market. Everyone anticipates the next James Bond movie, but there's nothing in between. What you have in your head is what you saw the last time around.

In this case, everyone anticipates the next iteration of Grand Theft Auto. Lots of people are currently engaged today with Grand Theft Auto. Today. I think that's one sign. Obviously, 475 million trailers in 24 hours tells you something. It's not just that, "Wow, that was a great trailer." It tells you something more than that. We, of course, do market research around here. The market research that we've done is pretty astonishing. Look, we're not in the business of claiming success until it happens. All we're focused on is making the best possible entertainment here. That's all that Rockstar is focusing on. That's our job. The rest will take care of itself. In terms of pricing, we obviously don't talk about specific pricing here. Pricing is set at the label level.

In the context of the individual release, we have had variable pricing here for a very long time. As I said earlier in the call, we want to focus on value. We want to deliver way, way, way more value to a consumer than whatever that consumer pays. That's our job. We have to do that job. That's our focus, not on what the top-line price is.

Michael Hickey (Senior Analyst)

Thank you, Strauss. Good luck, guys.

Operator (participant)

Our next question comes from the line of Brian Pitz with BMO Capital Markets. Your line is open.

Brian Pitz (Managing Director and Head of Internet and Interactive Entertainment Equity Research)

Yeah. Thanks for the question. On console price increases to the gaming ecosystem, any impact on your guide for this year? If so, maybe help us size that impact. Looking at the nearly $2 billion of software development costs on the balance sheet for capitalizing games and development, any color you can provide as to what percentage is related to GTA VI versus other titles? Thanks.

Strauss Zelnick (Chairman and CEO)

Look, our guide is for the next 10 months, essentially. That's the part of the fiscal year that hasn't elapsed yet. It's very difficult to predict where tariffs will land given how things have bumped around so far. We feel reasonably confident that our guide wouldn't be meaningfully affected unless tariffs ran off in a very different direction than we currently expect. In any case, there's already a very substantial install base for all of our target platforms except Nintendo Switch 2, which is yet to be launched. We have, I think, enough insight that we wouldn't be meaningfully affected by any changes.

Lainie Goldstein (CFO)

For the balance sheet, the $2 billion of development costs, it really is supporting our extremely robust release schedule that we talked about for the next few years. We do not discuss on a title-by-title basis.

Brian Pitz (Managing Director and Head of Internet and Interactive Entertainment Equity Research)

Thanks, everyone.

Operator (participant)

Our next question comes from Martin Yang with Oppenheimer. Your line is open.

Martin Yang (Senior Equity Research Analyst)

Hi. Thank you for taking the question. One question is about the internal royalty line in the cost breakdown. Can you maybe talk about the year-over-year and quarter-to-quarter increase? What drove that? Is that related to any milestone achieved with Rockstar? Thank you.

Strauss Zelnick (Chairman and CEO)

I'm sorry. Could you repeat the question? We had trouble understanding you.

Martin Yang (Senior Equity Research Analyst)

Oh, sorry. I'm in a pretty noisy background. Can you talk about the internal royalties in the cost breakdown? A good increase on a year-over-year and quarter-to-quarter basis. What drove that increase on internal royalties this quarter?

Lainie Goldstein (CFO)

Internal royalties, the breakdown is driven by the product mix. It changes from quarter to quarter and also by year to year based on the mix of the business on the top line.

Martin Yang (Senior Equity Research Analyst)

Thank you.

Operator (participant)

Ladies and gentlemen, that concludes our question-and-answer session. I will now turn the conference back over to Mr. Strauss Zelnick for closing remarks.

Strauss Zelnick (Chairman and CEO)

First, as always, thank you for joining us today. Obviously, this was a good new meeting, and we're all super excited. All of the results that we have the pleasure of announcing here are driven by the many thousands of people who commit their professional lives to Take-Two and all of our affiliates and our incredibly hardworking, creative labels. I want to express enormous appreciation for the work of our colleagues. That work is what delivers the results. We just get to talk about them. I also want to thank our shareholders for their continued support. This is a great time for our company and a really exciting and challenging time in our industry and in the entertainment industry broadly. We're good at addressing challenges here. We like to address challenges.

We think that the release schedule that we have coming to market is second to none, certainly second to none in our history. It is our job to deliver. We do not ever take credit for things that do not happen. A lot of what we talked about today is in the future. We know we have to buckle down every day and deliver the results. Arrogance is the enemy of continued success. With, I hope, great humility, we aim to deliver and overdeliver. We thank you for listening today, and we thank you for your support.

Operator (participant)

Ladies and gentlemen, that concludes today's conference call. We thank you for your participation. You may now disconnect.