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TT

TAKE TWO INTERACTIVE SOFTWARE INC (TTWO)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered $1.37B Net Bookings (+3% YoY) with GAAP revenue of $1.36B (flat YoY) and GAAP net loss of $125.2M ($0.71), driven by significant outperformance in NBA 2K offsetting softer Zynga mobile titles; operating results exceeded internal expectations due to NBA 2K upside and a timing shift of expenses .
  • Management reiterated FY25 Net Bookings of $5.55–$5.65B and issued Q4 guidance for $1.484–$1.584B Net Bookings and GAAP EPS of $(0.20) to $0.13; FY25 EBITDA guidance was trimmed to $263–$317M (from $282–$336M in Nov) while FY25 GAAP net loss outlook improved to $(788)–$(729)M (from $(839)–$(775)M) .
  • NBA 2K25 momentum was a key positive surprise: >7M units sold-in to date; RCS up >30%, DAU up ~20%, MAU up ~10%; design updates (shooting/dribbling, badge progression, MyTEAM overhaul) supported engagement and monetization .
  • Mobile trends were mixed: Match Factory! and Peak titles (Toon Blast/Toy Blast) grew, but hyper-casual and Empires & Puzzles underperformed; Zynga’s direct-to-consumer channel posted strong double-digit conversion during the holidays .
  • 2025 pipeline is a material stock catalyst: Civilization VII (2/11), PGA TOUR 2K25 (2/28), WWE 2K25 (3/14), Mafia: The Old Country (summer), Grand Theft Auto VI (fall), Borderlands 4 (calendar 2025); management expects “record” Net Bookings in FY26–FY27, reinforcing multi-year growth narrative .

What Went Well and What Went Wrong

  • What Went Well

    • NBA 2K25 outperformed with strong engagement and monetization; sold-in >7M units; RCS up >30%, DAU up ~20%, MAU up ~10% (design and gameplay improvements resonated) .
    • Operating results beat internal expectations due to NBA 2K upside and expense timing shifts from Q3 to Q4, despite flat GAAP revenue YoY .
    • Clear pipeline visibility and reaffirmed GTA VI fall 2025; management signaled sequential increases and record Net Bookings in FY26–FY27 .

  • What Went Wrong

    • Mobile softness: hyper-casual portfolio and Empires & Puzzles underperformed; overall mobile growth below plan (mid-single digits vs low double-digit target earlier) .
    • GAAP loss widened YoY to $125.2M (from $91.6M), with diluted loss per share of $(0.71) vs $(0.54) YoY amid higher operating expenses (marketing, personnel, and business reorg) .
    • FY25 EBITDA guide lowered ($263–$317M vs prior $282–$336M), even as net loss range improved, reflecting mix shifts and opex timing into Q4 .

Financial Results

MetricQ3 FY2024Q1 FY2025Q2 FY2025Q3 FY2025
GAAP Net Revenue ($B)$1.37 $1.34 $1.35 $1.36
Net Bookings ($B)$1.34 $1.22 $1.47 $1.37
GAAP Gross Profit ($M)$678.1 $771.1 $727.9 $759.9
Gross Margin (%)49.6% 57.6% 53.8% 55.9%
GAAP Operating Expenses ($M)$807.6 $956.0 $1,025.1 $892.0
GAAP Net (Loss) ($M)$(91.6) $(262.0) $(365.5) $(125.2)
Diluted EPS ($)$(0.54) $(1.52) $(2.08) $(0.71)
Non-GAAP EBITDA ($M)$146.5 $24.9 $(75.5) $88.8

Segment/Channel Mix (Q3 FY25 vs Q3 FY24)

  • Net Revenue by Platform
PlatformQ3 FY2024Q3 FY2025
Mobile ($M, % total)$706.7 (52%) $731.6 (54%)
Console ($M, % total)$547.6 (40%) $507.9 (37%)
PC & Other ($M, % total)$112.0 (8%) $120.3 (9%)
Total ($M)$1,366.3 $1,359.8
  • Net Bookings by Platform
PlatformQ3 FY2024Q3 FY2025
Mobile ($M, % total)$697.9 (52%) $709.5 (52%)
Console ($M, % total)$524.3 (39%) $538.0 (39%)
PC & Other ($M, % total)$115.6 (9%) $125.9 (9%)
Total ($M)$1,337.8 $1,373.4

Key KPIs

KPIQ3 FY2025Notes
Net Bookings Growth YoY+3% $1.37B vs $1.34B
Recurrent Consumer Spending (RCS) – Bookings+9% YoY; 79% of total
RCS – GAAP Revenue+5% YoY; 80% of total
NBA 2K25 sold-in>7M units to date
NBA 2K25 engagementRCS >30%; DAU ~+20%; MAU ~+10%
GTA V cumulative>210M units
Red Dead Redemption 2 cumulative>70M units
GTA+ membership+10% YoY in Q3

Guidance Changes

MetricPeriodPrevious Guidance (Nov 6)Current Guidance (Feb 6)Change
Net Bookings ($B)FY25$5.55–$5.65 $5.55–$5.65 Maintained
GAAP Net Revenue ($B)FY25$5.57–$5.67 $5.57–$5.67 Maintained
Cost of Revenue ($B)FY25$2.397–$2.422 $2.413–$2.349 Slightly revised
Operating Expenses ($B)FY25$3.772–$3.792 $3.772–$3.792 Maintained
Interest & Other, net ($M)FY25$120 $107 Lower
GAAP Net (Loss) ($M)FY25$(839)–$(775) $(788)–$(729) Improved
GAAP EPS ($)FY25$(4.80)–$(4.43) $(4.50)–$(4.17) Improved
EBITDA ($M)FY25$282–$336 $263–$317 Lower
Net Cash from Ops ($M)FY25≈$(200) ≈$(200) Maintained
Capex ($M)FY25≈$140 ≈$140 Maintained
GAAP Share Count (M)FY25174.9 175.0 Slightly higher
Net Bookings ($B)Q4 FY25—$1.484–$1.584 Initial guide
GAAP Net Revenue ($B)Q4 FY25—$1.519–$1.619 Initial guide
GAAP EPS ($)Q4 FY25—$(0.20) to $0.13 Initial guide
EBITDA ($M)Q4 FY25—$223–$277 Initial guide

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 FY25)Current Period (Q3 FY25)Trend
NBA 2K engagement/monetizationQ1: NBA down; Q2: low single-digit growth; PC Gen9 uplift; new modes, ARPU/mode innovation (Gravity Ball) Q3: outsized upside; >7M units; RCS >30%; DAU/MAU up double digits; gameplay improvements highlighted Strongly improving
Mobile (Zynga) trendsQ1: Match Factory! scaling; Toon Blast strong; hyper-casual/E&P headwinds Q3: Mobile grew but below plan; hyper-casual & E&P underperformed; strong D2C conversion during holidays Mixed
Direct-to-ConsumerQ1–Q2: expanding D2C; margin accretive Q3: strong double-digit D2C conversion; ongoing expansion Positive
Pipeline visibilityQ1–Q2: GTA VI fall ’25; Borderlands 4; Mafia: The Old Country Q3: reiteration; near-term launches Civ VII (2/11), PGA 2K25 (2/28), WWE 2K25 (3/14) Strengthening
Cost/opex timingQ1–Q2: expense timing favorability; cost program savings Q3: upside partly from expense shift to Q4; opex elevated YoY Neutral (timing)
Platform strategyQ2: PC importance rising; Switch support as appropriate Q3: Switch 2 support expected; continue multi-platform focus Consistent
AI/TechnologyQ2: generative AI noted amid rising production complexity Q3: focus on quality and innovation; no specific AI updateNeutral

Management Commentary

  • “Our Net Bookings of $1.37 billion were within our guidance range, as significant outperformance in NBA 2K helped to offset moderation… in several of our mobile franchises… our operating results surpassed expectations, led by the upside from NBA 2K, as well as a shift in timing of expenses” — Strauss Zelnick, CEO .
  • “We are reiterating our Net Bookings guidance range of $5.55 to $5.65 billion… projections for the fourth quarter balance strength in NBA 2K with a continuation of the current mobile trends, and the shift of some operating expenses into the period.” — Strauss Zelnick .
  • “NBA 2K delivered a phenomenal quarter… recurrent consumer spending up over 30%, daily active users up nearly 20% and monthly active users up nearly 10%.” — Strauss Zelnick .
  • “Operating expenses… were favorable to our forecast largely due to a shift in timing of expenses into the fourth quarter… along with the outperformance of NBA 2K drove operating results above the high end of our guidance range.” — Lainie Goldstein, CFO .
  • “We remain highly confident that we will achieve sequential increases in, and record levels of, Net Bookings in Fiscal 2026 and 2027.” — Strauss Zelnick .

Q&A Highlights

  • Zynga synergies: mobile-native hits remain key; D2C inside Zynga has become a “very significant business” contributing meaningfully; some unannounced projects in development .
  • Match Factory!: expected to turn profitable toward year-end after heavy UA; performance “better and better” .
  • NBA 2K drivers: beyond Gen8→Gen9 mix, new mechanics (shooting/dribbling), badge progression, smaller city, MyTEAM overhaul; focus is engagement-first, not “tweaking the economy” .
  • Platform strategy: long-standing Nintendo relationship; expect to support Switch 2 as appropriate; selective on Roblox as a destination (competitive situation) .
  • Capital allocation: strong cash flow in outer years expected; paying down debt prioritized, with selective M&A possible .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Revenue, EPS, and EBITDA to benchmark Q3 results and FY/Q4 guidance; however, estimates were unavailable due to data access limits during this session. As a result, we cannot quantify beats/misses vs Wall Street consensus for this quarter. Management indicated internal operating outperformance versus guidance driven by NBA 2K and expense timing .
  • If helpful, we can refresh and add S&P Global consensus comparisons once access resumes.

Key Takeaways for Investors

  • NBA 2K strength is the near-term driver: engagement and RCS momentum provide upside to Q4 bookings and profitability versus internal plans; watch sustainability into off-season and Gen9/PC tailwinds .
  • Mobile is a tale of two halves: Peak’s Match Factory!/Toon Blast provide growth while hyper-casual/E&P drag; continued D2C expansion and UA optimization are levers to stabilize/mobile margins in FY25–26 .
  • Guidance quality improved: FY25 Net Bookings reiterated; FY25 net loss narrowed; but FY25 EBITDA range reduced—mix and opex timing matter; Q4 guide embeds expense shift and balanced view on mobile .
  • Multi-year pipeline underpins the thesis: Civ VII, WWE/PGA releases in Q4, and GTA VI, Mafia: The Old Country, Borderlands 4 in CY25 support management’s “record” Net Bookings outlook for FY26–27 .
  • Balance sheet/liquidity: cash and equivalents $1.21B at 12/31; near-term cash from ops expected ≈$(200)M for FY25; capex ≈$140M—monitor cash dynamics into FY26 launches and potential debt paydown/M&A .
  • Trading setup: Near-term catalysts include launch execution (Civ VII/PGA/WWE), NBA 2K live ops, and any incremental GTA VI marketing beats; medium-term inflection hinges on CY25 slate landing on time/with quality .

Additional Context from Q3 Materials and Prior Quarters

  • Q3 operational highlights: Net Bookings $1.373B; 96% digital mix; U.S. 61% of bookings; mobile 52% of bookings—consistent with diversified mix .
  • Q2 perspective: Net Bookings $1.475B (top of guide) with strong GTA and Borderlands; opex timing shifts aided results; reiterated FY25 bookings .
  • Q1 perspective: Net Bookings $1.218B in line; management reiterated FY25 bookings and multi-year growth outlook .

Non-GAAP definitions and assumptions

  • EBITDA as defined in releases excludes interest, taxes, D&A of acquired intangibles; management assumes an 18% tax rate and specified diluted share counts for non-GAAP per-share metrics .