Release Date: May 15, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Take-Two Interactive Software Inc (TTWO, Financial) concluded fiscal year 2025 with outstanding results, achieving fourth quarter net bookings of $1.58 billion, which was at the top of their guidance range.
- NBA 2K delivered one of its strongest periods on record, with recurrent consumer spending growth of 42% and a 7% increase in unit sales compared to NBA 2K24.
- Rockstar Games exceeded expectations with the Grand Theft Auto and Red Dead Redemption series, with GTA V selling over 215 million units.
- Zynga continued to gain momentum, with successful titles like Match Factory!, Toon Blast, and Color Block Jam contributing to strong mobile performance.
- The company is optimistic about its upcoming pipeline, planning to release 38 titles through fiscal 2028, including highly anticipated games like Grand Theft Auto VI and Borderlands 4.
Negative Points
- 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.
- Recurrent consumer spending is expected to be flat in fiscal 2026 compared to fiscal 2025, with declines anticipated in mobile and Grand Theft Auto Online.
- The company faced challenges in the mobile gaming segment, with expectations of moderation in trends for mature titles in fiscal 2026.
- There is uncertainty regarding the impact of console price increases on the company's guidance for the year.
- The company experienced higher development costs for titles not technologically feasible, impacting operating expenses.
Q & A Highlights
Q: With the industry discussing potential game price increases to $80, why did Take-Two choose a $50-$60 price range for Mafia? Will future releases have variable pricing?
A: Strauss Zelnick, CEO: We've always had variable pricing, aiming to deliver more value than what we charge. For Mafia, we want to reach as many players as possible, believing that if a game is a hit, revenue will follow.
Q: Regarding the $3.5 billion goodwill impairment, is it related to Zynga, and are there structural changes at Zynga?
A: Lainie Goldstein, CFO: We haven't specified which unit the impairment is from, but it was a partial impairment due to updated long-term expectations. This is a regular process based on forecast updates.
Q: Can Take-Two achieve the low to mid-20% operating margins seen during the peak performance period post-Red Dead 2 and the pandemic?
A: Lainie Goldstein, CFO: There's no reason we can't reach those margins again. We're working on cost reduction and efficiency to offset increased development costs, aiming to build scale and improve margins.
Q: What drives the impressive performance of the mobile segment, and why is it positioned to grow this fiscal year?
A: Strauss Zelnick, CEO: Creating new mobile hits is challenging, but Zynga is succeeding with titles like Match Factory! and Color Block Jam. This success is due to talented teams and effective publishing strategies.
Q: What are the long-term assumptions for Take-Two's business post-GTA VI launch, and what are the key drivers for sustainability?
A: Strauss Zelnick, CEO: While we don't provide long-term guidance, we're more optimistic than before. We expect sequential growth in fiscal '26 and '27, with GTA VI contributing to record net bookings and free cash flow.
Q: How is the Nintendo Switch 2 viewed as a distribution partner, and will more Take-Two titles be available on the platform?
A: Strauss Zelnick, CEO: We're launching four titles with Switch 2, more than ever before. We evaluate each platform on a case-by-case basis, aiming to be where consumers are, but not every title will be on every platform.
Q: What are the key learnings from scaling games via Netflix, and could Netflix help transform gaming IP into mainstream media?
A: Karl Slatoff, President: Netflix is a great partner, serious about gaming, and has a large consumer base. While we've done some media deals like the BioShock movie, it's not the primary driver of our partnership.
Q: What are the expectations for operating expenses in fiscal '26, and how do they relate to GTA-related marketing costs?
A: Lainie Goldstein, CFO: We expect a 3% year-over-year increase in operating expenses, mainly due to higher marketing costs for current and future titles. We aim for operating expense leverage as net bookings growth outpaces expense expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
