Take-Two Interactive Software Q4 2025 Earnings Call Transcript

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Provided by Quartr
May 15, 2025

Key Takeaways

  • Take-Two delivered Q4 net bookings of $1.58 billion at the top of its guidance range, driven by standout contributions from NBA 2K25, blockbuster Rockstar franchises and Zynga’s hits.
  • For fiscal 2026 management expects net bookings of $5.9 to $6.0 billion (about 5% yoy growth), assuming continued strength in NBA 2K, healthy mobile performance and releases like Mafia: The Old Country and Borderlands 4.
  • Grand Theft Auto VI is now slated for May 26, 2026 (FY 2027), with its second trailer shattering records (475 million views in 24 hours) and underlining unprecedented consumer anticipation.
  • Zynga’s momentum continued as Match Factory and Color Block Jam both reached profitability quickly, although management expects some moderation in mature mobile titles next year.
  • Q4 operating expenses rose 44% to $4.6 billion, including a $3.6 billion goodwill and intangible impairment charge, though on a management basis OPEX grew just 3% due to higher development costs.
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Earnings Conference Call
Take-Two Interactive Software Q4 2025
00:00 / 00:00

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Operator

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 twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad.

Operator

If you would like to withdraw your question, press star 1 again. Thank you. And 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
Nicole Shevins
SVP of IR & Corporate Communications at Take-Two Interactive

Good afternoon. Thank you for joining our conference call to discuss our results for the fourth quarter and fiscal year twenty twenty five ended 03/31/2025. Today's call will be led by Strauss Zelnick, Take Two's Chairman and Chief Executive Officer Karl Sladeoff, our President and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q and 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.

Nicole Shevins
Nicole Shevins
SVP of IR & Corporate Communications at Take-Two Interactive

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 ks 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.

Nicole Shevins
Nicole Shevins
SVP of IR & Corporate Communications at Take-Two Interactive

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 take2games.com. And now I'll turn the call over to Strauss.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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 $1,580,000,000 which was the top of our guidance range. Each of our labels contributed meaningfully to our performance. Two ks posted a fantastic quarter, the successful launches of Sid Meier's Civilization VII, WWE 2K25 and PGA Tour 2K25.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

NBA two k 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, Toon Blast, and Rolex newest hit, Color Block Jam. We're providing our initial financial outlook for fiscal twenty twenty six, including net bookings of 5,900,000,000.0 to $6,000,000,000 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 two ks as well as the release of several eagerly anticipated titles, including The Old Country and Borderlands four. Rockstar expects to release Grand Theft Auto six on 05/26/2026, which is in our fiscal year twenty twenty seven.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

I believe affording Rockstar additional time for such a groundbreaking project is a worthy investment. Grand Theft Auto six began development in earnest in 2020 following the massive success of Red Dead Redemption two, and the title is now the most anticipated entertainment property of all time. Consumer anticipation is unprecedented with Trailer two's cross platform debut last week shattering records to become the biggest video launch of all time with over 475,000,000 views in twenty four hours. This follows Trailer One's record breaking debut of 93,000,000 views in twenty four hours on YouTube alone. Spotify streams of the track featured in the trailer hot together by the Pointer sisters surged by 182000%, once again proving Rockstar's ability to influence popular culture.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

The ambition and complexity of Grand Theft Auto six 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 two k 25 posted near record performance and exceeded our forecast. To date, the title is sold in nearly 10,000,000 units, a 7% increase compared to NBA two k 24 during the same time frame. Engagement grew significantly.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

Daily active users, MyCareerDaily players, and average games per user increasing thirty, forty, and 80% respectively. We're also pleased with the performance for our brand extensions for the franchise. NBA two k 25 Arcade Edition remains a top five performing title on Apple Arcade. NBA two k Online in China continues to hold its place as the number one PC sports game in the country. And our NBA two k All Stars mobile title, which we developed in partnership with Tencent and launched on March 25, is maintaining the number one spot on the iOS sports game chart for both downloads and revenue in China.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

I'd like to thank Adam Silver of the NBA and Andrei Gudala of the NBA Players Association for their extraordinary partnership and support. Two k's release of WWE two k 25 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 20% during the quarter. This includes strong performance from WWE SuperCard, which achieved near record levels of net bookings in March.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

WWE '2 k twenty five has been integrated regularly into WWE's televised programming and was also a cosponsor of last month's spectacular WrestleMania forty one. In addition, two k is bringing WWE two k to Switch two this summer as well as bringing WWE two k 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. Two k and HP Studios successfully launched PGA Tour two k twenty five, which earned a Metacritic score of 80 on PlayStation five 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.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

During the period, two k released Sid Meier's Civilization seven, the revolutionary new chapter in our esteemed strategy franchise. As stewards of the Civilization series, Faraxis 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 seven VR for Meta Quest three and three s, as well as the title's upcoming release on Switch two, which will offer new mouse controls for a highly intuitive game experience. The Grand Theft Auto series once again exceeded our expectations.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

And to date, GTA five has sold in over 215,000,000 units. Recurrent consumer spending outperformed our forecast, 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 five m creator platform. Red Dead Redemption two 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.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

Zynga outperformed during the period, and we're pleased that their momentum is continuing to fiscal twenty twenty six. 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 TuneBlast grew 7% over last year, primarily due to the introduction of the Cannon Fest event.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

We're also thrilled the title achieved its largest quarter of net bookings since Zynga acquired Peak in 2020. Rolex newest hit Color Block Jam is scaling rapidly and is currently a top 10 downloaded game and among the top grossing titles in The US 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 and Puzzles. Small Giant improved the title's in game economy to support faster player progression and develop fun new features based on player feedback, like instant power summit hero coach and visiting outfitter.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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 enhanced personalization, which are driving better conversion. While we've been implementing d to c 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.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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 six in fiscal twenty twenty seven, 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
Karl Slatoff
President at Take-Two Interactive

Thanks, 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 Traus mentioned, we are extremely optimistic about our upcoming pipeline, which includes approximately 38 titles through fiscal twenty twenty eight. During fiscal twenty twenty six, we plan to release 13 titles, including four within the immersive core category. This includes Mafia, the Old Country, which two k and Hangar thirteen 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 1900 Sicily.

Karl Slatoff
Karl Slatoff
President at Take-Two Interactive

Preorders are off to a strong start following the debut of their first official gameplay trailer at PAX East last week, and we're excited for its upcoming launch. Additionally, two k and Gearbox will launch Borderlands four 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.

Karl Slatoff
Karl Slatoff
President at Take-Two Interactive

Two k and Gearbox will also release Borderlands four for the Switch two in the future. And as always, we will release the next iterations of our industry leading annual sports franchises, NBA two k and WWE two k. We also plan to bring to market five mobile titles this fiscal year, including w w v two k for Netflix in the fall, and we are launching four new iterations of prior releases, including the recent release of civilization seven VR for Meta Quest three and three s, as well as civilization seven for Switch two. Our labels will continue to provide new content and experiences that drive engagement and recurrent consumer spending across many marquee offerings. Looking ahead, we currently expect to deliver 25 titles throughout fiscal two thousand twenty seven and 02/1928, including 17 immersive core releases, including Grand Theft Auto six and five sports simulation games, four mobile games, and four new iterations of previously released titles.

Karl Slatoff
Karl Slatoff
President at Take-Two Interactive

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 now turn the call over to Lainie.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

Thanks, Carl, and good afternoon, everyone. We delivered an outstanding finish to fiscal two thousand and twenty five 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 multiyear 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 booking of $1,580,000,000 which was the top of our guidance range of 1,480,000,000.00, 1 point 5 8 billion dollars.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

This reflected better than expected performance from NBA 2K25, Zynga led by Toonblast, our hyper casual mobile portfolio, and Match Factory, the Red Dead Redemption series, and Grand Theft Auto Online. The current consumer spending growth was phenomenal, increasing 14% over last year and accounted for 77% of net bookings. NBA two k 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 seven, PGA Tour two k 20 five, and WWE two k 25.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

GAAP net revenue increased 13% to $1,580,000,000 Cost of revenue declined 16% to $779,000,000 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 $4,600,000,000 due to an impairment expense of $3,600,000,000 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 twenty twenty five, we achieved net bookings of $5,650,000,000 which was also the top of our guidance range of 5,550,000,000.00 to $5,650,000,000 Recurrent consumer spending exceeded our outlook, growing 7% and accounted for 80% of net bookings. NBA two ks grew high teens, mobile increased mid single digits, and Grand Theft Auto Online declined modestly.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

Operating cash flow was an outflow of $45,000,000 compared to our forecast of an outflow of $200,000,000 due to timing of tax payments and lower development costs. We spent approximately $169,000,000 in capital expenditures, which was above our forecast of a hundred and 40 million dollars, primarily due to higher game technology expenses. GAAP net revenue rose 5% to $5,630,000,000, while cost of revenue decreased 17% to $2,600,000,000, primarily due to lower impairment of acquired intangibles in the current year as well as timing of development credits. Operating expenses increased 28% to $7,500,000,000 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.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

Today, we are providing our initial outlook for fiscal twenty twenty six. We project net bookings to range from $5,900,000,000 to $6,000,000,000 which represents 5% growth over fiscal twenty twenty five at the midpoint. Largest contributors to net bookings are expected to be NBA two ks, the Grand Theft Auto series, Toon Blast, Borderlands four, Mashed Factory, Empires and Puzzles, Words With Friends, the Red Dead Redemption series, and Zynga Poker. We expect recurrent consumer spending to be flat compared to fiscal two thousand and twenty five and to represent 76% of net bookings. Our current consumer spending forecast assumes high single digit growth for NBA two k and declines for mobile and Grand Theft Auto Online.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

We expect the net bookings breakdown from our labels to be roughly 45% Zynga, thirty nine % two k, and 16% Rockstar Games. We expect operating cash flow to be approximately a hundred and $30,000,000, and we plan to deploy approximately a hundred and $40,000,000 of capital expenditures for game technology and office build outs. We expect GAAP net revenue to range from $5,950,000,000 to $6,050,000,000 and cost of revenue to range from $2,520,000,000 to $2,550,000,000 Our total operating expenses are expected to range from $3.78 to $3,800,000,000 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 $1,250,000,000 to $1,300,000,000 compared to $1,220,000,000 in the first quarter last year.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

The largest contributors to net bookings are expected to be NBA two ks, the Grand Theft Auto series, Tomb Blast, Color Block Jam, Match Factory, Empires and 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 two k, 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 seven, including its VR launch in April and its upcoming launch on Switch two in June. We expect GAAP net revenue to range from 1,350,000,000.00 to $1,400,000,000 and cost of revenue to range from $544,000,000 to $562,000,000 Operating expenses are planned to range from 908 to $918,000,000. On a management basis, operating expenses are expected to grow by approximately 2% year over year, primarily driven by higher development costs.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

In closing, our core businesses are showing strength into fiscal two thousand and twenty six, and our long term outlook continues to be positive. Fiscal two thousand and twenty seven 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 multiyear financial profile. We are confident that this will be an exciting period from 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
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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

Thank you. And 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.

Operator

Again, it is star one if you would like to join the queue. And our first question comes from the line of Doug Creutz with TD Cowen. We did lose connection with Mr. Creutz. We will move to our next question, Eric Handler with Roth Capital. First,

Eric Handler
MD & Senior Research Analyst at Roth Capital Partners, LLC

I thought it was very interesting with all the industry discussion that's been going on about maybe prices for for games going up to $80, you chose a different path with with Mafia in doing a $50, 60 dollar price SKU. Can you maybe talk about what went into that decision? And do you see future, game releases sort of having a variable pricing along a wide range scale?

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

So, 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, and and we need to deliver value in so doing. So that's really how we look at it.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

In the case of Mafia, the old country, you know, we think it's extraordinary, extraordinary. It looks amazing, and we wanna get it into as many hands as we possibly can. And I I think our view is that if you create a huge hit and everyone wants it and everyone buys it, the revenue is gonna take care of itself.

Eric Handler
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. And then as a follow-up, I guess, for Lainie, maybe a little of accounting. The 3 and a half billion dollar 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
Lainie Goldstein
CFO at Take-Two Interactive

Eric, we haven't discussed which of our reporting units the impairment was from, but it was a partial impairment of one of our units. And it's result of updating long term expectations, and that's 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
MD & Senior Research Analyst at Roth Capital Partners, LLC

Thanks.

Operator

Our next question comes from the line of Douglas Kreutz with TD Cowen. Your line is open.

Doug Creutz
Managing Director at TD Cowen

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, were able to reach low to mid-twenty percent operating margins in the wake of the success of Red Dead two 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 you would not be able to reach those margin levels again? Thank you.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

There's no reason why we wouldn't be able to reach those margins. That is, you know, 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, you know, 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. And you'll see that in our expenses being reduced this year and seeing those margins coming down.

Doug Creutz
Managing Director at TD Cowen

Great. Thank you.

Operator

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

Colin Sebastian
Senior Research Analyst at Baird

Thanks. I appreciate the questions. I have a couple. I I guess, first, the mobile segment performance looks looks impressive relative to the broader mobile gaming space. So so hoping you could maybe drill down on that a bit in terms of what's working in this environment, that could be customer acquisition retention or or game mechanics.

Colin Sebastian
Senior Research Analyst at Baird

And then maybe some of the background of why the segment wouldn't necessarily be positioned to grow again, this fiscal year. Thank you.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

You're right. The the mobile gaming segment's a challenging one broadly. Creating new mobile hits is incredibly difficult. And 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. So we feel really good about what's going on.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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 Rolex are doing a great job along with many other studios at Zynga.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

And given the outstanding results that we saw from a lot of our top titles in fiscal two thousand and twenty five, Some of those are mature titles that have been out for many years. We expect that there may some be some moderation of trends for those titles in fiscal two thousand and twenty six, and, that's what's affecting that business into next year.

Colin Sebastian
Senior Research Analyst at Baird

Okay. Thank you.

Operator

And our next question comes from the line of Chris Scholl with UBS. Your line is open.

Christopher Schoell
Christopher Schoell
Equity Research Associate at UBS Group

Great. Thank you. You mentioned a new baseline for the business on net bookings once GTA VI launches in fiscal twenty twenty seven. In the past, I know you pointed to $8,000,000,000 of annual bookings and over $1,000,000,000 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?

Christopher Schoell
Christopher Schoell
Equity Research Associate at UBS Group

And as you think about the sustainability of performance post g t a six's console release, can you help us think through some of the key drivers in your mind? Thank you.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

I'll take a shot at it. However, we do issue annual guidance for a reason. Know, 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 our both our hopes and our expectations, we're more optimistic than we were before. And that optimism is reflected in our expectations for net bookings and our expectations for free cash flow.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

We just, in the 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 twenty six and '27. And the guidance we just gave, of course, in the absence of the release of of Grand Theft Auto six still reflects meaningful year over year top line growth and reflects a new record for net bookings for this company.

Christopher Schoell
Christopher Schoell
Equity Research Associate at UBS Group

Got it. Thank you. If I can just fit one more in. Going back to the first GTA six trailer, I believe you saw a meaningful uplift in engagement and monetization for GTA Online with it. Appreciate it's early, but are you seeing similar uplift right now from the second trailer?

Christopher Schoell
Christopher Schoell
Equity Research Associate at UBS Group

And could that potentially drive some upside versus your expectations for declines at GTA Online in fiscal 'twenty six?

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

Well, 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 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, you know, one week or ten day results. However, just as a reminder, and I think most everyone knows this, the the trailer did set a record for views in its first twenty four hours, four hundred and seventy five million. So, essentially, once again, Rockstar Games broke the Internet, and, we feel really good about that and what that means for the upcoming release of GTA six.

Christopher Schoell
Christopher Schoell
Equity Research Associate at UBS Group

Great. Thank you very much.

Operator

And our next question comes from the line of Andrew Merrick with Raymond James. Your line is open.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

Hi. Thanks for taking my questions. Maybe first on the Nintendo Switch. So pretty exciting news, you know, with Borderlands four coming, to the platform as well as Civ seven. So I guess as you've seen the reception and and seen the technical specifications of that platform over the last little bit, how do you think, what are the boundaries of of the Switch as a partner, a distribution partner for you?

Andrew Marok
Andrew Marok
Director at Raymond James Financial

Is it something where the entire, take two lineup is eligible, or is it really just kind of an opportunistic thing for certain titles? And then I have a follow-up.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

You know, we're we're launching, four titles with Nintendo Switch two, and that's, I think, a bigger array of releases than we've ever offered before with a new Nintendo platform. You know, 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 for the platform. I in terms of what we would bring to any platform, we address it on a case by case basis. We we obviously wanna be where the consumers are.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

But, you know, we we would we would, not necessarily bring every title to every platform. There are also great catalog opportunities as well.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

Understood. Thank you. And then maybe one on the mobile side. So Zynga, as you mentioned, on a little bit of a role here. It seemed like Match Factory was one of the was one of the titles that kind of seems like an an inflection point.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

So I guess the question I would have is how much of the match factory playbook is instructive to future Zynga releases and and current successes like Color Block Jam? And, again, how much of that is kind of idiosyncratic to the title being launched? Thank you.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

I think we learned from every release. We learn on the dev side. We learn on the marketing side of of remember, Color Block Jam came from a different studio than Match Factory. Match Factory came from Geek. Color Block Jam from Rollock.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

And I think Color Block Jam was really a reflection of an evolution of strategy at Rolex. However, all of our studios work together. That's the whole point of being one company. They have great creative independence. They do coordinate.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

They share best practices. Then Zynga itself, obviously, shares best practices with take two, other labels of take two. An example of that is our consumer database, which has many hundreds of millions of consumer records that we are, you know, able to address legally, and 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 in launching 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, and there are very few companies that are close to as large as we are in the mobile space.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

None of that matters if you don't make something consumers want, and that's the trick. That's what's hard. That's hard in mobile. It's hard in console. It's hard in the entertainment business broadly, but that's our job.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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

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

Matthew Cost
Matthew Cost
Analyst at Morgan Stanley

Hi, everybody. Thanks for taking the questions. I guess just starting out on on NBA two k. I mean, another, you know, really strong quarter for that franchise, you know, second in a row. I guess, is is there anything that you would call out that's driving that continued strength and even the acceleration versus what you saw, last quarter? And then separately on the mobile side, when you think about the impact, you know, 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
Karl Slatoff
President at Take-Two Interactive

So, on the NBA side, look, I don't think there's anything specific that's been done in this quarter that would call out the performance of the NBA, which has been absolutely fantastic. Think it's more a reflection on the ongoing strategy and the ongoing strength of this particular iteration. The team at two k 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're on a twelve month cycle. And particularly this year, the the folks at two k Visual Concepts really listened to the consumer and focused on that core consumer on bringing back a lot of features that consumers are asking for or from the past. Like, for example, the auction house and the my team excuse me, in the my team mode, working on different new like, dribbling mechanics, etcetera.

Karl Slatoff
Karl Slatoff
President at Take-Two Interactive

All these things add up to make the game just better and better. And the focus is always on engagement, and that's where the growth has really been is that year over year, this game has engagement has gone up. I mean, the engagement this in this particular quarter has just been fantastic. And that's without regard to the increase of 7% on on units year over year. So that that relentless focus on quality is really what's driving that success.

Karl Slatoff
Karl Slatoff
President at Take-Two Interactive

And, you know, I said specifically in the quarter, my team's having a fantastic quarter, so that helps a lot as well.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

With regard to direct to consumer, we we entered the direct to consumer business in mobile immediately upon closing the acquisition of Zynga, and it's 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've been saying for years that I expected the cost of third party distribution to decline. I've 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 movement in that direction. It is early. However, these are all positive signs for us.

Operator

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

Eric Sheridan
Eric Sheridan
Analyst at Goldman Sachs

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? And 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
Karl Slatoff
President at Take-Two Interactive

So our partners our partner with Netflix has been fantastic. Obviously, the most attractive part of that is that, number one, they they seem very serious about gaming and have shown that over and over at this point, which is which is great news for us. And there are a lot of consumers. And when Netflix gets together and with the marketing power that they have with incredible content, which we've been able to offer, then you know that's gonna be a great recipe for success. So we're very sanguine on that relationship.

Karl Slatoff
Karl Slatoff
President at Take-Two Interactive

You know, we've only done a few titles at this point. And but, obviously, we think that there's an opportunity, again, on a game by game basis for us to continue to bring titles to the Netflix. I'm not announcing anything at this point, but we do think that they're 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 with Netflix.

Karl Slatoff
Karl Slatoff
President at Take-Two Interactive

So we we are looking at things of that opportunity, but I wouldn't say that's driving the partnership. That's sort of a nice to have, not necessarily must have for the partnership. But when you can bring that kind of synergy value to the table, obviously, that's always a a strong consideration and and a nice thing for us to do.

Eric Sheridan
Eric Sheridan
Analyst at Goldman Sachs

Great. Thank you.

Operator

And our next question comes from the line of James Feeney with Jefferies. Your line is open.

James Heaney
James Heaney
SVP - Equity Research at Jefferies

Great. Thanks guys for the questions. Just looking at your guidance for fiscal twenty twenty six, 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 and then just anything on, you know, GTA related marketing costs for the second half? Thanks.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

We expect operating expense growth of approximately 3% year over year and that is largely due to higher marketing expenses and that is for our current year marketing for our current year titles and for future titles. But 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
James Heaney
SVP - Equity Research at Jefferies

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

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

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

Operator

Our next question comes from the line of Michael Hickey with The Benchmark Company. Your line is open.

Mike Hickey
Equity Research Analyst at The Benchmark Company LLC

Hey, Charles, Lainie, Carl and Nicole. Congrats guys on a quarter and strong year. Just two questions from us. First on GTA VI, 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?

Mike Hickey
Equity Research Analyst at The Benchmark Company LLC

Obviously, it's one of the biggest franchises in the world. And how you're measuring this demand just besides the trailer views? That's the first question. And then the second question, as a follow-up on the software pricing, you know, Microsoft and attend to 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
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

We all do. Look. Grand Theft Auto five has been the standard bearer, not just for our company, but for the industry. Since it was launched, it's you know, it's not only survived through three console generations. It's thrived, and here it is this many years later and still, you know, the number one titles since GTA five is sold in February units, and continues to sell.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

And Grand Theft Auto Online, you know, just had a phenomenal quarter, and GTA plus is doing great. So consumers are actively engaged with all things, Grand Theft Auto. This is an ongoing business. And yet, in terms of a new iteration, it's been some time. So there's enormous anticipation on the one hand.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

On the other hand, it's still fresh. It's still in market. So, you know, everyone anticipates the next James Bond movie, but there's nothing in between. You know, what you 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, and lots of people are currently engaged today with Grand Theft Auto.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

Today. So I I think that's, that's one sign. Obviously, 475,000,000 trailers in twenty four hours tells you something. It it's not just that, wow, that was a great trailer. It tells you something more than that.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

And we, of course, do market research around here. And the market research that we've done is is pretty astonishing. But look, we're 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.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

That's our job. The 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.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

And as I said earlier in the call, we wanna focus on value. We wanna deliver way, way, way more value to a consumer than whatever that consumer pays. That's our job. We have to do that job. And, and that's our focus, not not on what the top line price is.

Mike Hickey
Equity Research Analyst at The Benchmark Company LLC

Thank you, Strauss. Good luck, guys.

Operator

And our next question comes from the line of Brian Pitts with BMO Capital Markets. Your line is open.

Brian Pitz
Brian Pitz
Managing Director and Senior Analyst at BMO Capital Markets

Yeah. Thanks for the question. On console price increases to the gaming ecosystem, any impact on your guide for this year? And if so, maybe help us size that impact? And then looking at the nearly $2,000,000,000 of software development costs on the balance sheet for capitalizing games and development, Any color you could provide as to what percent is related to GTA six versus other titles? Thanks.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

Look. Our our guide is for, you know, the next, ten months, essentially. That's the, you know, that's the the part of the fiscal year that hasn't elapsed yet. And, it's very difficult to predict where tariffs will land, given how, things have bumped around so far. We feel reasonably confident that our our guide wouldn't be meaningfully affected in unless tariffs ran off in a very different direction than we currently expect.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

In any case, there's already a very substantial installed base for all of our target platforms except Nintendo Switch two, which is yet to be launched. And so so we have, I think, enough insight that we wouldn't be meaningfully affected by any changes.

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

And for the balance sheet, the 2,000,000,000 of development costs, it really is supporting our extremely robust, release schedule that we talked about for the next few years, and we don't discuss on a title by title basis.

Brian Pitz
Brian Pitz
Managing Director and Senior Analyst at BMO Capital Markets

Thanks, everyone.

Operator

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

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

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

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

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

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

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

Lainie Goldstein
Lainie Goldstein
CFO at Take-Two Interactive

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

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Thank you.

Operator

And 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
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

Well, first, as always, thank you for joining us today. Obviously, this was a good news 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 our incredibly hardworking creative labels. And I wanna express enormous appreciation for the work of our colleagues. That work is what delivers the results.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

We just get to talk about them. I also wanna 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.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

We think that the release schedule that we have coming to market is second to none, certainly second to none in our history, and it's our job to deliver. We don't ever take credit for things that don't happen. A lot of what we talked about today is in the future. We know we have to buckle down every day, and and deliver the results. Arrogance is the enemy of continued success.

Strauss Zelnick
Strauss Zelnick
Chairman and CEO at Take-Two Interactive

So 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

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

Executives
Analysts
    • Nicole Shevins
      SVP of IR & Corporate Communications at Take-Two Interactive
    • Eric Handler
      MD & Senior Research Analyst at Roth Capital Partners, LLC
    • Doug Creutz
      Managing Director at TD Cowen
    • Colin Sebastian
      Senior Research Analyst at Baird
    • Christopher Schoell
      Equity Research Associate at UBS Group
    • Andrew Marok
      Director at Raymond James Financial
    • Matthew Cost
      Analyst at Morgan Stanley
    • Eric Sheridan
      Analyst at Goldman Sachs
    • James Heaney
      SVP - Equity Research at Jefferies
    • Mike Hickey
      Equity Research Analyst at The Benchmark Company LLC
    • Brian Pitz
      Managing Director and Senior Analyst at BMO Capital Markets
    • Martin Yang
      Senior Analyst at Oppenheimer & Co. Inc.
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