Take-Two Interactive Software Q1 2027 Earnings Report

Take-Two Interactive Software EPS Results

• Actual EPS: -$0.18
• Consensus EPS: $0.33
• Beat/Miss: Missed by -$0.51
• One Year Ago EPS: -$0.07

Take-Two Interactive Software Revenue Results

• Actual Revenue: $1.53 billion
• Expected Revenue: $1.36 billion
• Beat/Miss: Beat by +$176.09 million
• YoY Revenue Growth: -2.10%

Take-Two Interactive Software Announcement Details

• Quarter: Q1 2027
• Date: 8/7/2026
• Time: Before Market Opens
• Conference Call Date: Friday, August 7, 2026
• Conference Call Time: 8:00AM ET

Take-Two Interactive Software (NASDAQ:TTWO) is an American video game publisher headquartered in New York City. Founded in 1993 by Ryan Brant, the company is publicly traded on the NASDAQ under the ticker TTWO and is led by Chairman and CEO Strauss Zelnick. Take-Two operates through distinct publishing labels that manage development, marketing and distribution of interactive entertainment for a global audience.

Take-Two’s publishing portfolio includes Rockstar Games and 2K, as well as the Private Division label, which supports independent and mid-size developers. Its major franchises span a variety of genres and platforms and include Grand Theft Auto and Red Dead Redemption (Rockstar), as well as 2K-owned series such as NBA 2K, BioShock, Borderlands and Civilization. The company distributes games across consoles, PC and mobile devices and supports titles post-launch with downloadable content, live-service updates and in-game offerings.

Take-Two serves markets worldwide, leveraging digital distribution, licensing and merchandising to extend franchise value and recurring consumer engagement. The company pursues a mix of internally developed projects, third‑party publishing partnerships and strategic investments to broaden its content and technical capabilities. Take-Two’s business model emphasizes high-quality, narrative-driven blockbuster titles alongside recurring-revenue sports and live-service products to sustain long-term player communities and commercial performance.

Take-Two Interactive Software Q1 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: First-quarter net bookings reached $1.39 billion, slightly above the high end of guidance, driven by stronger-than-expected NBA 2K and Grand Theft Auto performance. Management reiterated fiscal 2027 net bookings guidance of $8.0 billion-$8.2 billion, representing approximately 20% growth at the midpoint.
• Positive Sentiment: Grand Theft Auto VI remains the key catalyst, with an exceptional start to pre-orders ahead of its November 19 release. Management said anticipation continues to build but cautioned that pre-orders may pull forward some post-launch sales and that no units have yet been sold.
• Positive Sentiment: NBA 2K26 delivered a record year, with more than 12 million units sold, unit growth of 9%, recurrent consumer spending up 7%, and substantial increases in player engagement. Take-Two expects NBA 2K27 to continue benefiting from innovation and additional growth opportunities.
• Neutral Sentiment: Mobile performance was broadly in line with expectations, though net bookings declined 7% year over year due largely to difficult comparisons with Color Block Jam. Management reported healthy engagement across titles such as Toon Blast, Words with Friends, and Top Eleven, while noting pressure on user-acquisition costs.
• Negative Sentiment: Cost of revenue rose 17% to $651 million, including a $43 million impairment charge tied to an unannounced third-party title that will not proceed. Full-year capital-expenditure expectations also increased to approximately $290 million due to a planned real-estate purchase.

Presentation

[Operator]

Everyone. Thank you for joining us, and welcome to Take-Two Interactive Software's first quarter fiscal year 2027 results conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Nicole Shevins, SVP, Investor Relations and Corporate Communications. Nicole, please go ahead.

[Nicole Shevins, SVP of Investor Relations and Corporate Communications at Take-Two Interactive Software]

Good morning. Thank you for joining our conference call to discuss our results for the first quarter of fiscal year 2027 into June 30, 2026. 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.

[Nicole Shevins, SVP of Investor Relations and Corporate Communications at Take-Two Interactive Software]

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. 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 taketwogames.com.

[Nicole Shevins, SVP of Investor Relations and Corporate Communications at Take-Two Interactive Software]

Now I'll turn the call over to Strauss.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Thanks, Nicole. Good morning, thank you for joining us today. Fiscal 2027 is off to an excellent start, led by the power of our diverse portfolio and the strong, consistent execution of our strategy at all of our labels. We delivered first-quarter net bookings of approximately $1.39 billion, which was slightly above the high end of our guidance range, primarily due to the outperformance of NBA 2K and the Grand Theft Auto series. We're reiterating our fiscal 2027 outlook for net bookings of $8 billion-$8.2 billion, which reflects both ongoing positive trends in our business and our high degree of confidence around the November 19th release of Grand Theft Auto VI. We expect to sustain this new level of scale and generate strong cash flows for the next several years as we release a robust development pipeline, capitalize on incremental opportunities within our highly-established kit franchises, and continue to apply our proven, long-term approach to managing the company.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Turning to highlights for the period. NBA 2K26's performance was outstanding and concluded a record year for the franchise. To date, the title has sold in over 12 million units, reflecting 9% growth compared to NBA 2K25. Engagement was up meaningfully during the quarter, with recurrent consumer spending growing 7%, driven by a 15% increase in average daily active users, a 25% increase in MyCAREER daily active users, and a 35% increase in average games played per user.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

The achievements of this year's iteration of the series are a testament to Visual Concepts' ability to continually deliver new, innovative ways for fans to stay engaged, and our live service execution remains a cornerstone of NBA 2K's sustained success. During the quarter, 2K also supported Borderlands 4, Sid Meier's Civilization VII, and WWE 2K26 with an array of new offerings, which enhanced player engagement and sentiment. The Grand Theft Auto series once again exceeded expectations, and to date, Grand Theft Auto V has sold in over 230 million units worldwide. Recurrent consumer spending for the series grew 3%, and GTA+ continues to thrive, all led by a series of content offerings, including the addition of the Rockstar Mission Creator, an all-new suite of innovative and in-depth tools empowering the player community to bring missions to life.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Global excitement for the launch of Grand Theft Auto VI continues to build, with the title having an exceptional start to pre-orders. With Rockstar Games' recent announcement of Grand Theft Auto VI and an extended look coming on August 27th, we believe that consumers' passion and anticipation for the next evolution of this iconic series will grow further leading up to the title's November 19th release. Turning to our mobile business, Zynga performed in line with our expectations, and we're pleased that many of our forever franchises continued to resonate with players. Net bookings for Toon Blast grew 8% over last year. The title was supported by a new marketing campaign featuring Emmy-nominated actor Giancarlo Esposito. Empires & Puzzles maintained steady momentum, anchored by a successful ninth anniversary campaign and the introduction of new heroes and character abilities.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Words with Friends exceeded our forecast, with net bookings growing 8% year-over-year, led by strong ad performance and higher player engagement with several features, including Dice Challenge, the title's latest permanent one-on-one game mode. Top Eleven surpassed our expectations with net bookings increasing 15% year-over-year as fans enjoyed a special in-game event featuring player versus environment matches in 10 international locations. 2K's mobile offerings continue to perform well with strong downloads and engagement across key titles. NBA 2K All-Star, our mobile title in China in partnership with Tencent, surpassed 10 million registered users since launching last year and is yielding strong profit margins. Our mobile direct-to-consumer channel remains a significant driver of revenue and margin enhancement, with many of Zynga's titles offering this feature and further growth anticipated.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Guided by our core pillars to be the most creative, innovative, and efficient entertainment company in the world, our 13,000 colleagues share a singular vision for excellence and hit creation. Each day, we strive to bring joy to our player communities and value to our shareholders. I'd like to express my gratitude to our teams for their immense passion and unwavering commitment to our mission to make the most captivating and engaging experiences in the entertainment business. We believe that fiscal 2027 will be an inflection point for Take-Two, one that will write an exciting new chapter in our history and provide the foundation for new levels of success and the creation of groundbreaking entertainment experiences. I'll now turn the call over to Karl.

[Karl Slatoff, President at Take-Two Interactive Software]

Thanks, Strauss. I'd like to thank our teams for delivering a great start to the year and setting the stage for the most exciting pipeline in our company's history. I'll now discuss our recent and upcoming releases. On July 8th, 2K and HB Studios launched Season 7 for PGA TOUR 2K25, a free update which added the 154th Open Championship at Royal Birkdale Golf Club. The team is planning to launch Season 8 in late September and is hard at work on this year's release of PGA Tour 2K27. 2K will share more details in the coming months. On July 14th, Rockstar Games launched The Kortz Center Heist for GTA Online, which introduced an all-new blockbuster heist targeting Los Santos Premier Cultural Institution with an array of artwork for the taking.

[Karl Slatoff, President at Take-Two Interactive Software]

On July 30th, 2K and Gearbox launched Bounty Pack 4: Murders & Acquisitions for Borderlands 4, which includes a new story mission and cosmetic items. Fans can look forward to even more action in September when Gearbox releases additional content, including the title's next story pack. On August 14th, 2K and Hangar 13 will release the Man of Honor story expansion for Mafia: The Old Country. With Hangar 13's industry-leading capabilities and narrative-driven action titles, players will enjoy two new story chapters and all-new content for the game's Free Ride mode. 2K and Visual Concepts will launch the WrestleMania 42 Pack for WWE 2K26 on August 19th, followed by new seasons as part of the Ringside Pass during the fall. WWE 2K27 is currently in development, and 2K will provide updates later this year.

[Karl Slatoff, President at Take-Two Interactive Software]

On September 4th, 2K and Visual Concepts will launch NBA 2K27, the next installment of our industry-leading basketball simulation that provides the most realistic and authentic NBA experience in interactive entertainment. This year, Victor Wembanyama of the San Antonio Spurs will be on the cover of the standard edition, Caitlin Clark of the Indiana Fever will be on the cover of the deluxe edition, and Chicago Bulls legend Derrick Rose will be on the cover of the ultra edition, with early access available as part of the deluxe and ultra editions. Last week, a first-look trailer of NBA 2K27's gameplay was revealed, and the response has been positive, with fans and the media expressing excitement over the title's improved graphics and enhanced player movement and presentation. 2K will share more about the game soon, including the NBA 2K27 preseason breakdown and full game reveal on August 18th.

[Karl Slatoff, President at Take-Two Interactive Software]

Zynga will continue to focus on enhancing its existing mobile portfolio with bold beats and updates, as well as releasing new titles, including Top Goal, which is currently in soft launch. The title recently introduced real-world soccer stars, as well as enhanced 3D match simulation and player-versus-player gameplay. In closing, we are deeply excited about this year, highlighted by the November 19th launch of Grand Theft Auto VI, which will usher in a new era of growth for our company and returns for our shareholders. We remain steadfast in our mission and commitment to delivering the highest-quality entertainment experiences that captivate and engage audiences throughout the world. I'll now turn the call over to Lainie.

[Lainie Goldstein, CFO at Take-Two Interactive Software]

Thanks, Karl, and good morning, everyone. We achieved excellent first quarter results driven by our powerful franchises, industry-leading talent, and unwavering commitment to our strategic vision. I would like to thank our teams for their hard work, which has enabled us to reach this exciting point within our company's history. Turning to our results, we delivered first-quarter net bookings of $1.39 billion, which was slightly above our guidance range of $1.32 billion-$1.37 billion. This primarily reflected better-than-expected performance from NBA 2K and the Grand Theft Auto series. Recurrent consumer spending declined 1% for the period, which was favorable to our guidance of a 3% decline and accounted for 84% of net bookings. NBA 2K grew 7%, the Grand Theft Auto series rose 3%, and as expected, mobile declined 7% over last year. GAAP net revenue increased 2% to $1.5 billion.

[Lainie Goldstein, CFO at Take-Two Interactive Software]

While cost of revenue rose 17% to $651 million and included a $43 million impairment charge related to the decision not to proceed with an unannounced title from a third-party developer. Operating expenses were flat at $918 million. On a management basis, operating expenses declined 1% year-over-year, which was favorable to our forecast of 3% growth due to timing of marketing expenses across our labels. With the ongoing positive trends in our business and excitement around the November 19th release of Grand Theft Auto VI, we are reiterating our fiscal 2027 net bookings outlook range of $8 billion-$8.2 billion, which represents approximately 20% growth over fiscal 2026 at the midpoint.

[Lainie Goldstein, CFO at Take-Two Interactive Software]

The largest contributors to net bookings are expected to be the Grand Theft Auto series, NBA 2K, Toon Blast, Match Factory!, Empires & Puzzles, Words with Friends, the Red Dead Redemption series, WWE 2K, Color Block Jam, and Zynga Poker. We continue to expect recurrent consumer spending to be in line with fiscal 2026 and to represent 64% of net bookings. The underlying drivers remain unchanged. The NBA 2K is projected to grow high single digits. The Grand Theft Auto series is expected to be up, and mobile expected to be down due to last year's success of Color Block Jam and our assumption that trends will moderate for several of Zynga's mature mobile titles. We now expect the net bookings breakdown from our labels to be roughly 37% Rockstar Games, 34% Zynga, and 22% 2K.

[Lainie Goldstein, CFO at Take-Two Interactive Software]

We continue to forecast operating cash flow in excess of $1 billion, we remain on track to be in a net cash position by the end of the fiscal year. We now plan to deploy approximately $290 million of capital expenditures, which is up from our prior forecast due to a planned real estate purchase. We continue to expect GAAP net revenue to range from $7.9 billion-$8.1 billion, while we now expect cost of revenue to range from $3.54 billion-$3.66 billion. Our total operating expenses are now expected to range from $4.15 billion-$4.17 billion. On a management basis, we expect operating expense growth of approximately 7% year-over-year, which is down slightly from our prior forecast. Moving on to our guidance for the fiscal second quarter.

[Lainie Goldstein, CFO at Take-Two Interactive Software]

We project net bookings to range from $1.62 billion-$1.67 billion, compared to $1.96 billion in the second quarter last year. Our release slate for the quarter includes NBA 2K27 as well as new content updates for various titles. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory!, Empires & Puzzles, Words with Friends, Color Block Jam, the Borderlands franchise, the Red Dead Redemption series, and Zynga Poker. We project recurrent consumer spending to decline by approximately 5%, which assumes growth for NBA 2K and the Grand Theft Auto series, while mobile is expected to be down. We expect GAAP net revenue to range from $1.42 billion-$1.47 billion. Operating expenses are planned to range from $1.01 billion-$1.02 billion.

[Lainie Goldstein, CFO at Take-Two Interactive Software]

On a management basis, operating expenses are expected to decline by approximately 5% year-over-year, as last year included significant marketing expenses for the launch of Borderlands 4. Looking ahead, fiscal 2027 is on track to be a milestone year for our company, led by the release of Grand Theft Auto VI. We have great ambitions as our teams have carefully curated new opportunities that we believe will sustain this new level of scale for the foreseeable future, including live service enhancements, franchise extensions, the launch of new IP, and international expansion. In addition, we will continue to evaluate accretive M&A. As we bring these opportunities to fruition, we are confident in our ability to enhance our financial profile further and generate strong cash flows, setting us on a path to deliver continued growth and long-term shareholder returns. Thank you. I'll now turn the call back to Strauss.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for an excellent start to what is poised to be an outstanding year for Take-Two. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

[Operator]

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Doug Creutz with TD Cowen. Your line is open. Please go ahead.

[Doug Creutz, Analyst at TD Cowen]

Thank you. One of your peers that reported previously suggested that there had been some slowdown in the mobile market in Q2, which they attributed to macro uncertainty. Just wondered if you saw the same thing, or if you saw different things. Any commentary you could offer would be helpful.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

No, it's really not what we're seeing. Our results have been affected by how Color Block Jam is doing versus last year in terms of comping, because it was a new title last year. Apart from that, we've delivered some really good news in mobile. There's no doubt there's a bit of pressure on user acquisition at the moment. I think that comes and goes in the marketplace. No, we don't feel like the consumer's pulling back at all.

[Doug Creutz, Analyst at TD Cowen]

Great. Thank you.

[Operator]

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

[Andrew Marok, Analyst at Raymond James]

Hi. Thanks for taking my questions. Maybe one on the GTA VI extended look. I guess if you could give us a little bit more color on the thinking that went into the decision to go with Netflix for the timed exclusivity, rather than just the traditional route of releasing it on a free platform like YouTube or through Rockstar Games socials.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

This is a first-of-its-kind partnership with Netflix. They're a great marketing partner for us and a distribution partner, as you know. We also work with virtually every social media outlet on Earth. This is part of Rockstar Games' marketing strategy. We're excited for everyone to see an extended look of Grand Theft Auto VI. I'm not prepared to tell you how it's going to go, but I feel really good about it. Of course, six hours after the initial launch on Netflix, it'll be available on the Rockstar Games channel on YouTube, and I think ultimately many other outlets.

[Andrew Marok, Analyst at Raymond James]

Great. Thank you. Maybe one more, if I could. Not that you needed any other tailwinds into GTA VI launch excitement, but can you talk a little bit about The Kortz Center update for GTA Online and maybe how that's been in terms of bringing in some lapsed players ahead of the GTA VI launch? Thank you.

[Karl Slatoff, President at Take-Two Interactive Software]

We're actually very pleased with how things are going right now. We typically don't give specific details about how releases are doing. I can tell you that right now we're very pleased with how things are going. Like all the Rockstar releases, they're exciting, they're well received by players, and they always reactivate folks. So far so good.

[Operator]

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

[Brian Pitz, Analyst at BMO Capital Markets]

Thanks for the question. You recently announced the $80 base game for GTA VI, ultimately decided to leave NBA 2K27 base pricing at $70. As you think about go forward base pricing, help us understand how you're thinking about being able to price games at a more premium price, with more traditional AAA game prices around the $70 price point. Thank you.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

We've said this many times. Our goal is to deliver way more value to consumers than what we charge them. The truth is that the real cost of a AAA video game is a whole lot lower today than it was 20 years ago. Pricing has not kept pace with inflation. Our goal is to continue to over-deliver for our consumers because how you feel about any experience is the intersection of the experience itself and what you paid for it. To say that we expect that Grand Theft Auto VI will be an incredible bargain as experiences go is a gross understatement because Rockstar Games is known for over-delivering.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

When people engage with our titles, Karl just answered a question about GTA Online. Remember, we're 13 years after GTA Online was launched, and people are still highly engaged, and we have record-setting engagement at times. That's our goal. Our goal is not to maximize price. In this case, I think what we've decided to do makes a whole lot of sense in the context of what we're delivering, and that's the lens through which we'll look going forward as well.

[Brian Pitz, Analyst at BMO Capital Markets]

Thanks, Strauss.

[Operator]

Your next question comes from the line of Eric Handler with Roth Capital. Your line is open. Please go ahead. A gentle reminder to unmute locally.

[Eric Handler, Analyst at Roth Capital]

Sorry about that. Good morning. Apologies, I had you on mute. Strauss, wonder if you could give a little bit of background on the decision to go with Netflix for the extended trailer launch. Did they approach you? Did you approach them? I assume for exclusivity, they probably paid a little bit of a premium to get that.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Netflix is a close partner of the company, and we have tight relationships up and down the line. We're always in conversation about things that we can do together. This is a groundbreaking partnership that Rockstar arranged with our friends at Netflix. We're really excited about how it's going to come about. I wouldn't normally give details on sort of the nature of the back-and-forth or the terms of the arrangement.

[Eric Handler, Analyst at Roth Capital]

Okay, thanks. As a follow-up, with chip costs rising so much and the input costs for hardware rising significantly, there's talks about the next-gen consoles maybe getting delayed. I know you're a software company and you produce for whatever is out there; I'm curious about your big picture thoughts on the industry, just given the rising cost of hardware.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Look, the rising cost of hardware is not a good thing. We wouldn't argue that it is. I don't think it will slow us down any because we believe we're delivering experiences that people want. However, a lower price point for hardware would be a good thing because there'd be more hardware in people's hands. I cannot argue this is a positive, equally, we don't see it as a headwind either. Going forward, look, two things that I think are relevant. Probably the most relevant thing is the world continues to move to open systems. That will continue. 20 years ago, when we showed up here at Take-Two for a console release that was available on PC at launch, PC would represent 1%-2% of the overall sales. Today, that can be 40% or 50% in a similar situation.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

I believe that's going to grow because people have PCs that have outboard controllers, they work great as game machines, and I think that will continue. Number two, with the advent of streaming, which we really do believe is around the corner in terms of having something that's low latency and really works well for consumers, machines that weren't game machines before will become game machines. Without regard to what happens in the console business, which is of consequence to us, of course, we see the overall installed base as a practical matter growing materially. If you believe in streaming, and to be clear, we really do, and I'm happy to put a timeline on it. I think we'll be in commercial streaming mode within three years. By commercial, I mean low latency. That can 10x the effective installed base.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

It doesn't mean we're going to 10x our revenue, and we wouldn't project that we would, because obviously your avid consumers already had access to video game machines. I do think it creates great opportunity for titles that are broadly desirable even outside of core markets. We do have titles like that, obviously. The third thing is that interactive entertainment, and the most important thing, remains America's pastime and the world's pastime. It is the fastest-growing part of the entertainment business. That's going to continue as the cohort ages and grows. All we need to do is the hardest thing you can do, which is continue to make hits.

[Eric Handler, Analyst at Roth Capital]

Thank you.

[Operator]

Your next question comes from the line of Colin Sebastian with Baird. Your line is open. Please go ahead.

[Colin Sebastian, Analyst at Baird]

Thanks. Good morning. I appreciate the questions. I guess on NBA, the next game coming up here shortly, following another strong year for the franchise, what do you think is going to be part of this game that might differentiate or provide another opportunity to grow the franchise another year? Secondly, on an unrelated topic, just curious on any update to how your studios are deploying AI tools internally. I know we've talked about this quite a bit, the technology seems to be developing fairly quickly. Are those tools capturing any additional value and perhaps maybe more measurable efficiency? Any commentary on that would be helpful. Thank you.

[Karl Slatoff, President at Take-Two Interactive Software]

In terms of NBA, obviously NBA 2K26 performance was outstanding. It was a record for us, both on units and engagement, I think that's the key. We get the same question almost every quarter, certainly every year, about how high can high be and how the growth is. Every time we get the question, we answer it the same way. It's really is, I don't want to say it's unlimited, there's still a huge amount of growth potential in the NBA franchise. That would be coming both from increased units, geographic expansion, et cetera, and bringing more customers back year-over-year. There's still a lot of wood to chop there, and also more and more engagement. We continue to refine that.

[Karl Slatoff, President at Take-Two Interactive Software]

What really drives that is the folks at Visual Concepts and 2K and their efforts to year upon year to innovate. It's really hard to do that on an annual release. Yet somehow, through the brilliance and hard work of the team, they're able to do it. I would just answer it the same way we have before, which is the growth is going to be coming from the same place it always does, and that's through the innovation, the creativity of the teams. We did announce some fun things in terms of cover athletes for NBA 2K27. I'm going to leave all the exciting news about what's next for that title with 2K, which is August 18th, I think, is when there's going to be more of a reveal.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

With regard to your question about AI, look, we are first and foremost an entertainment company and always have been. However, we're an entertainment company that creates its entertainment in computers and always has. This company, its products, and its approach was built on AI and machine learning well before it became a buzzword du jour. We're dyed-in-the-wool adopters of new technology to the extent it enhances our ability to do what we do. We have a three-part strategy, two parts of which are innovation and efficiency. We have projects that sort of fall into both the basic research and the applied research buckets here to see, on the basic research side, the art of the possible, on the applied research side, how we can innovate more and how we can create additional efficiencies. That threads through our entire company.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

All that said, the first of our core pillars is creativity. We have 13,000 colleagues around the world, the vast majority of whom are people who are creative every day. We believe that technology can enhance their creativity, but we do not believe it can or should replace their creativity. Ultimately, we make bespoke entertainment products, and we aim to make the best ones in the world. Technology should make it easier for our incredibly creative people to innovate. For better or for worse, and I happen to think it's very much for the better, those tools are not going to replace anyone.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Unlike some of our competitors who are announcing opportunities to save hundreds of millions of dollars with AI, I've said since the beginning that the history of new technology in the interactive entertainment business is efficiencies are indeed created, and we find ways to do bigger and bigger things. We actually don't reduce the cost of doing those things, but we can meaningfully increase the quality. What does meaningfully increasing the quality mean for us? It means making bigger and bigger hits that appeal to more and more consumers, and that's our job. Our job is not to lead in technology. Our job is to lead in entertainment. As it happens, we use technology to try to do that.

[Colin Sebastian, Analyst at Baird]

Great. Thank you.

[Operator]

Your next question comes from the line of Chris Schoell with UBS. Your line is open. Please go ahead.

[Chris Schoell, Analyst at UBS]

Great. Thank you. In the slides and prepared remarks, you mentioned international expansion and evaluating accretive M&A. Can you just walk us through the opportunities you see overseas for your franchises that are maybe untapped today? For M&A, remind us of the criteria you use when evaluating deals, the types of assets you would be most interested in, and any particular regions where you feel like you would like to scale your operations. Thank you.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Yeah, we've been very focused here on increasing our international footprint. As you know, companies like Take-Two, and there aren't many of us, but there are some- basically derive about 80% of their revenue from the U.S., Western Europe, and one or two countries in Asia. The rest of the world's really underrepresented, even though they love video games, of course, and even though they have devices, typically low-res, low-capability mobile devices, but devices nonetheless. For example, despite the number of people in India, our revenue out of India is really, really tiny. People in India love to play mobile video games. Same is true for Africa. A massive market, but our revenue footprint is very low.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

We're also underrepresented in places like Latin America, obviously Russia, much of the Middle East, and much of Asia, although we do have a significant amount of business in China and a select of other countries, South Korea, Taiwan, for example, growing business in India and Asia, a little business in Vietnam. It's been an enormous strategic priority for us to begin to build up in these underrepresented territories in a way that appeals to local consumers. We have a geo-pricing tool for that purpose because different markets have different ability to pay. That's a tool that we created in-house that allows us to experiment in a way that doesn't infect other parts of our business in other parts of the world. In certain instances, we're working on properties that may only appeal to some of those markets very selectively.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

My goal is that in the next 10 years, we flip the percentage of our revenue that comes from the U.S. and international markets in the other direction because we've grown the overall business. If we don't invest here now, we run the risk of being behind in 10 years. It's an area of enormous focus. Turning to your second question about M&A, we've always looked at inorganic growth through the same sort of three categories. First, are we buying owned intellectual property? Secondly, are we buying tools and teams that are valuable? Third, is the transaction immediately accretive to EBITDA and to GAAP earnings? Generally speaking, our acquisitions have ticked all those boxes. We have the broader rubric: is there a cultural fit? We've done many small tuck-in acquisitions, we've obviously done one very, very large acquisition.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

I'm proud to say that, unlike the history for most corporations, public corporations, our track record is excellent. I think virtually all of our deals have worked out if you define worked out as being accretive and long-lasting. Certainly the Zynga deal has been terrifically successful, as has the Gearbox deal, our most recent larger transactions. We'll continue to look at the world that way, and in terms of areas in which we're not represented, thankfully, we don't really have that anymore. We're a big mobile company. We're a big console and PC company. We don't have any must-haves, but there are certainly some nice-to-haves, and we think some opportunities will come our way. We also, to finish the thought, have this allergy to being over-leveraged. We have very, very light net leverage now.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

We expect to be in a net cash position in about 30 seconds. Sorry, not exactly 30 seconds, but you get what I mean. Once we're back in a net cash position, I think that would be the time when we'd be more likely to think about an inorganic opportunity.

[Chris Schoell, Analyst at UBS]

That was very helpful. Thank you.

[Operator]

Your next question comes from the line of Mike Hickey with StoneX. Your line is open. Please go ahead.

[Mike Hickey, Analyst at StoneX]

Hey, Strauss, Karl, Lainie, Nicole, great quarter, guys. Thanks for taking our questions. First one, Strauss, you mentioned in your prepared remarks that you think 2027 will be an inflection point in your company's history. Obviously, that's a strong statement. I'm sure there's an obvious answer as well. I am curious, sort of what that means to you exactly when you say that, and maybe details on why you believe that. We've got a quick follow-up.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Well, it's obviously a great question, and I think the point is that if you look historically at really, really big releases for this company, I'm thinking obviously of Grand Theft Auto and Red Dead. They didn't just affect us positively for a quarter. They had ongoing effects on our company. We also have this massive pipeline that's, we think, quite extraordinary. We have live services, and we have a catalog. If you believe, as I said I do before, that there are opportunities in terms of organic growth because the market is growing and because we're trying to extend into other markets and we have a pipeline and we have what we believe is a huge release coming up, there's a lot of fuel for the fire.

[Mike Hickey, Analyst at StoneX]

Nice. As a follow-up to the streaming comment, I think you said that you think we could have a commercial streaming solution within three years that would solve the latency problem. Strauss, it feels like we've been down this road at least twice. I am curious to hear that. Obviously, the TAM's exciting at 10x. We've heard that before, it's never really materialized. Is there something that you're seeing differently today in terms of the tech solution or some change that's sort of giving you better visibility that we could actually have a real streaming solution in the future? Because obviously, that would be a sea change to the industry.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

It is a very fair and accurate comment. Even when we supported Stadia some years ago, at the same time we were supporting Stadia about concerns about latency. You're right, certain things remain perpetually in the future, like nuclear fusion, which is perpetually 30 years away, although people think it's not now. I hope it's not. I don't think that's the case here because of enormous advances in hyperscaler networks and advances in edge network technology. I think, for example, there's one player in the market that's looking at rolling out a significant edge network that would address latency, at least in the U.S. I picked three years kind of because we know it's not tomorrow, I don't think it's five years. Of course, I could be wrong. We're not betting any of our company on this.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

We just see it as another one of the many embedded call options in our security.

[Mike Hickey, Analyst at StoneX]

Thanks, Strauss. Good luck.

[Operator]

Your next question comes from the line of Alec Brondolo with Wells Fargo. Your line is open. Please go ahead.

[Alec Brondolo, Analyst at Wells Fargo]

Yeah. Hey, thanks so much. Appreciate the question. Maybe two from me. Could you help us maybe walk us through the thinking behind the GTA VI premium SKU mix? I think Red Dead Redemption 2 launched with three SKUs. GTA VI only had two, and you didn't offer early access in the premium SKU, which I think has been a big part of the hook or the upsell driver on some of the other titles over the last several years. Maybe secondly, encouraging to hear pre-order data for GTA VI is strong. I guess I'd love to get your perspective as someone that's been in the industry a long time: how you think about the incrementality of pre-order units as they flow in.

[Alec Brondolo, Analyst at Wells Fargo]

Is it possible that kind of hype around the game is pulling forward sales that you otherwise would have earned post-release into pre-release, and the strong data won't prove to be that incremental? Thanks.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Yeah. We don't tend to give a lot of color around pricing or additions. We leave that to our labels. I think Rockstar feels that offering a phenomenal value at $80 makes sense for some consumers, and then offering incremental value at a modestly increased price makes sense for consumers. Given the hype around this title, I think we could have made any number of other pricing choices. As I said earlier, our focus is on delivering way more value than what we charge for something. With regard to pre-orders, our pre-orders are exceptional. No one's ever seen anything like this before at Take-Two or in the industry. That said, you could absolutely be right. We just don't know. Could demand be pulled forward? Sure.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

One of the reasons that we're not changing our guidance is, to be clear, we haven't sold one unit yet. You can cancel a pre-order. Around here, we're sort of allergic to victory laps, but one thing we certainly don't do is take a victory lap before we run the event. The news is great so far. We're incredibly excited. We couldn't be more excited than we are, and yet we are realistic and, at best, cautiously optimistic, and we're going to leave it at that until the thing occurs.

[Alec Brondolo, Analyst at Wells Fargo]

Thank you.

[Operator]

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

[Matthew Cost, Analyst at Morgan Stanley]

Good morning. Thanks for taking the questions. I was wondering if you could comment on Sony's decision to get rid of physical disc sales for new games in the beginning of 2028. Will that have a material impact on your gross margins, or will you continue to sell boxed download codes at a similar gross margin, presumably at a similar scale going forward? Then secondly, if you could just comment on your progress shifting towards direct payments inside of the Zynga business, and if that's still something that is currently increasing and has a significant runway ahead. Thank you.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Thanks for your questions. I'm not going to comment on Sony's own decision, but in terms of our decision, look, our business is well over 90% digitally distributed as is. It's already a digital business. In certain instances, especially if it's a big game, discs, and note I said discs, don't really make sense for the consumer. Also, in most instances, you have to register online to play anyhow. If you're already connected, who cares if you download digitally? It's all the same, and it's much more convenient. That's where the world is going, in our opinion, and I think Sony understands that. We certainly understand that. It doesn't mean that we won't have physical editions now and then. I'm sure we will, in the same way that there's still vinyl in the recorded music business. In other instances, it just won't make sense.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

On direct-to-consumer, yes, that remains a growth business for us. We are not direct-to-consumer across our entire mobile portfolio yet, but we're getting closer, and we are seeing growth there. We don't talk about the actual percentage, and we don't talk about our goals in terms of the percentage of our business. What we want to do is be where the consumer is. We will support and continue to support all third-party distributors who treat us appropriately, and with which we can make sound economic arrangements. At the same time, we'll offer direct-to-consumer opportunities for consumers who want to avail themselves with those. There is no doubt that our direct-to-consumer business has had a material positive effect on our margins in the mobile business.

[Matthew Cost, Analyst at Morgan Stanley]

Great. Thank you.

[Operator]

Your next question comes from the line of Jason Bazinet with Citi. Your line is open. Please go ahead.

[Jason Bazinet, Analyst at Citi]

As you can imagine, the buy-side is doing everything they can to sort of monitor these pre-orders to gauge demand for GTA. I don't know if there's anything you can share from a historical perspective, as experts on ranges or how people should think about pre-orders in terms of what bookings ultimately are for a title. I think it would be helpful just because there's some risk that the buy I've just gotten some crazy emails from buy-siders on how big they think GTA should be. Any sort of ring-fencing or dimensionalization that you could offer I think, would be super helpful.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

I like that. Ring-fencing of dimensionalization, which is another way of saying how many units are you going to sell? The answer is, I don't know. I'm not going to tell you. I can say that the level of pre-orders is unprecedented and astonishing, and we're very grateful for that. They are so unprecedented that we just don't know how it'll translate into sales. Which was a question I answered earlier. We genuinely don't know, and we just don't believe in claiming victory before it occurs.

[Jason Bazinet, Analyst at Citi]

Thank you.

[Operator]

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

[Eric Sheridan, Analyst at Goldman Sachs]

Thanks so much for taking the question. Strauss, wanted to know if you could opine about any evolution in your thinking about mobile gaming and being more tied into triple-A quality of content when you think about the advances in mobile silicon and processing. A second part of the question would be, with Grand Theft Auto and the community you have there, how should we be thinking about either engagement or maybe even gameplay components of Grand Theft Auto that could be an extension of the launch later this year? Thanks so much.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Yeah. You're 100% right that if you believe in Moore's law, what we'll be able to do with mobile games will grow materially, if not exponentially. What I said earlier about streaming basically means that all games will become mobile games, if you wish. I think, and I haven't used the word mobile all the time as a result. When we talk about mobile versus console, we're really not talking about where you consume the title or on what device. We're talking about two different types of interactive entertainment. What we call a console or PC title is big, and you spend hours on it, and often you consume it on a big screen. What we call mobile is light. A light experience. Typically, an avid consumer of a mobile game will play that game five to seven times a day for around nine minutes per session.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

It's a very different consumption experience. A console experience is akin to sitting down and watching a movie or binge-watching a series for an evening. A mobile experience is something you do when you have a few moments free, and you want to relax and enjoy and be entertained. The change in technology that will allow a console experience effectively to become a mobile experience probably broadens the market. I don't think means that casual or hyper-casual or semi-casual or double-A games necessarily go away. I think there's going to be a need and a desire for all different kinds of interactive entertainment, and as technology enhances the art of the possible, there'll be new formats that are delivered. An example of that, it's not interactive, but an example of a new format that digital technology has enabled is micro dramas.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

That's huge business in China and a growing business in the U.S. It didn't exist five years ago. There's some moral equivalent thereof in interactive entertainment. One of the things that we think about here is the unknown unknown. Like, what's the next thing that's coming in interactive entertainment at which we can excel, which our customers would love, that new technology enables? We spend a lot of time thinking in terms of Grand Theft Auto, and where it's going in the future, that's something that we're not talking about today. In the fullness of time, I'm sure Rockstar will talk about it.

[Eric Sheridan, Analyst at Goldman Sachs]

Thank you.

[Operator]

Your next question comes from the line of Ron Song with Wolfe Research. Your line is open. Please go ahead.

[Ron Song, Analyst at Wolfe Research]

Good morning. Can you guys share any updates on your thoughts about advertising's place in Take-Two, especially with a continued shift to open platforms and streaming? You've been clear that it makes less sense for the consumers who are paying $70+ for a AAA game. How can you strategically employ advertising beyond mobile games in a way that's not overly intrusive? Thanks.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Yeah. Advertising is a growing part of our mobile business. We've rolled out ad units in many of our titles that previously did not have them. Our view really is, look, if you're going to engage with one of our mobile titles, we ought to be able to monetize that engagement in some way. If you only engage with in-app payments, you're monetizing, pardon me, less than 20% of the audience typically, often quite a bit less than 20%. But if you have advertising as an option, you could monetize 100% of the audience in one form or another. That has been a big part of our strategy in mobile, and we have rolled out advertising units in most, but not all, of our titles so far.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

On the console side, look, you're correct in quoting me as saying, if you're paying a premium price, you probably shouldn't be subject to advertising unless the advertising is endemic to the title. When you go to a basketball game or watch a basketball game on television, you're accustomed to seeing advertising in and around that game. Advertising in the arena, for example. In our video game, you'll see that too, and that's appropriate, and we are able to monetize that. It is a relatively small part of the console business, though, and I expect that that will continue to be the case.

[Operator]

Your next question comes from the line of Martin Yang with Oppenheimer. Your line is open. Please go ahead.

[Martin Yang, Analyst at Oppenheimer]

Hi, thank you for taking my question. Two questions. One on the Netflix partnership. Do you think this is a one-off deal, or this more creative use of Rockstar IP signal a broader framework for licensing Rockstar content in the longer term, especially when you consider there will be numerous ways to share derivative content of gameplay after the game launches?

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

While this particular partnership is groundbreaking and unique, Rockstar has licensed content to Netflix before, as has the rest of Take-Two. We have a close partnership with Netflix, they are in the video game business, and we're very happy to be their partner. I'm sure there'll be plenty of things that we can do with Netflix and many other outlets in the future. We want to be ubiquitous. We want to be where our customers are. We believe the best and biggest collection of owned intellectual property in the interactive entertainment business. Wherever you are when you wake up, if you want to engage with our content, we want you to be able to do so.

[Martin Yang, Analyst at Oppenheimer]

The question on GTA Online. More recently, we see a higher frequency of content updates. Does that require you putting additional resources into the GTA Online development team, or are you really just spreading out, cutting larger, less frequent updates into smaller chunks?

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Generally speaking, our update cadence for GTA Online has been pretty stable. Some of the updates have been amazing, some have been less successful. Generally speaking, consumers really love them. The cadence hasn't really changed, and we do apply significant resources to that, and we expect to continue to support GTA Online going forward.

[Martin Yang, Analyst at Oppenheimer]

Thank you.

[Operator]

Your next question comes from the line of Jim Callahan with Piper Sandler. Your line is open. Please go ahead.

[Jim Callahan, Analyst at Piper Sandler]

Hi, thanks for taking the questions. I guess one on GTA VI pre-orders. It sounds like the demand for the deluxe edition has been extremely strong. Any comment we can provide on what that could look like, what maybe the mix looks like as we get closer to the release of the game, would be helpful. Thank you.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Look, I think that Rockstar got it right in terms of the pricing of this standard edition and the pricing of the deluxe edition. I think there's no doubt that consumers are really excited about both. I think depending on your own ability to pay and how avid a consumer you are, you can choose between them. The pre-orders have been exceptional, and we're happy with the mix as well.

[Jim Callahan, Analyst at Piper Sandler]

Okay. That's great. Then maybe just a follow-up on the user acquisition cost comment on mobile. I guess, how do we parse that out from what overall engagement looks like broadly on mobile? Any comment there would be helpful. Thank you.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

Engagement is fine. As I said, we're very happy with what we see in the marketplace, we have some titles that are just doing incredibly well. We have a tougher year-over-year comp on Color Block Jam. That has affected our numbers. That's really a comping issue, not a performance issue. Give people what they want, they show up for it, we have some titles that just continue to do great, like Toon Blast and Match Factory! and Words with Friends and Empires & Puzzles and many other big titles. The consumer is there. That said, user acquisition costs are a reflection of any number of things at any given time, including what else is going on in the market and what our competitors are doing.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

In certain instances, we'll have competitors who, from our point of view, are vastly overspending in UA, that'll make it less economic for us to spend. We really pay attention to how much we spend on UA and how that fits with the lifetime value of the property. We want to make sure that every nickel that we spend in marketing comes back at a significant multiple. Some of our competitors don't seem to look at the world that way, if there are a bunch of them in a given period of time, that can crowd us out of the market. Sometimes it happens.

[Jim Callahan, Analyst at Piper Sandler]

Very helpful. Thank you.

[Operator]

There are no further questions at this time. I will now turn the call back to Strauss Zelnick for closing remarks.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

The first thing and the most important thing is that we all want to reiterate our enormous gratitude to our 13,000 colleagues around the world who work hard every day to deliver the best entertainment properties to consumers wherever they are, whatever devices they have, and whatever interests they have. More often than not, our teams brilliantly succeed at that task. That's everything. That's the whole shooting match, and we are aware of that and, as I said, highly grateful for that. We're also really excited about what we believe the future will bring for our company and for our colleagues. All of that should translate into enormous benefits for our shareholders.

[Strauss Zelnick, Chairman and CEO at Take-Two Interactive Software]

We have a wonderful year that we're in the process of, things are going really well, and we have great expectations for the upcoming launch of GTA VI, NBA 2K, WWE, and lots of other titles coming from both the console and the mobile side. As I said, we expect that this will usher in a new period of success at a different and enhanced level for Take-Two. We couldn't feel more optimistic than we do with big smiles on our faces, and yet we know we have to wake up every day and do the hard work to deliver. That's our goal. Thank you so much for joining us today.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect

Participants

Executives

• Nicole Shevins, SVP of Investor Relations and Corporate Communications
• Strauss Zelnick, Chairman and CEO
• Karl Slatoff, President
• Lainie Goldstein, CFO

Analysts

• Doug Creutz, Analyst at TD Cowen
• Andrew Marok, Analyst at Raymond James
• Brian Pitz, Analyst at BMO Capital Markets
• Eric Handler, Analyst at Roth Capital
• Colin Sebastian, Analyst at Baird
• Chris Schoell, Analyst at UBS
• Mike Hickey, Analyst at StoneX
• Alec Brondolo, Analyst at Wells Fargo
• Matthew Cost, Analyst at Morgan Stanley
• Jason Bazinet, Analyst at Citi
• Eric Sheridan, Analyst at Goldman Sachs
• Ron Song, Analyst at Wolfe Research
• Martin Yang, Analyst at Oppenheimer
• Jim Callahan, Analyst at Piper Sandler