Take-Two Interactive Software, Inc. (TTWO) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial metrics, including raised net bookings outlook and recurrent consumer spending growth. Management's confidence in new releases and strategic focus on quality content suggest positive sentiment. Despite a softer release for Borderlands, optimism remains for future launches. Analysts' questions indicate acknowledgment of strategic positioning and growth potential. Overall, the company's strong financial performance, ambitious pipeline, and positive analyst sentiment suggest a positive stock price reaction.
Key Financial Performance
Net Bookings $1.96 billion, a significant increase year-over-year and the best second quarter in the company's history. This was driven by strong performance from NBA 2K26, Mafia: The Old Country, and several mobile titles like Toon Blast, Color Block Jam, and Match Factory!.
Recurrent Consumer Spending Increased 20% year-over-year, accounting for 73% of net bookings. Growth was driven by NBA 2K (45% growth), mid-teens growth in mobile, and a decline in Grand Theft Auto Online as expected.
GAAP Net Revenue $1.77 billion, a 31% increase year-over-year. This growth was attributed to strong top-line performance from key titles and mobile games.
Cost of Revenue Increased 27% year-over-year to $793 million, reflecting higher costs associated with the increased revenue.
Operating Expenses Increased 5% year-over-year to $1.1 billion. On a management basis, operating expenses rose 13%, driven by user acquisition investments and higher performance-based compensation.
Operating Cash Flow Raised to approximately $250 million, reflecting the strength in the business.
NBA 2K26 Sales Over 5 million units sold, representing a double-digit increase over NBA 2K25. Average selling prices reached an all-time high, driven by premium editions. Recurrent consumer spending for NBA 2K grew 45%.
Mobile Business Performance Toon Blast grew 26% year-over-year, Match Factory! grew 20%, and Rollic achieved a new net bookings record. Mobile recurrent consumer spending increased in the mid-teens.
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Operating Highlights
NBA 2K26: Achieved record-breaking launch with over 5 million units sold, a double-digit increase over NBA 2K25. Daily active users grew nearly 30%, and MyCAREER daily active users grew nearly 40%. Recurrent consumer spending increased by 45%.
Borderlands 4: Received high critical praise and achieved the largest concurrent player count on Steam in franchise history during its opening weekend. Post-launch content planned to support the game.
Mafia: The Old Country: Surpassed internal expectations and received vast praise from critics and consumers. Demonstrated strong demand for premium, narrative-driven experiences.
Grand Theft Auto VI: Announced release date of November 19, 2026, with expectations of a record-breaking launch.
Mobile Business Expansion: Toon Blast grew 26% year-over-year and 90% over two years. Match Factory! achieved record net bookings with 20% growth. Rollic surpassed 3.8 billion lifetime downloads and achieved a new net bookings record.
International Growth: Implemented new technologies for direct transactions and payment mechanisms to support international growth, enhancing net bookings and margins.
Recurrent Consumer Spending: Increased by 20% in Q2, accounting for 73% of net bookings. NBA 2K grew 45%, and mobile increased mid-teens.
Operating Cash Flow: Raised forecast to approximately $250 million, reflecting strong business performance.
Long-term Pipeline: Includes Grand Theft Auto VI, Judas, Project ETHOS, CSR 3, Top Goal, and the next BioShock, indicating a focus on sustained growth and innovation.
Mobile Direct-to-Consumer Business: Focused on higher conversion through new offers, events, and enhanced personalization, driving growth in mobile portfolio.
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Risk or Challenges
Optimization and Performance Issues: Challenges with optimization and performance on PC for Borderlands 4 were noted, requiring updates to improve gameplay. This could impact user satisfaction and sales.
Decline in Grand Theft Auto Online Engagement: Grand Theft Auto Online experienced a decline in engagement as expected, which could affect recurrent consumer spending and overall revenue.
Incremental Marketing and Compensation Costs: Higher marketing expenses and performance-based compensation were reported, which could pressure operating expenses and margins.
Dependence on Key Franchises: The company’s financial performance heavily relies on a few key franchises like NBA 2K and Grand Theft Auto, making it vulnerable to underperformance in these areas.
Delayed Release of Grand Theft Auto VI: The release of Grand Theft Auto VI has been delayed to November 2026, which could impact revenue expectations and investor sentiment in the short term.
Soft Launch Performance of Borderlands 4: Borderlands 4 experienced softness in its initial launch, which could affect its long-term sales trajectory and profitability.
Cost of Revenue Increase: The cost of revenue increased by 27%, which could impact profitability if not offset by revenue growth.
Economic Uncertainty: General economic conditions and uncertainties could impact consumer spending on entertainment and gaming.
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Guidance & Outlook
Net Bookings Outlook for Fiscal 2026: Raised to $6.4 billion to $6.5 billion, reflecting optimism for the fiscal year.
Grand Theft Auto VI Release: Scheduled for November 19, 2026, with expectations for a record-breaking launch.
Fiscal 2027 Projections: Anticipated record levels of net bookings and enhanced profitability.
Recurrent Consumer Spending: Expected to grow approximately 11%, representing 77% of net bookings, driven by NBA 2K and mobile titles.
Operating Cash Flow Forecast: Raised to approximately $250 million.
Capital Expenditures: Increased to approximately $180 million due to acquisition of an office building.
Fiscal Third Quarter Net Bookings: Projected to range from $1.55 billion to $1.6 billion.
Recurrent Consumer Spending for Q3: Projected to increase by approximately 8%, with low double-digit growth in mobile and mid-single-digit growth for NBA 2K.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What are the common denominators across NBA mobile and other titles showing strong RCS performance?
A:The management attributes the strong RCS performance to their creative teams delivering at the highest level, engaging and captivating consumers, and correlating quality with performance. They believe that giving consumers great content leads to monetization.
Q:Does the change in release date for GTA affect the cadence of content updates or marketing support for GTA Online?
A:No, the management does not expect any change in the cadence of content updates or marketing support for GTA Online. They highlighted that GTA+ was up 20% year-over-year and that Grand Theft Auto V has sold 220 million units.
Q:How does being the last publicly traded stand-alone publisher of scale affect Take-Two's competitive position?
A:The management believes they are in a strong position due to their economic and creative performance. They emphasized their independence, underleveraged status, and net cash position as advantages, but they remain cautious and focused on continued success.
Q:What is the impact of alternate payment mechanisms on mobile margins and expectations for the year?
A:The management stated that alternate payment mechanisms have been rolled out across most of their mobile portfolio, leading to increased net bookings and margins. They did not provide specific margin impact but noted that it contributed to their increased guidance for the year.
Q:What are the drivers behind the new GTA timeline, and what gives confidence in the release date?
A:The drivers include a desire to deliver a perfect entertainment experience and exceed consumer expectations. The management expressed confidence in the release date, citing their history of delaying releases for quality and the success of such decisions.
Q:What is driving the incremental audience growth for NBA, and what inning are they in accessing the total NBA audience?
A:The growth is driven by returning players, international success, and increased engagement. Management believes they are not yet in the 'seventh inning stretch,' indicating significant room for growth.
Q:How important is the launch period for longer-lived titles like Borderlands, and how does player behavior change?
A:The management acknowledged a softer release for Borderlands due to PC issues but believes the title will achieve solid unit sales and meet economic expectations over time. They aim to learn from the experience and improve future launches.
Q:What is the confidence level in Zynga's ability to sustain outperformance, and is M&A in mobile gaming being considered?
A:The management attributes Zynga's success to great leadership and creative teams. They are optimistic about sustaining outperformance through focused execution and new releases. They are selective about M&A, ensuring strategic alignment and accretive deals.
Q:What is the role of AI in Take-Two's operations, and how is it being implemented?
A:AI is used to improve efficiency and free up creative teams for more innovative tasks. The management does not see AI as a replacement for forward-looking creativity but as a tool to enhance operations.
Q:What is the update on the BioShock franchise and the role of Rod Fergusson?
A:Rod Fergusson has been hired to lead the BioShock franchise. The management is optimistic about the next BioShock release, aiming to exceed consumer expectations and take the franchise to the next level.
Q:What is driving the higher ad revenue in the mobile business?
A:The higher ad revenue is driven by strong performance across the entire mobile business, particularly Rollic.
Q:How is the Rockstar team handling the delay of GTA VI, and what does 'polish' mean in this context?
A:The management emphasized Rockstar's culture of seeking perfection and delivering high-quality entertainment. 'Polish' refers to meeting and exceeding consumer expectations through meticulous attention to detail.
Q:What is the impact of premium SKUs and season passes on NBA's RCS growth?
A:The higher mix of premium SKUs and the inclusion of season passes have positively impacted average selling prices and RCS growth.
Q:Is the gaming industry entering a more positive growth cycle, and what is driving this?
A:The management senses industry tailwinds and attributes growth to quality content and consumer enthusiasm, similar to the early pandemic period.
Q:What is the framework for mobile margin improvement over the past few years?
A:The management attributes margin improvement to better execution, cultural alignment, and a focus on creativity, innovation, and efficiency.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the margin impact of alternate payment mechanisms, the internal workings of Rockstar during the GTA VI delay, and the exact framework for mobile margin improvement over the years.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Auto audience
BioShock title
Borderlands Cost
Borderlands Empires
Borderlands Words
CSR
Country NBA
Lainie
NBA Borderlands
NBA Mobile
PC
Steam
acquisition investment
balance
booking outlook
core franchise
decline
digit increase
efficiency
expense dollar
expense leverage
feature service
game feature
game spending
investment portfolio
lifetime downloads
mobile
month
opportunity
outperformance
portfolio compensation
position
praise
premium
record launch
sale
series Match
strength
update
user acquisition
TTWO Transcript
Take-Two Interactive Software, Inc. (TTWO) Presents at TD Cowen's 54th Annual Technology, Media & Telecom Conference Transcript
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Positive2-3
The earnings call highlights several positive factors: raised net bookings outlook, GTA VI's anticipated release, and increased recurrent consumer spending. The Q&A reveals strategic capital allocation, successful NBA 2K growth, and strong engagement with GTA Online. While some guidance is limited, the overall sentiment is optimistic. The raised fiscal outlook and strategic growth plans suggest a positive stock price movement, likely in the 2% to 8% range.
Take-Two Interactive Software, Inc. (TTWO) Q2 2026 Earnings Call Transcript
Positive11-6
The earnings call highlights strong financial metrics, including raised net bookings outlook and recurrent consumer spending growth. Management's confidence in new releases and strategic focus on quality content suggest positive sentiment. Despite a softer release for Borderlands, optimism remains for future launches. Analysts' questions indicate acknowledgment of strategic positioning and growth potential. Overall, the company's strong financial performance, ambitious pipeline, and positive analyst sentiment suggest a positive stock price reaction.
TTWO Slides
TTWO Report
Frequently Asked Questions
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