Take-Two Interactive Software, Inc. (TTWO) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Net Bookings $1.76 billion, a significant increase above the guidance range of $1.55 billion to $1.6 billion. This was driven by better-than-expected performance from NBA 2K, the Grand Theft Auto series, and several mobile titles.
Recurrent Consumer Spending Increased 23% year-over-year, accounting for 76% of net bookings. NBA 2K grew 30%, Grand Theft Auto Online increased 27%, and mobile increased 19%, all exceeding expectations.
GAAP Net Revenue Increased 25% year-over-year to $1.7 billion. This growth was attributed to strong performance across core franchises.
Cost of Revenue Increased 26% year-over-year to $754 million, reflecting higher costs associated with the increased revenue.
Operating Expenses Increased 10% year-over-year to $984 million. On a management basis, operating expenses rose 13%, in line with guidance, showing significant leverage on top-line growth.
NBA 2K26 Sold approximately 8 million units, representing a high single-digit percentage increase over NBA 2K25. Recurrent consumer spending, daily active users, and MyCAREER daily active users all grew 30% year-over-year.
Grand Theft Auto Online Recurrent consumer spending grew 27% year-over-year, driven by updates like 'A Safehouse in the Hills' and the return of Michael De Santa. GTA+ membership levels nearly doubled year-over-year.
Mobile Business Toon Blast grew 43% year-over-year and surpassed $3 billion in lifetime net bookings. Match Factory grew 17%, Empires & Puzzles grew 11%, and Words with Friends grew 6%. Advertising revenues grew 10% year-over-year.
Operating Cash Flow Raised forecast to approximately $450 million, up from the prior expectation of $250 million, reflecting the strength in the business.
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Operating Highlights
NBA 2K26: Delivered a stellar quarter with approximately 8 million units sold, a high single-digit percentage increase over NBA 2K25. Recurrent consumer spending, daily active users, and MyCAREER daily active users grew 30% year-over-year.
Grand Theft Auto series: Recurrent consumer spending grew 27%, driven by GTA Online's updates. Full game sales of Grand Theft Auto V reached over 225 million units. GTA+ membership levels nearly doubled year-over-year.
Mobile Games: Toon Blast grew 43% year-over-year, surpassing $3 billion in lifetime net bookings. Match Factory grew 17%, and Empires & Puzzles and Words with Friends grew 11% and 6%, respectively. Advertising revenues grew 10%.
Red Dead Redemption and Undead Nightmare: Expanded to new platforms including PlayStation 5, Xbox Series X and S, Nintendo Switch 2, and mobile devices for Netflix subscribers.
Direct-to-Consumer Mobile Business: Delivered its strongest quarter on record with enhancements like personalized offers, flexible pricing, and alternative payment methods. Regulatory environment becoming more favorable.
NBA 2K All-Star in China: Grew to nearly 9 million registered users within less than a year.
Recurrent Consumer Spending: Increased 23% for the quarter, accounting for 76% of net bookings. NBA 2K grew 30%, Grand Theft Auto Online increased 27%, and mobile increased 19%.
Operating Cash Flow: Raised forecast to approximately $450 million, up from $250 million, reflecting business strength.
Grand Theft Auto VI: Set for release on November 19, 2026, with launch marketing beginning in summer 2026. Expected to drive record levels of net bookings in fiscal 2027.
AI Investments: Exploring and investing in AI to unlock efficiencies and focus on innovation.
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Risk or Challenges
Regulatory Environment: The company mentioned that the regulatory environment is becoming more favorable for their direct-to-consumer business. However, any changes in regulations could pose challenges to this growth strategy.
Operating Expenses: Operating expenses increased by 10% year-over-year, and while this was in line with guidance, it represents a significant cost burden that could impact profitability if not managed effectively.
Recurrent Consumer Spending: While recurrent consumer spending grew significantly, the forecast assumes continued growth in key franchises like NBA 2K and Grand Theft Auto Online. Any underperformance in these areas could negatively impact financial results.
Marketing Expenses: A shift of some marketing expenses into the next fiscal year could create challenges in maintaining momentum for key product launches.
Mobile Business: The mobile business is a significant growth driver, but it is highly competitive and subject to rapid changes in consumer preferences, which could impact its performance.
Grand Theft Auto Online: The forecast assumes only slight growth for Grand Theft Auto Online in the next quarter, indicating potential challenges in sustaining its current level of engagement.
Performance-Based Compensation: Higher performance-based compensation and user acquisition investments are planned, which could strain operating margins if not offset by revenue growth.
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Guidance & Outlook
Full Fiscal Year Net Bookings: The company has raised its net bookings outlook to $6.65 billion to $6.7 billion, representing 18% growth at the midpoint over fiscal 2025. This increase reflects strong third-quarter performance and higher expectations for key titles in the fourth quarter.
Recurrent Consumer Spending: Recurrent consumer spending is expected to grow approximately 17% and represent 78% of net bookings, up from the prior forecast of 11%. NBA 2K is projected to grow approximately 37%, mobile by 13%, and Grand Theft Auto Online slightly.
Operating Cash Flow: The company has raised its operating cash flow forecast to approximately $450 million, up from the prior expectation of $250 million, reflecting business strength.
Capital Expenditures: Capital expenditures are expected to be approximately $180 million.
Fiscal Fourth Quarter Net Bookings: Net bookings for the fiscal fourth quarter are projected to range from $1.51 billion to $1.56 billion, compared to $1.58 billion in the prior year. Key contributors include NBA 2K, Grand Theft Auto series, Toon Blast, Match Factory, and others.
Recurrent Consumer Spending for Q4: Recurrent consumer spending is projected to increase by approximately 7%, with NBA 2K expected to grow by a high 20%, mobile by mid-single digits, and a modest decline for Grand Theft Auto Online.
Fiscal 2027 Projections: The company projects record levels of net bookings in fiscal 2027, driven by the release of Grand Theft Auto VI and a robust forward release schedule. This is expected to establish a higher financial baseline, enhance profitability, and strengthen the balance sheet.
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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 Strauss Zelnick's thoughts on the impact of AI on the video game industry?
A:Strauss Zelnick expressed enthusiasm about AI, stating that the video game industry has always been built on machine learning and AI. He highlighted the company's active embrace of generative AI with hundreds of pilots and implementations, aiming to drive efficiencies, reduce costs, and enhance creativity. He emphasized that AI aligns with their strategy of being creative, innovative, and efficient.
Q:What initiatives are driving the strong performance of Zynga's mobile games?
A:Strauss Zelnick attributed Zynga's success to creating hits, fostering a home for top talent, and supporting them with strong marketing and a solid balance sheet. He noted that Zynga's mobile business grew 19% year-over-year, with specific games like Toon Blast up 43% and Match Factory up 17%. He also mentioned that the mobile market's rebound post-pandemic has contributed to their success.
Q:What percentage of mobile recurring spending comes from direct-to-consumer?
A:Strauss Zelnick stated that direct-to-consumer spending is meaningful but did not provide a specific percentage. He mentioned that the regulatory environment has become more favorable, leading to potential revenue synergies and improved margins.
Q:What are the learnings from the Safe House expansion in GTA Online?
A:Strauss Zelnick noted that delivering great content, like the Safe House expansion, drives consumer engagement. He emphasized that Rockstar's focus on creativity and quality ensures continued relevance and engagement with GTA Online, even as anticipation builds for GTA VI.
Q:What are the capital allocation priorities for Take-Two?
A:Strauss Zelnick outlined three priorities: supporting organic growth, pursuing selective and accretive inorganic growth opportunities, and returning capital to shareholders through buybacks. He emphasized disciplined and strategic use of capital.
Q:What is driving the success of NBA 2K, and what are the future growth opportunities?
A:Karl Slatoff attributed NBA 2K's success to constant refinement based on consumer feedback, attention to detail, and innovative features like the cruise mode. He identified international expansion and higher engagement as key growth opportunities, emphasizing basketball's global appeal.
Q:What are the differences between Genie and proprietary game engines?
A:Karl Slatoff explained that Genie is not a game engine but rather a procedurally generated interactive video tool. He noted that it cannot replace the creative process or elements like storyline and mission structure, which are essential to game development.
Q:What is driving growth in mobile advertising for Zynga?
A:Strauss Zelnick stated that adding ad units selectively across Zynga's games and smart monetization strategies have driven growth. He emphasized the importance of monetizing users without interfering with the gaming experience.
Q:What is the future of GTA Online after the release of GTA VI?
A:Strauss Zelnick expressed confidence that GTA Online will continue to be supported and remain relevant, citing its strong community and Rockstar's ability to deliver engaging content.
Q:What are the expectations for non-GAAP earnings growth after the release of GTA VI?
A:Lainie Goldstein stated that the release schedule, including numerous titles, will drive sequential growth and establish a new baseline for the business. Detailed guidance for fiscal year '27 will be provided in the May earnings call.
Q:What qualities does Take-Two look for in potential M&A opportunities?
A:Strauss Zelnick highlighted talent, technology, and intellectual property as key factors. He emphasized the importance of cultural fit and accretive opportunities that align with Take-Two's strategy.
Q:How much marketing is required for GTA VI, given its anticipated demand?
A:Strauss Zelnick stated that while consumer anticipation is high, Rockstar's marketing team will bring creative and impactful campaigns to engage consumers. He emphasized the importance of judicious marketing for such a significant release.
Q:How does Take-Two address affordability concerns in the gaming industry?
A:Strauss Zelnick emphasized delivering value by offering engaging experiences at reasonable prices. He noted that interactive entertainment has become more affordable on a real basis over the years, and Take-Two aims to democratize access to its games.
Q:What are the market dynamics for launching new mobile games?
A:Strauss Zelnick acknowledged the challenges of launching new mobile hits but credited Zynga's selective approach, focus on talent, and data-driven iteration for their success. He noted that only a few companies, including Zynga, have consistently delivered new hits.
Q:What is the significance of the Cfx Marketplace and UGC gaming for Take-Two?
A:Strauss Zelnick stated that user-generated content (UGC) is an important development, with opportunities for tools that make UGC more viable and accessible. He emphasized that Take-Two remains focused on delivering high-quality entertainment created by its teams.
Q:How are GTA players engaging with the game?
A:Strauss Zelnick reported strong engagement with both GTA V and GTA Online, with the latter seeing a 27% year-over-year increase. Rockstar continues to attract new consumers to the franchise.
Q:What is the potential for reducing app store fees through third-party solutions?
A:Karl Slatoff stated that Take-Two primarily focuses on in-house direct-to-consumer efforts and sees growth potential in this area. He did not comment on specific third-party solutions but acknowledged the favorable legislative environment for reducing fees.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific percentage for mobile recurring spending from direct-to-consumer, citing it as meaningful but not disclosing details. Additionally, they did not provide detailed guidance for non-GAAP earnings growth beyond fiscal year '26, emphasizing the variability of their release schedule. On the topic of Genie and its comparison to game engines, management provided limited details, stating that Genie is in its early stages and not comparable to game engines. Similarly, they did not comment on specific third-party solutions for reducing app store fees, focusing instead on in-house efforts.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Block Jam
Civilization VII
Color Block
Golf Club
Hills
Lainie
Meier Civilization
Mobile
Netflix
Nightmare platform
Nintendo Switch
PGA Tour
Puzzles Color
Redemption Undead
Sid Meier
Undead Nightmare
booking end
booking outlook
device
expense leverage
lifetime
mobile
payment
season
series Match
series Words
service
strength
talent
title contributor
track
update
user
TTWO Transcript
Take-Two Interactive Software, Inc. (TTWO) Presents at TD Cowen's 54th Annual Technology, Media & Telecom Conference Transcript
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Take-Two Interactive Software, Inc. (TTWO) Q4 2026 Earnings Call Transcript
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Take-Two Interactive Software, Inc. (TTWO) Q3 2026 Earnings Call Transcript
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
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