Video game publisher Take-Two Interactive Software has delivered impressive results for its fiscal third quarter, significantly surpassing analysts’ expectations. The company reported an adjusted earnings per share of $1.23, alongside net bookings of $1.76 billion for the quarter ending December 31. In contrast, analysts had predicted earnings of only 83 cents per share with net bookings of $1.58 billion. Year-over-year, this marks a remarkable 71% increase in adjusted earnings and a 28% rise in net bookings.
Looking ahead, Take-Two anticipates earning an adjusted 51 cents per share on net bookings of $1.54 billion for the upcoming fiscal fourth quarter. This guidance exceeds Wall Street’s forecasts, which estimated earnings of 42 cents per share on net bookings of $1.52 billion. Last year, for the same quarter, the company reported adjusted earnings of $1.08 per share with net bookings of $1.58 billion.
Take-Two’s CEO, Strauss Zelnick, expressed confidence in the company’s trajectory, emphasizing that their strong third-quarter performance is attributed to the success of various labels under their umbrella. He highlighted the upcoming launch of “Grand Theft Auto VI” on November 19 as a critical factor expected to boost net bookings, projecting record growth for fiscal 2027 and establishing a new financial baseline for the company. This anticipated success could enhance profitability and strengthen their balance sheet.
However, sentiment around the gaming industry took a hit last week following Google’s announcement of Project Genie, a generative AI initiative that aims to revolutionize open virtual world creation. This news caused Take-Two’s stock to decline nearly 8% in the wake of the announcement, reflecting concerns about the potential disruption to traditional video game development.
Analysts have varied views on the implications of Project Genie, with some suggesting that the initial market reaction may have been exaggerated. Wolfe Research analyst Peter Supino noted that while Genie could pose some risks, it might also serve as a complementary tool that enhances existing intellectual property and storytelling in gaming. Conversely, Deutsche Bank analyst Benjamin Black warned that Genie could simplify game development significantly, enabling users with limited coding skills to create their own games.
Despite these concerns, DA Davidson analyst Wyatt Swanson maintains a bullish outlook on Take-Two’s stock, emphasizing that while generative AI may find applications in idea generation and concept testing, it may not be suitable for the core mechanics of video game development, which rely on deterministic models. Swanson has set a price target of $300 for Take-Two’s stock, suggesting confidence in the company’s long-term potential, despite current market fluctuations.
Overall, while Take-Two is navigating challenges brought by emerging technologies, its robust earnings and strategic product launches position it for continued success in the dynamic video game landscape.
