Take-Two Interactive Software, Inc. (TTWO) Q2 2027 earnings review
Take-Two locks in Grand Theft Auto launch, but mobile shrinks
Take-Two Interactive, the maker of Grand Theft Auto and NBA 2K, missed its own sales target while locking in the biggest launch in its history. Second-quarter net bookings fell 18% to $1.60 billion as mobile games and ongoing player spending dropped faster than planned, though lower marketing costs kept losses smaller than forecast. Chief executive Strauss Zelnick confirmed Grand Theft Auto VI will launch on November 19 and set a third-quarter bookings plan of roughly $3.4 billion, but by our math the unchanged full-year outlook leaves growth slowing to 7% in the fourth quarter.
| Net bookings | $1.60B -18.3% from a year ago (missed $1.62–1.67B plan) |
|---|---|
| Ongoing player spending (RCS bookings) | -8.8% planned for about -5% |
| Q3 net bookings outlook | $3.35–3.50B middle of the range: +94.9% growth |
| Full-year net bookings outlook | Unchanged $8.0–8.2B (+20.5% at the middle of the range) |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because locking in the November 19 launch date offsets a weaker supporting catalogue. Eliminating the risk of a third delay secures the third-quarter jump, and marketing cuts lifted the full-year profit plan. The bad news: mobile bookings fell 14%, snapping a five-quarter beat streak, and the unchanged full-year bookings target means the company is not yet banking any upside from record pre-orders.
The question now is whether Grand Theft Auto VI lifts Take-Two to a permanently higher sales level or produces a one-quarter spike over the holidays. Either players keep spending heavily in the online mode after buying the game, or weak mobile titles and a 7% implied fourth-quarter growth rate pull total bookings back down once initial copy sales pass. Third-quarter bookings and any revision to the fourth-quarter remainder in February will tell.
🐂 Bull Case
Grand Theft Auto VI Locks In Its Launch
Take-Two makes the Grand Theft Auto, NBA 2K and Red Dead Redemption video games. Its entire full-year growth plan rests on Grand Theft Auto VI, which the company delayed twice over the past two years. With the release date of November 19 now ten days away, a third delay is off the table.
"The launch of Grand Theft Auto VI is ten days away and, with pre-orders continuing to reach unprecedented levels, we expect to deliver an historic year for our company," chief executive Strauss Zelnick said. The publisher put that launch into its third-quarter plan, calling for net bookings — the total value of games and in-game items sold — of $3.35 billion to $3.50 billion, nearly double last year's $1.76 billion.
What to watch: third-quarter net bookings against the $3.50 billion top of the range. Because Zelnick held the full-year outlook unchanged at $8.0 billion to $8.2 billion despite citing record pre-orders, a reading above the range will show whether those pre-orders turned into extra sales.
Lower Marketing Spend Lifted the Profit Plan
Even though second-quarter bookings fell short, operating profit before interest, taxes, depreciation and amortisation (EBITDA, the company's main profit measure) reached $92.2 million, well above the plan for between a $20 million loss and a $4 million profit. Lower game development royalties helped gross margin rise 2.2 percentage points to 57.5% of revenue.
- Selling and marketing: $444.9 million, down 17.1% from a year ago and down 0.5 percentage points of revenue
- General and administrative overhead: $230.5 million, up 2.7 percentage points of revenue on lower sales
- Research and development: $254.4 million, up 1.9 percentage points of revenue
- Full-year operating expense outlook: cut by $72 million at the middle of the range to $4.08–4.10 billion
Take-Two passed most of those operating cost savings into its full-year EBITDA plan, raising the middle of the range by $30 million to $1.05 billion after cutting it by $18.5 million last quarter.
What to watch: third-quarter operating expenses against the $1.16 billion to $1.18 billion outlook. Staying inside that band during the Grand Theft Auto VI launch campaign will confirm the marketing savings are permanent rather than shifted into the winter quarter.
Positives this quarter didn't test
Three longer-term growth initiatives got no new figures in the earnings release and wait for the conference call or quarterly filing.
- International expansion: Zelnick repeated his goal to "expand our geographic footprint", while second-quarter international net bookings fell 18.0% from a year ago to $633.1 million, matching the 18.5% drop in the United States.
- Mobile direct-to-consumer billing: shifting mobile players to pay on Take-Two's own websites lowers app-store fees, and any disclosed share of mobile bookings on the call would test that margin boost.
- Artificial intelligence tools in game development: management previously framed AI as a cost-saving tool, and commentary from the call will show whether it is trimming studio expenses.
🐻 Bear Case
Pre-Launch Bookings Missed the Company's Own Plan
While Zelnick highlighted upcoming blockbusters, the rest of the catalogue weakened faster than the company planned. Second-quarter net bookings fell 18.3% from a year ago to $1.60 billion, missing Take-Two's own $1.62 billion to $1.67 billion outlook and snapping a streak of five straight quarters above the top of its range.
- Recurrent consumer spending (ongoing sales of virtual currency, add-ons and in-game ads): down 8.8% in bookings to $1.30 billion, worse than the 5% drop planned
- Mobile net bookings (Zynga titles such as Toon Blast and Match Factory!): down 13.5% to $707.6 million
- Console net bookings: down 18.2% to $742.6 million against last year's Borderlands 4 launch
- PC and other net bookings: down 35.6% to $151.1 million
The company noted "factors affecting our performance on mobile, such as player acquisition costs" in its outlook assumptions. Because mobile and ongoing player spending provide 81% of bookings before the November launch, a faster drop in Zynga titles eats into the base that Grand Theft Auto VI builds upon.
What to watch: full-year recurrent consumer spending guidance on the conference call. Management previously planned for flat full-year ongoing player spending, and a cut to that target after a 5.4% first-half drop would confirm that mobile weakness is eating into the launch year.
The Outlook Leaves Little Growth After Launch
Take-Two held its full-year net bookings outlook at $8.0 billion to $8.2 billion while issuing its first plan for the third quarter. Putting the two together reveals how concentrated the Grand Theft Auto VI boost is inside the current fiscal year.
With $2.99 billion of net bookings in the first half and $3.43 billion planned at the middle of the third-quarter range, the full-year outlook leaves $1.69 billion for the fourth quarter by our math. That represents 6.8% growth from a year ago, down from 94.9% in the launch quarter, and implied fourth-quarter revenue growth slows to 1.5%.
A sharp fourth-quarter slowdown matters because players moving from Grand Theft Auto Online to the new game may simply shift their ongoing spending rather than add to it, and every future title on the company's release slate still lacks a launch date.
What to watch: whether management raises the full-year outlook when it reports third-quarter results in February. Holding the full-year range today means either the fourth-quarter plan is very cautious or the launch spike fades within three months.
Game Development Costs Eat Into Launch Profits
Even with $8.1 billion in planned net bookings, Take-Two expects very thin accounting profit this year. Once a game goes on sale, the company must start expensing the development costs it stored on its balance sheet during production, alongside ongoing charges from past acquisitions such as Zynga.
In this release, the publisher raised its full-year cost of revenue — the direct cost of making and licensing its games — by $141.5 million at the middle of the range, to between $3.68 billion and $3.80 billion. That offset the cut in operating expenses and left full-year accounting net income at $109 million to $142 million, just 1.5% of planned bookings.
What to watch: software development cost amortisation in the third-quarter income statement. The outlook includes $1.65 billion to $1.73 billion of third-quarter cost of revenue, which will show how heavily Grand Theft Auto VI's production bill weighs on per-unit profit.
Risks this quarter didn't answer
Three standing risks around customer concentration, artificial intelligence competition, and deal-making had no new disclosures in the preliminary release.
- Platform concentration: five digital storefronts accounted for 82.3% of first-quarter revenue; the second-quarter 10-Q filing will update that dependency ahead of the console-only launch of Grand Theft Auto VI.
- Acquisition track record and related-party pay: Zelnick pledged to "pursue accretive M&A" after $5.89 billion of goodwill write-downs in fiscal 2024 and 2025, while the 10-Q's related-party footnote will disclose quarterly stock grants to ZMC, the management firm owned by Zelnick.
- Generative AI competition: whether AI tools let smaller studios build competing open-world games at lower cost remains an open debate for the call's question-and-answer session.
💲 Other KPIs
Total deferred revenue — cash collected from players for games and virtual items not yet recognized as sales — fell 17.8% from $1,268.1 million a year ago. The balance rose by only $27.6 million from last quarter, well below the $150 million to $250 million build implied by the company's second-quarter plan.
Current and non-current software development costs and licenses stored on the balance sheet rose by $146.3 million in the quarter and $231.0 million over the first six months. That inventory of unreleased game production will begin amortising through cost of revenue when Grand Theft Auto VI launches in November.
Take-Two used $173.5 million of cash in operations over the first six months, swinging from $83.7 million of cash generated a year ago on game development spending and lower deferred revenue. Second-quarter capital expenditures jumped to $138.3 million by our math, up from $25.0 million in the first quarter, as the planned real-estate purchase closed.
Net debt — total debt of $2,519.8 million minus $1,756.6 million of cash, short-term investments and restricted cash — widened from $611.9 million last quarter and $436.1 million in March as first-half cash outflows drew down cash balances before the winter launch.
🔮 Guidance
Unchanged. The plan still calls for 20.5% growth at the middle of the range over last year's $6,721 million. Holding the full-year target after a $43.7 million second-quarter miss shifts more work into the second half.
New. The third-quarter plan calls for 94.9% growth from a year ago at the $3,425 million middle of the range as Grand Theft Auto VI launches on November 19. By our math, that leaves $1,687.8 million for the fourth quarter, or 6.8% growth over last year's fourth quarter.
Raised. Take-Two lifted both ends of the revenue range by $80 million, to 21.4% growth at the middle of the range. Because the bookings plan did not change, the higher revenue outlook comes entirely from deferring only $20 million of net bookings into next year rather than $100 million.
New. The outlook points to 96.9% revenue growth from a year ago at the $3,345 million middle of the range, with $80 million of third-quarter bookings deferred into future periods. By our math, the full-year target leaves $1,704.1 million of revenue for the fourth quarter, up 1.5% from a year ago.
Raised. The middle of the range moved up $30 million to $1,053 million after a $18.5 million cut last quarter, putting full-year EBITDA margin at 13.0% of bookings. Lower planned operating expenses outweighed higher cost of revenue.
New. The plan puts third-quarter EBITDA at $674.5 million at the middle of the range, or 19.7% of planned net bookings. By our math, the full-year outlook then leaves just $119.3 million of EBITDA for the fourth quarter, or 7.1% of implied fourth-quarter bookings.
Raised. The publisher increased expected cost of revenue by $141.5 million at the middle of the range, its second straight upward move after adding $33 million last quarter, as more revenue is recognised inside the year.
New. Direct game costs are planned at 50.5% of third-quarter revenue at the middle of the range, up from 42.5% in the second quarter as capitalised development costs begin amortising at launch.
Cut. Planned full-year operating expenses fell by $72 million at the middle of the range, following a $30 million reduction last quarter, reflecting the second-quarter marketing savings.
New. Third-quarter operating costs step up from $977.9 million in the second quarter to support the November launch campaign. By our math, the full-year plan leaves $1,020.1 million of operating expenses for the fourth quarter.
Raised slightly. The bottom of the range moved up by $5 million ($0.02 per share) on 189.5 million expected diluted shares, lifting the middle of the range by $2 million despite the $94.5 million second-quarter net loss beat.
New. Take-Two plans a swing to accounting profit in the launch quarter on 192.0 million diluted shares. Because third-quarter profit of $263 million at the middle of the range exceeds the full-year total of $125.5 million after a $88.1 million first-half loss, the plan implies a fourth-quarter net loss of about $49.4 million by our math.
Unchanged. Generating over $1 billion of operating cash flow for the year requires at least $1,173.5 million of cash inflow in the second half after the $173.5 million first-half outflow. With $163.3 million of capital spending already spent in the first half, second-half capital expenditures step down to about $126.7 million.
❓ Key Questions
Did you cut the full-year ongoing player spending plan?
The earnings release dropped the usual guidance line for recurrent consumer spending after second-quarter ongoing bookings fell 9% against a 5% planned drop. Investors need to know if the full-year flat target still stands.
Why does the plan imply 7% Q4 bookings growth?
By our math, the third-quarter and full-year midpoints leave $1.69 billion of net bookings for the fourth quarter, up just 6.8% from a year ago and with a GAAP net loss right after the Grand Theft Auto VI launch.
How will Grand Theft Auto Online work after launch?
With ten days until release, management still has not explained whether current Grand Theft Auto Online spending migrates into the new game or shrinks as players switch titles.
What share of mobile sales bypasses the app stores?
Mobile bookings fell 13.5% in the quarter and the release cited player acquisition costs as a risk. Disclosing the share of mobile sales running through direct web billing would show how much fee relief remains.
Can fiscal 2028 bookings stay above $8 billion?
Nearly all of fiscal 2027's growth comes from the November launch quarter while every other announced game on the future slate still lists its release date as to be announced.