Take-Two Earnings Emblematic of Endless Risk-Taking in Gaming Biz

Between its leading live service, high revenues, heavy M&A activity and many layoff rounds, “Grand Theft Auto” parent Take-Two Interactive provides one of the best gaming biz gut checks every earnings season.

But after an enormous $2.9 billion loss last quarter, largely stemming from goodwill expenses incurred because of its $12.7 billion acquisition of mobile giant Zynga two years ago, what does a return to normal look like for the publishing group before its highly anticipated fall 2025 release window for “Grand Theft Auto 6”?

Truthfully, quarterly loss is the norm for Take-Two ever since its Zynga acquisition closed in May 2022. The second quarter of 2024 saw a net loss of $262 million, which was an improvement year over year but otherwise represents the ninth straight quarter of losses since Take-Two was last profitable.

This trend has persisted despite Zynga’s addition to the Rockstar and 2K labels proving an immediate boost for revenue, as Take-Two has raked in more than $1 billion in quarterly net bookings for two years.

Per chairman and CEO Strauss Zelnick, Q2 2024’s $1.2 billion in net bookings were in line with the company’s expectations, and management “remains highly confident in [Take-Two's] path forward,” indicating an acceptance of the losses incurred to get “GTA 6,” with its rumored $2 billion budget, to the finish line.

While all the in-game spending that came with a suite of popular Zynga games certainly complemented the near-$8 billion “Grand Theft Auto 5” has made to date, it didn’t erase the impact of adding thousands of roles to Take-Two's headcount when the deal closed, especially after Take-Two had already tripled in size in the wake of the 2013 “GTA 5” 2013 launch.

It’s no wonder the gaming giant has made as many as three rounds of layoffs within the span of a year, with its most recent cut in April affecting 5% of the company’s 12,400 employees (headcount as of the end of March).

That said, global layoffs in the games industry are trending downward, despite Bungie cutting 220 roles in July, and Take-Two chief Zelnick has indicated the company is not anticipating further layoffs ahead of “GTA 6” releasing next fall.

Take-Two's outlook for the rest of its fiscal 2025 isn’t expected to change much until FY26. It expects net bookings of $5.65 billion by the end of next March, slightly up from the $5.33 billion brought in throughout FY24. This is due in part to the completion of its acquisition of “Borderlands” studio Gearbox Software in June, which was valued at $460 million. 

However, Lionsgate’s adaptation of “Borderlands” that hits theaters Friday isn’t representative of any big Hollywood push on Take-Two's part. Budgeted at around $115 million, the film is expected to misfire with an opening of $12 million to $16 million and critical pans as “Deadpool & Wolverine” continues to dominate the box office.  

It’s no sweat off Zelnick’s back, who reemphasized ahead of earnings that he’s “said all along that the value of [film] licenses is typically not all that significant, even in great success.” A “BioShock” film currently in the works was also scaled back in scope recently by Netflix, a move that lends credence to Zelnick’s trepidation over adapting gaming IP to the screen.

One year ago, Zelnick described film and TV projects as “typically very challenged asset classes” he’s familiar with, having come from a Hollywood background and chaired CBS before its 2019 merger with Viacom. 

As such, there won’t be a “Mario”-scale Hollywood success to help bridge the gap at Take-Two before “GTA 6” steers the “sequential increases in net bookings in fiscal 2026 and 2027” that Take-Two expects.

Likewise, Zelnick seemed unfazed on the earnings call when asked for his thoughts on SAG-AFTRA's recent strike against major gaming publishers, saying Take-Two doesn’t expect “any impact whatsoever” on its games in development, provided the strike doesn’t go on for a long time.

Until then, the company has September’s “NBA 2K25” to keep prospects up for its post-layoff workforce as “GTA 6” hits the imminent one-year mark from its expected release.

As much as that game is likely to reverse the company’s ongoing losses, Take-Two remains a striking example of how the biggest gaming companies can suffer under the weight of necessary expansion to improve upon their products.