What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-07 · 216 added, 96 removed, 233 unchanged (57% of the section changed)

12 unchanged sentences

factors affecting our mobile business, such as player acquisition costs;

and the ability to maintain acceptable pricing levels on our games;

the ability to maintain acceptable pricing levels on our games;

and other risks included herein;

as well as, but not limited to, the risks and uncertainties discussed under the heading " Risk Factors " included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025;

and our other periodic filings with the Securities and Exchange Commission.

All forward-looking statements are qualified by these cautionary statements and speak only as of the date they are made.

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We support our products with innovative marketing programs created by our internal global marketing teams.

We derive substantially all of our revenue from the sale of our interactive entertainment content, which includes the sale of internally developed software titles and software titles developed by third parties, the sale of in-game virtual items and advertising, and live services on console, mobile, and PC.

We derive substantially all of our revenue from the sale of our interactive entertainment content, which includes internally developed software titles and software titles developed by third parties, in-game virtual items and advertising, and live services on console, mobile, and PC.

Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development and marketing costs.

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Rockstar Games offers its GTA+ membership program, which engages its player community with an array of rotating benefits, including access to classic Rockstar Games titles.

Rockstar Games continues to invest in the franchise and announced that Grand Theft Auto VI is planned for release on May 26, 2026, during our fiscal year 2027.

Rockstar Games continues to invest in the franchise and announced that Grand Theft Auto VI is planned for release on November 19, 2026, during our fiscal year 2027.

The label released its first trailer for the title in December 2023 and the second in May 2025, and will share more details in the future.

Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 75 million units worldwide to date.

Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 75 million units worldwide.

Rockstar Games continues to expand on its established series by developing sequels, offering downloadable episodes, and providing additional content.

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Zynga's strategy is to have numerous games in concept development and to determine which titles are best suited for soft and worldwide launch based on the achievement of various milestones and key performance indicator (KPI) thresholds.

Zynga's diverse portfolio of popular game franchises has been downloaded more than six billion times, including CSR Racing , Dragon City , Empires & Puzzles , FarmVille , Game of Thrones:

Legends, Golf Rival , Harry Potter:

Puzzles & Spells , Match Factory!

Zynga's diverse portfolio of popular game franchises has been downloaded more than ten billion times, including CSR Racing , Dragon City , Empires & Puzzles , FarmVille , Game of Thrones:

Legends, Golf Rival , Hair Challenge, Harry Potter:

Puzzles & Spells , High Heels!, Match Factory!

, Merge Dragons!

, Merge Magic!

, Monster Legends , Toon Blast , Top Eleven , Toy Blast , Two Dots , Words With Friends , Zynga Poker , and a high volume of hyper-and hybrid-casual mobile titles, including Color Block Jam, Fill the Fridge!

, Power Slap , Pull the Pin, Screw Jam , and Twisted Tangle .

, Monster Legends , Screw Jam, Seat Away, Toon Blast , Top Eleven , Toy Blast , Two Dots , Words With Friends , and Zynga Poker.

Trends and Factors Affecting our Business

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Additionally, our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue.

Sales of Grand Theft Auto products generated 14.7% of our net revenue for the three months ended June 30, 2025.

Sales of Grand Theft Auto products generated 12.0% of our net revenue for the six months ended September 30, 2025.

The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis.

Rockstar plans to release Grand Theft Auto VI on May 26, 2026.

To date we have announced that, during the remainder of fiscal year 2026, 2K plans to release Mafia:

The Old Country, NBA 2K26 , Borderlands 4 , and WWE 2K26.

Rockstar plans to release Grand Theft Auto VI on November 19, 2026.

During fiscal year 2026, 2K released Mafia:

The Old Country, NBA 2K26 , and Borderlands 4.

We have announced that, during the remainder of fiscal year 2026, 2K plans to release WWE 2K26.

Economic Environment and Retailer Performance.

We continue to monitor various macroeconomic and geopolitical factors, such as global tariff policies, that may affect our business in several areas, including consumer demand, inflation, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates.

We continue to monitor various macroeconomic and geopolitical factors, such as global tariff policies, that may affect our business in several areas, including consumer demand, inflation, pricing pressure on our products and third party hardware platforms, credit quality of our receivables, and foreign currency exchange rates.

Actions we have taken to date and other potential actions we may take in the future in response to these factors could result in negative impacts in future periods.

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We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties.

Such console revenue comprised 36.6% of our net revenue for the three months ended June 30, 2025.

Such console revenue comprised 38.8% of our net revenue for the six months ended September 30, 2025.

The success of our business is dependent upon consumer acceptance of these platforms and the continued growth in the installed base of these platforms, which could be impacted by global economic factors, including global tariff policies.

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We provide a variety of online delivered products, including direct digital downloads of our titles, and access to additional offerings through virtual currency, add-on content, in-game purchases, and in-game advertising, which drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles.

Net revenue from digital online channels comprised 98.2% of our net revenue for the three months ended June 30, 2025.

Net revenue from digital online channels comprised 96.7% of our net revenue for the six months ended September 30, 2025.

We expect online delivery of games and game offerings to continue to be the primary part of our business over the long term.

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We monitor Net Bookings as a key operating metric in evaluating the performance of our business.

Net Bookings is defined as the net amount of products and services sold digitally or sold-in physically during the period and includes licensing fees, merchandise, in-game advertising, strategy guides, and publisher incentives.

Net Bookings were as follows:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2025 2024 Increase/

(decrease) % Increase/

(decrease) 2025 2024 Increase/

(decrease) % Increase/

Net Bookings $ 1,960.5 $ 1,474.9 $ 485.6 32.9 % $ 3,383.6 $ 2,693.1 $ 690.5 25.6 %

For the three months ended June 30, 2025, Net Bookings increased as compared to the prior year period.

The increase was primarily due to an increase in Net Bookings from our NBA 2K franchise and Color Block Jam , which released in November 2024.

For the three months ended September 30, 2025, Net Bookings increased as compared to the prior year period.

The increase was primarily driven by higher Net Bookings from our NBA 2K franchise;

our Borderlands franchise, the latest installment of which, Borderlands 4 , released in September 2025;

Color Block Jam , which released in November 2024;

and our Mafia franchise, the latest installment of which, Mafia:

The Old Country, released in August 2025.

For the six months ended September 30, 2025, Net Bookings increased as compared to the prior year period.

The increase was primarily driven by higher Net Bookings from our NBA 2K and Borderlands franchises, Color Block Jam, and our Mafia franchise.

Results of Operations

The following tables set forth, for the periods indicated, our Condensed Consolidated Statements of Operations, net revenue by platform, net revenue by distribution channel, and net revenue by content type:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2025 2024 2025 2024

Total net revenue $ 1,773.8 100.0 % $ 1,353.1 100.0 % $ 3,277.6 100.0 % $ 2,691.3 100.0 %

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Total operating expenses 1,078.5 60.9 % 1,025.1 74.5 % 2,001.9 61.1 % 1,981.1 73.6 %

Income (loss) from operations 21.6 1.4 % (184.9) (13.7) %

Loss from operations (98.0) (5.6) % (297.2) (20.7) % (76.4) (2.4) % (482.1) (17.8) %

Interest and other, net (17.5) (1.0) % (27.1) (2.0) % (52.9) (1.6) % (54.4) (2.1) %

Loss before income taxes (115.5) (6.6) % (324.3) (22.7) % (129.3) (4.0) % (536.5) (19.9) %

(Benefit from) provision for income taxes (1.9) (0.1) % 49.8 3.7 %

Provision for income taxes 18.4 1.0 % 41.2 3.0 % 16.5 0.5 % 91.0 3.4 %

Net loss $ (133.9) (7.6) % $ (365.5) (25.7) % $ (145.8) (4.5) % $ (627.5) (23.3) %

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2025 2024 2025 2024

Net revenue by platform:

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Full game and other 497.9 28.1 % 274.1 20.3 % 745.6 22.7 % 514.6 19.1 %

Three Months Ended June 30, 2025 Compared to June 30, 2024

Three Months Ended September 30, 2025 Compared to September 30, 2024

2025 % 2024 % Increase/

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Product costs 229.3 12.9 % 212.5 15.7 % 16.8 7.9 %

Software development costs and royalties (1)

172.1 9.7 % 64.9 4.8 % 107.2 165.2 %

Game intangibles 158.8 9.0 % 173.4 12.8 % (14.6) (8.4) %

Licenses 154.4 8.7 % 97.2 7.2 % 57.2 58.8 %

Internal royalties 78.7 4.4 % 77.2 5.7 % 1.5 1.9 %

Cost of revenue 793.3 44.7 % 625.2 46.2 % 168.1 26.9 %

Gross profit $ 980.5 55.3 % $ 727.9 53.8 % $ 252.6 34.7 %

(1) Includes $4.8 and $3.1 of stock-based compensation expense in 2025 and 2024, respectively, in software development costs and royalties.

For the three months ended September 30, 2025, net revenue increased by $420.7 as compared to the prior year period.

The increase was primarily driven by higher net revenue of (i) $148.7 from our Borderlands franchise, the latest installment of which, Borderlands 4 , released in September 2025, (ii) $127.9 from our NBA 2K franchise, (iii) $72.8 from Color Block Jam , which released in November 2024, and (iv) $55.9 from our Mafia franchise, the latest installment of which, Mafia:

The Old Country released in August 2025.

Net revenue from mobile increased by $81.4 and accounted for 46.3% of our total net revenue for the three months ended September 30, 2025, as compared to 54.7% for the prior year period.

The increase was primarily driven by higher net revenue from Color Block Jam .

Net revenue from console games increased by $228.9 and accounted for 40.6% of our total net revenue for the three months ended September 30, 2025, as compared to 36.3% for the prior year period.

The increase was primarily driven by higher net revenue from our NBA 2K, Borderlands , and Mafia franchises.

Net revenue from PC and other increased by $110.4 and accounted for 13.1% of our total net revenue for the three months ended September 30, 2025, as compared to 9.0% for the prior year period.

The increase was primarily driven by higher net revenue from our Borderlands , Mafia , and NBA 2K franchises .

Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising.

Net revenue from RCS increased by $196.9 and accounted for 71.9% of net revenue for the three months ended September 30, 2025, as compared to 79.7% of net revenue for the prior year period.

The increase was primarily driven by higher net revenue from our NBA 2K franchise and Color Block Jam .

Net revenue from full game and other increased by $223.8 and accounted for 28.1% of net revenue for the three months ended September 30, 2025 as compared to 20.3% of net revenue for the prior year period.

The increase was primarily driven by higher net revenue from our Borderlands and Mafia franchises.

Net revenue from digital online channels increased by $393.1 and accounted for 95.5% of our total net revenue for the three months ended September 30, 2025, as compared to 96.1% for the prior year period.

The increase was primarily driven by higher net revenue from our NBA 2K and Borderlands franchises, Color Block Jam , and our Mafia franchise .

Net revenue from physical retail and other channels increased by $27.6 and accounted for 4.5% of our total net revenue for the three months ended September 30, 2025, as compared to 3.9% for the same period in the prior year period.

The increase was primarily driven by higher net revenue from our Borderlands and Mafia franchises, partially offset by lower net revenue from our NBA 2K franchise.

Gross profit as a percentage of net revenue for the three months ended September 30, 2025 was 55.3% as compared to 53.8% for the prior year period.

The increase in gross profit as a percentage of net revenue was primarily driven by (i) lower amortization of intangible assets primarily due to impairments in the prior year and (ii) lower product costs as a percentage of net revenues, partially offset by higher amortization of capitalized software and development costs primarily due to the timing of releases.

Changes in foreign currency exchange rates increased net revenue by $2.5 and increased gross profit by $5.6 for the three months ended September 30, 2025 as compared to the prior year period.

Operating Expenses

2025 % of net revenue 2024 % of net revenue Increase/

(decrease) % Increase/

Selling and marketing $ 536.6 30.3 % $ 461.3 34.1 % $ 75.3 16.3 %

Research and development 268.0 15.1 % 246.7 18.2 % 21.3 8.6 %

General and administrative 225.0 12.7 % 253.0 18.7 % (28.0) (11.1) %

Depreciation and amortization 48.8 2.8 % 47.3 3.5 % 1.5 3.2 %

Business reorganization 0.1 — % 16.8 1.2 % (16.7) (99.4) %

Total operating expenses (1)

$ 1,078.5 60.9 % $ 1,025.1 74.5 % $ 53.4 5.2 %

(1) Includes stock-based compensation expense, which was allocated as follows:

Selling and marketing $ 25.2 $ 24.5

Research and development 25.1 26.2

General and administrative 40.8 32.4

Changes in foreign currency exchange rates increased total operating expenses by $6.0 for the three months ended September 30, 2025, as compared to the prior year period.

Selling and marketing

Selling and marketing expenses increased by $75.3 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher overall marketing expense for our Borderlands franchise, and Color Block Jam , partially offset by lower overall marketing expense for Match Factory!

, Screw Jam and Game of Thrones:

Legends , and (ii) higher personnel expense due to higher performance-based compensation .

Research and development

Research and development expenses increased by $21.3 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by higher performance-based compensation, partially offset by lower IT-related expenses for cloud-based services and IT infrastructure.

General and administrative

General and administrative expenses decreased by $28.0 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by lower legal and settlement fees related to the IBM case against Zynga in the prior year, partially offset by higher personnel expense due to higher performance-based compensation.

Depreciation and amortization

Depreciation and amortization expenses increased by $1.5 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher IT infrastructure expense and (ii) higher leasehold improvement expense for office buildouts, partially offset by lower amortization related to acquired intangible assets due to prior year impairments.

Business reorganization

Business reorganization decreased by $16.7 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by the completion of the 2024 Plan.

Interest and other, net

Interest and other, net was an expense of $17.5 for the three months ended September 30, 2025, as compared to an expense of $27.1 for the prior year period.

The net decrease in expense was primarily driven by lower interest expense related to our debt transactions (refer to Note 9 - Debt ) and foreign currency gains in the current period compared to foreign currency losses in the prior year period.

Provision for income taxes

The provision for income taxes for the three months ended September 30, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $18.4 for the three months ended September 30, 2025, as compared to the provision for income taxes of $41.2 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of (15.9)% for the three months ended September 30, 2025 was primarily driven by tax expense of $33.7 related to an increase in the U.S.

and international valuation allowances and $16.0 related to geographic mix of earnings and changes in reserves, offset by tax benefits of $10.3 from tax credits.

In the prior year period, when compared to the statutory rate of 21.0%, the effective tax rate of (12.7)% for the three months ended September 30, 2024 was due primarily to tax expense of $104.9 related to an increase in valuation allowance and tax expense of $9.9 related to geographic mix of earnings offset by benefits of $17.2 from tax credits.

The change in the effective tax rate, when compared to the prior year period's effective tax rate, is primarily driven by lower tax expense from changes in the U.S.

and international valuation allowance, lower tax benefits from tax credits, offset by higher tax expense from employee stock-based compensation and lower tax expense from geographic mix of earnings and changes in reserves.

The accounting for share-based compensation will increase or decrease our effective tax rate based upon the difference between our share-based compensation expense and the deductions taken on our tax return, which depends on the stock price at the time of the employee award vesting.

We anticipate that additional excess tax benefits or shortfalls from employee stock compensation, tax credits, and changes in our geographic mix of earnings could have a significant impact on our effective tax rate in the future.

In addition, we are regularly examined by domestic and foreign taxing authorities.

Examinations may result in tax assessments in excess of amounts claimed and the payment of additional taxes.

We believe our tax positions comply with applicable tax law, and that we have adequately provided for reasonably foreseeable tax assessments.

It is possible that settlement of audits or the expiration of the statute of limitations could have an impact on our effective tax rate in future periods.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into law and includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, accelerated deductions for domestic research expenditures, permanently reinstating 100% bonus depreciation, and modifications to tax credits.

The legislation has multiple effective dates, with certain provisions effective in fiscal year ending March 31, 2026 and others implemented in future periods.

The impact of OBBB has been reflected in our estimated annualized effective tax rate, and reduced our forecasted U.S.

cash tax liability.

It did not, however, impact our U.S.

deferred tax assets or liabilities since we continue to maintain a full valuation allowance against U.S.

net deferred tax assets.

The American Rescue Plan Act of 2021 (the “ARPA”), among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations.

Effective for tax years starting after December 31, 2026 (April 1, 2027 for the Company), the ARPA expands the limitation to cover the next five most highly compensated employees.

The ARPA did not have a material impact on our Condensed Consolidated Financial Statements for the three months ended September 30, 2025.

We continue to evaluate the potential impact the ARPA may have on our operations and Consolidated Financial Statements in future periods.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) includes a corporate alternative minimum tax ("CAMT") of 15% on the adjusted financial statement income (AFSI) of corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period.

It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income.

We do not estimate any tax liability relating to CAMT for the current fiscal year.

We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.

The Organization for Economic Co-operation and Development ("OECD") has proposed a global minimum tax of 15% of reported profits, referred to as Pillar Two.

Many countries have already implemented or are taking steps to implement Pillar Two.

Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly differently than the model rules and on different timelines.

Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than a 15% minimum rate.

The impact of Pillar Two was not material to the tax provision for the three months ended September 30, 2025.

We will continue to evaluate the impact Pillar Two and any additional guidance may have on our results and operations.

Net loss and Loss per share

For the three months ended September 30, 2025, net loss was $133.9, as compared to a net loss of $365.5 in the prior year period.

Basic and diluted loss per share for the three months ended September 30, 2025 was $0.73, as compared to basic and diluted loss per share of $2.08 in the prior year period.

Basic weighted average shares of 184.6 were 9.2 shares higher as compared to the prior year period basic weighted average shares, primarily due to our equity issuance, as well as normal stock compensation activity, including vests, grants, and forfeitures in the prior year being fully outstanding in the current year.

See Note 10 - Loss Per Share to our Condensed Consolidated Financial Statements for additional information.

Six Months Ended September 30, 2025 Compared to September 30, 2024

2025 % 2024 % Increase/

(decrease) % Increase/

Total net revenue $ 3,277.6 100.0 % $ 2,691.3 100.0 % $ 586.3 21.8 %

Product costs 439.7 13.4 % 415.8 15.4 % 23.9 5.7 %

Game intangibles 317.3 9.7 % 336.9 12.5 % (19.6) (5.8) %

Licenses 225.3 6.9 % 152.3 5.7 % 73.0 47.9 %

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202.2 6.2 % 141.1 5.2 % 61.1 43.3 %

Internal royalties 167.6 5.1 % 146.2 5.4 % 21.4 14.6 %

Cost of revenue 1,352.1 41.3 % 1,192.3 44.2 % 159.8 13.4 %

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(1) Includes $(36.2) and $6.0 of stock-based compensation expense in 2025 and 2024, respectively, in software development costs and royalties.

For the three months ended June 30, 2025, net revenue increased by $165.6 as compared to the prior year period.

The increase was primarily due to increases in net revenue of $76.0 from Color Block Jam , which released in November 2024 and $72.8 from our NBA 2K franchise.

Net revenue from mobile increased by $79.2 and accounted for 53.3% of our total net revenue for the three months ended June 30, 2025, as compared to 54.0% for the prior year period.

The increase was primarily due to an increase in net revenue from Color Block Jam .

Net revenue from console games increased by $41.7 and accounted for 36.6% of our total net revenue for the three months ended June 30, 2025, as compared to 38.0% for the prior year period.

The increase in net revenue from console games was primarily due to an increase in net revenue from our NBA 2K franchise.

Net revenue from PC and other increased by $44.7 and accounted for 10.1% of our total net revenue for the three months ended June 30, 2025, as compared to 8.0% for the prior year period.

The increase in net revenue from PC and other was primarily due to an increase in net revenue from our Grand Theft Auto and NBA 2K franchises .

Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising.

Net revenue from RCS increased by $158.4 and accounted for 83.5% of net revenue for the three months ended June 30, 2025, as compared to 82.0% of net revenue for the prior year period.

The increase in net revenue from RCS was primarily due to an increase in net revenue from Color Block Jam and our NBA 2K franchise.

Net revenue from full game and other increased by $7.2 and accounted for 16.5% of net revenue for the three months ended June 30, 2025 as compared to 18.0% of net revenue for the prior year period.

The increase in net revenue from full game and other was primarily due to an increase in net revenue from our Grand Theft Auto franchise.

The increase was partially offset by a decrease in net revenue from TopSpin 2K25, which released in April 2024,.

Net revenue from digital online channels increased by $181.1 and accounted for 98.2% of our total net revenue for the three months ended June 30, 2025, as compared to 96.8% for the prior year period.

The increase was primarily due to an increase in net revenue from our NBA 2K franchise and Color Block Jam.

Net revenue from physical retail and other channels decreased by $15.5 and accounted for 1.8% of our total net revenue for the three months ended June 30, 2025, as compared to 3.2% for the same period in the prior year period.

The decrease in net revenue from physical retail and other channels was primarily due to a decrease in net revenue from TopSpin 2K25;

and our NBA 2K and WWE 2K franchises.

Gross profit as a percentage of net revenue for the three months ended June 30, 2025 was 62.9% as compared to 57.6% for the prior year period.

The increase in gross profit as a percentage of net revenue was primarily due to (i) the reversal of expense related to the forfeiture of awards (refer to Note 10 - Loss Per Share ) and (ii) lower amortization of intangibles assets primarily due to divestitures and impairments in the prior year, partially offset by the acquisition of Gearbox (refer to Note 13 - Acquisitions ).

Changes in foreign currency exchange rates increased net revenue by $1.8 and increased gross profit by $10.9 for the three months ended June 30, 2025 as compared to the prior year period.

For the six months ended September 30, 2025, net revenue increased by $586.3 as compared to the prior year period.

The increase was primarily driven by higher net revenue of (i) $200.7 from our NBA 2K franchise, (ii) $151.0 from our Borderlands franchise, the latest installment of which, Borderlands 4 , released in September 2025, (iii) $148.8 from Color Block Jam , which released in November 2024, and (iv) $58.4 from our Mafia franchise, the latest installment of which, Mafia:

The Old Country , released in August 2025.

Net revenue from mobile increased by $160.6 and accounted for 49.5% of our total net revenue for six months ended September 30, 2025, as compared to 54.3% for the prior year period.

The increase was primarily driven by higher net revenue from Color Block Jam .

Net revenue from console games increased by $270.6 and accounted for 38.8% of our total net revenue for the six months ended September 30, 2025, as compared to 37.2% for the prior year period.

The increase was primarily driven by higher net revenue from our NBA 2K, Borderlands , and Mafia franchises.

Net revenue from PC and other increased by $155.1 and accounted for 11.7% of our total net revenue for the six months ended September 30, 2025, as compared to 8.5% for the prior year period.

The increase was primarily driven by higher net revenue from our Borderlands , Grand Theft Auto , NBA 2K , and Mafia franchises.

Net revenue from RCS increased by $355.3 and accounted for 77.3% of net revenue for the six months ended September 30, 2025, as compared to 80.9% of net revenue for the prior year period.

The increase was primarily driven by higher net revenue from our NBA 2K franchise and Color Block Jam.

Net revenue from full game and other increased by $231.0 and accounted for 22.7% of net revenue for the six months ended September 30, 2025 as compared to 19.1% of net revenue for the prior year period.

The increase was primarily driven by higher net revenue from our Borderlands, Grand Theft Auto , and Mafia franchises.

Net revenue from digital online channels increased by $574.2 and accounted for 96.7% of our total net revenue for the six months ended September 30, 2025, as compared to 96.4% for the prior year period.

The increase was primarily driven by higher net revenue from our NBA 2K franchise, Color Block Jam , and our Borderlands franchise.

Net revenue from physical retail and other channels increased by $12.1 and accounted for 3.3% of our total net revenue for the six months ended September 30, 2025, as compared to 3.6% for the same period in the prior year period.

The increase was primarily driven by higher net revenue from our Borderlands and Mafia franchises, partially offset by lower net revenue from our NBA 2K franchise;

TopSpin 2K25 , which released in April 2024;

and our Grand Theft Auto franchise.

Gross profit as a percentage of net revenue for the six months ended September 30, 2025 was 58.7% as compared to 55.8% for the prior year period.

The increase in gross profit as a percentage of net revenue was primarily driven by lower amortization of intangible assets primarily due to impairment charges in the prior year for acquisition-related intangible assets.

Changes in foreign currency exchange rates increased net revenue by $4.3 and increased gross profit by $16.5 for the six months ended September 30, 2025 as compared to the prior year period.

Operating Expenses

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General and administrative 77.0 60.4

Changes in foreign currency exchange rates increased total operating expenses by $12.0 for the three months ended June 30, 2025, as compared to the prior year period.

Changes in foreign currency exchange rates increased total operating expenses by $12.1 for the six months ended September 30, 2025, as compared to the prior year period.

Selling and marketing

Selling and marketing expenses decreased by $22.6 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to lower overall marketing expenses for Match Factory!

, Screw Jam , Star Wars:

Hunters , and Twisted Tangle , partially offset by (i) higher marketing expenses for Color Block Jam , with no corresponding expense in the prior year, and (ii) higher personnel expense due to increased headcount.

Selling and marketing expenses increased by $52.7 for the six months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher personnel expense due to higher performance-based compensation and (ii) higher overall marketing expense for Color Block Jam and our Borderlands franchise, partially offset by lower overall marketing expenses for Match Factory!

, Screw Jam , Game of Thrones:

Legends , Star Wars:

Hunters , and Twisted Tangle .

Research and development

Research and development expenses increased by $41.6 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to increases due to (i) the timing of tax related credits related to certain titles and (ii) higher personnel expense due to the acquisition of Gearbox in June 2024 (refer to Note 13 - Acquisitions ).

Research and development expenses increased by $62.9 for the six months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher personnel expense due to the acquisition of Gearbox in June 2024 and higher performance-based compensation, and (ii) the timing of additional R&D related credits related to certain titles.

General and administrative

General and administrative expenses decreased by $3.5 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to decreases in transaction costs related to our Gearbox acquisition (refer to Note 13 - Acquisitions ) and legal and settlement fees related to the IBM case against Zynga in the prior year, partially offset by higher personnel expense.

General and administrative expenses decreased by $31.5 for the six months ended September 30, 2025, as compared to the prior year period, primarily driven by lower legal fees and contingencies related to the IBM case against Zynga, partially offset by higher personnel expense due to higher performance-based compensation.

Depreciation and amortization

Depreciation and amortization expenses increased by $5.6 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to increases in IT infrastructure expense and leasehold improvements for office buildouts.

Depreciation and amortization expenses increased by $7.1 for the six months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher IT infrastructure expense and (ii) higher leasehold improvement expense for office buildouts, partially offset by lower amortization related to intangible assets related to our acquisitions.

Business reorganization

Business reorganization decreased by $53.7 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to the completion of the 2024 Plan.

Business reorganization was $(4.2) for the three months ended June 30, 2025, primarily due to the recovery of previously incurred costs related to the termination of development of one of our titles in connection with the 2024 Plan.

Business reorganization decreased by $70.4 for the six months ended September 30, 2025, as compared to the prior year period, primarily driven by the completion of the 2024 Plan.

Interest and other, net

Interest and other, net was expense of $35.4 for the three months ended June 30, 2025, as compared to expense of $27.3 for the prior year period.

The net increase in expense was primarily due to an increase in foreign currency losses.

Benefit from income taxes

The benefit from income taxes for the three months ended June 30, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The benefit from income taxes was $1.9 for the three months ended June 30, 2025, as compared to the provision for income taxes of $49.8 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 13.8% for the three months ended June 30, 2025 was primarily due to tax expense of $5.6 related to an increase in the U.S.

and international valuation allowances and $2.9 by geographic mix of earnings and changes in reserves, offset by tax benefits of $4.9 from employee stock-based compensation, tax benefits of $2.6 from tax credits.

In the prior year period, when compared to the statutory rate of 21.0%, the effective tax rate of (23.5)% for the three months ended June 30, 2024 was primarily due to a tax expense of $96.8 related to an increase in valuation allowance and tax expense of $8.2 related to geographic mix of earnings offset by benefits of $17.7 from tax credits.

The change in the effective tax rate, when compared to the prior year period's effective tax rate, is primarily due to increased tax benefits from employee stock-based compensation, decreased tax benefits from tax credits, decreased tax expense from changes in the U.S.

and international valuation allowance, and decreased tax expense from geographic mix of earnings.

Interest and other, net was an expense of $52.9 for the six months ended September 30, 2025, as compared to an expense of $54.4 for the prior year period.

The net decrease in expense was primarily driven by lower interest expense related to our debt transactions (refer to Note 9 - Debt ) and changes in fair value based on the observable price changes of our long-term investments, partially offset by a lower interest income primarily due to lower interest rates and cash balances.

Provision for Income Taxes

The provision for income taxes for the six months ended September 30, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $16.5 for the six months ended September 30, 2025, as compared to the provision for income taxes of $91.0 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of (12.8)% for the six months ended September 30, 2025 was primarily driven by tax expense of $39.3 related to an increase in the U.S.

and international valuation allowances, $18.9 related to geographic mix of earnings and changes in reserves, offset by tax benefits of $12.9 from tax credits.

In the prior year period, when compared to the statutory rate of 21.0%, the effective tax rate of (17.0)% for the six months ended September 30, 2024 was due primarily to tax expense of $201.8 related to an increase in the U.S.

valuation allowance, tax expense of $18.1 related to geographic mix of earnings offset by benefits of $35.0 from tax credits.

The change in the effective tax rate, when compared to the prior year period's effective tax rate, is primarily driven by lower tax expense from changes in the U.S.

and international valuation allowance, lower tax benefits from tax credits, and lower tax benefits from employee stock-based compensation, offset by lower tax expense related to geographic mix of earnings and changes in reserves.

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It is possible that settlement of audits or the expiration of the statute of limitations could have an impact on our effective tax rate in future periods.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law and includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, accelerated deductions for domestic research expenditures and modifications to tax credits.

The legislation has multiple effective dates, with certain provisions effective in fiscal year ending March 31, 2026 and others implemented in future periods.

We are currently assessing its impact on our Consolidated Financial Statements

The impact of OBBB has been reflected in our estimated annualized effective tax rate, and reduced our forecasted U.S.

cash tax liability.

It did not, however, impact our U.S.

deferred tax assets or liabilities since we continue to maintain a full valuation allowance against U.S.

net deferred tax assets.

Effective for tax years starting after December 31, 2026 (April 1, 2027 for the Company), the ARPA expands the limitation to cover the next five most highly compensated employees.

The ARPA did not have a material impact on our Condensed Consolidated Financial Statements for the three months ended June 30, 2025.

The ARPA did not have a material impact on our Condensed Consolidated Financial Statements for the six months ended September 30, 2025.

We continue to evaluate the potential impact the ARPA may have on our operations and Consolidated Financial Statements in future periods.

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Many countries have already implemented or are taking steps to implement Pillar Two.

Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly differently than the model rules and on different timelines.

Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two

slightly differently than the model rules and on different timelines.

Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than a 15% minimum rate.

The impact of Pillar Two was not material to the tax provision for the three months ended June 30, 2025.

The impact of Pillar Two was not material to the tax provision for the six months ended September 30, 2025.

We will continue to evaluate the impact Pillar Two and any additional guidance may have on our results and operations.

Net loss and loss per share

For the three months ended June 30, 2025, net loss was $11.9, as compared to a net loss of $262.0 in the prior year period.

Basic and diluted loss per share for the three months ended June 30, 2025 was $0.07, as compared to basic and diluted loss per share of $1.52 in the prior year period.

For the six months ended September 30, 2025, net loss was $145.8, as compared to net loss of $627.5 in the prior year period.

For the six months ended September 30, 2025, basic and diluted loss per share was $0.80 as compared to basic and diluted loss per share of $3.61 in the prior year period.

Basic weighted average shares of 182.7 were 8.9 shares higher as compared to the prior year period basic weighted average shares, primarily due to our equity issuance, as well as normal stock compensation activity, including vests, grants, and forfeitures in the prior year being fully outstanding in the current year.

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The proceeds from these arrangements will be reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows.

No receivables were sold under this facility during the three months ended June 30, 2025.

No receivables were sold under this facility during the three months ended September 30, 2025.

We may utilize this facility in future periods depending on cash flow needs and market conditions.

Short-term investments

As of June 30, 2025, we had $10.1 of short-term investments, which primarily consisted of bank time deposits with maturities greater than 90 days.

As of September 30, 2025, we had $246.4 of short-term investments, which primarily consisted of bank time deposits with maturities greater than 90 days.

From time to time, we may make additional short-term investments depending on future market conditions and liquidity needs.

As of June 30, 2025, we had $3,050.0 of Senior Notes outstanding.

As of September 30, 2025, we had $3,050.0 of Senior Notes outstanding.

On April 14, 2025, we repaid our 2025 Notes with a principal amount of $600.0.

Credit Agreement

As of June 30, 2025, there were no borrowings under the 2022 Credit Agreement, and we had approximately $997.8 available for additional borrowings.

As of September 30, 2025, there were no borrowings under the 2022 Credit Agreement, and we had approximately $997.8 available for additional borrowings.

Convertible Notes

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The 2026 Convertible Notes do not bear regular interest, and the principal amount does not accrete.

An aggregate principal amount of $29.4 of the 2026 Convertible Notes remained outstanding at June 30, 2025.

An aggregate principal amount of $29.4 of the 2026 Convertible Notes remained outstanding at September 30, 2025.

Financial Condition

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A majority of our trade receivables are derived from sales to major retailers, including digital storefronts and platform partners, and distributors.

Our five largest customers accounted for 83.5% and 83.1% of net revenue during the three months ended June 30, 2025 and 2024, respectively.

We had four customers who accounted for 25%, 23%, 17%, and 13% of our net revenue as of June 30, 2025, and four customers who accounted for 25%, 24%, 19%, and 11% of our net revenue as of March 31, 2025.

As of June 30, 2025 and March 31, 2025, five customers accounted for 75.2% and 72.1% of our gross accounts receivable, respectively.

Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 61.0% and 61.0% of such balances at June 30, 2025 and March 31, 2025, respectively.

We had three customers who accounted for 25.6%, 22.8%, and 12.6% of our gross accounts receivable as of June 30, 2025, and three customers who accounted for 24.0%, 21.3%, and 15.7% of our gross accounts receivable as of March 31, 2025.

have any additional customers that exceeded 10% of our gross accounts receivable as of June 30, 2025, and March 31, 2025.

Our five largest customers accounted for 81.5% and 82.2% of net revenue during the six months ended September 30, 2025 and 2024, respectively.

We had four customers who accounted for 24.9%, 22.7%, 15.1%, and 12.4% of our net revenue as of September 30, 2025, and four customers who accounted for 25.6%, 22.5%, 18.6%, and 10.3% of our net revenue as of September 30, 2024.

As of September 30, 2025 and March 31, 2025, five customers accounted for 78.3% and 72.1% of our gross accounts receivable, respectively.

Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 64.9% and 61.0% of such balances at September 30, 2025 and March 31, 2025, respectively.

We had three customers who accounted for 31.5%, 18.9%, and 14.4% of our gross accounts receivable as of September 30, 2025, and three customers who accounted for 24.0%, 21.3%, and 15.7% of our gross accounts receivable as of March 31, 2025.

We did not have any additional customers that exceeded 10% of our gross accounts receivable as of September 30, 2025, and March 31, 2025.

Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers who sell our physical products, and our past collection experience, we believe that the receivable balances from these largest customers do not represent a significant credit risk, although we actively monitor each customer's creditworthiness and economic conditions that may affect our customers' business and access to capital.

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We believe that our current cash and cash equivalents, short-term investments, and projected cash flow from operations, along with availability under our 2022 Credit Agreement will provide us with sufficient liquidity to satisfy our cash requirements for working capital, capital expenditures, and commitments on both a short-term and long-term basis.

As of June 30, 2025, the amount of cash and cash equivalents held outside of the U.S.

As of September 30, 2025, the amount of cash and cash equivalents held outside of the U.S.

by our foreign subsidiaries was $1,432.2.

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The program does not require us to repurchase shares and may be suspended or discontinued at any time for any reason.

During the three months ended June 30, 2025, we did not repurchase shares of our common stock in the open market, as part of the program.

We have repurchased a total of 11.7 shares of our common stock under the program, and as of June 30, 2025, 10.0 shares of our common stock remained available for repurchase under the share repurchase program.

During the three months ended September 30, 2025, we did not repurchase shares of our common stock in the open market, as part of the program.

We have repurchased a total of 11.7 shares of our common stock under the program, and as of September 30, 2025, 10.0 shares of our common stock remained available for repurchase under the share repurchase program.

Our changes in cash flows were as follows:

Three Months Ended June 30,

Six Months Ended September 30,

(millions of dollars) 2025 2024

Net cash used in operating activities $ (44.7) $ (191.0)

Net cash provided by (used in) operating activities $ 83.7 $ (319.4)

Net cash used in investing activities (314.0) (68.0)

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Net change in cash, cash equivalents, and restricted cash and cash equivalents $ 401.8 $ 217.6

At June 30, 2025, we had $2,116.2 of cash and cash equivalents and restricted cash and cash equivalents, compared to $1,559.2 at March 31, 2025.

The increase was primarily due to Net cash provided by financing activities, primarily related to proceeds from our equity issuance of our common stock (refer to Note 10 - L oss Per Share ), partially offset by the repayment of our 2025 Notes (refer to Note 9 - Debt ).

This net increase was partially offset by the decrease in (i) Net cash used in operating activities, which was primarily due to investments in software development and licenses, partially offset by sales of our products and (ii) Net cash used in investing activities which was primarily due to the purchase of fixed assets.

At September 30, 2025, we had $1,961.0 of cash and cash equivalents and restricted cash and cash equivalents, compared to $1,559.2 at March 31, 2025.

The increase was primarily due to Net cash provided by financing activities, primarily related to proceeds from our equity issuance of our common stock (refer to Note 10 - Loss Per Share ), partially offset by the repayment of our 2025 Notes (refer to Note 9 - Debt ).

The increase was also due to Net cash provided by operating activities, which was primarily due to sales of our products, partially offset by investments in software development and licenses.

This net increase was partially offset by the decrease in Net cash used in investing activities, which was primarily due to the purchase of short-term investments and fixed assets.

Refer to Note 11 - Commitments and Contingencies for disclosures regarding our commitments.

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In fiscal year 2026, we anticipate capital expenditures to be approximately $180.0.

During the three months ended June 30, 2025, capital expenditures were $25.1.

During the six months ended September 30, 2025, capital expenditures were $57.0.

International Operations

Net revenue earned outside of the United States is principally generated by our operations in Europe, Asia, Australia, Canada, and Latin America.

For the three months ended June 30, 2025 and 2024, 40.1% and 38.7%, respectively, of our net revenue was earned outside the U.S.

For the three months ended September 30, 2025 and 2024, 41.6% and 39.8%, respectively, of our net revenue was earned outside the U.S.

We are subject to risks inherent in foreign trade, including increased credit risks, tariffs and duties, fluctuations in foreign currency exchange rates, shipping delays and international political, regulatory and economic developments, all of which can have a significant effect on our operating results.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis