What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-04 compared with 2025-11-07 · 150 added, 132 removed, 317 unchanged (47% of the section changed)

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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.

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 have a diverse portfolio that spans all key platforms and numerous genres, including action, adventure, family, casual, hyper-casual, role-playing, shooter, social casino, sports, and strategy.

This enables us to appeal to a wide array of consumers and demographic groups worldwide, ranging from game enthusiasts to casual gamers.

This enables us to appeal to a wide array of consumers worldwide, ranging from game enthusiasts to casual gamers.

Most of our intellectual property is internally owned and developed, which we believe best positions us financially and competitively.

In addition, we license selectively some highly recognizable renowned brands, especially in sports entertainment.

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

In addition, we license selectively some highly recognizable renowned brands, particularly in sports entertainment.

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

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.

We have internal development studios located in Australia, Canada, China, Czech Republic, Finland, Germany, Hungary, India, Serbia, South Korea, Spain, Turkey, the United Kingdom ("U.K."), and the United States ("U.S.").

To support our content pipeline, we have internal development studios located in Australia, Canada, China, Czech Republic, Finland, Germany, Hungary, India, Serbia, South Korea, Spain, Turkey, the United Kingdom ("U.K."), and the United States ("U.S.").

Rockstar Games.

Rockstar Games' strategy is to develop a limited number of titles that are known for their quality and longevity in the market for which they can create sequels and incremental revenue opportunities through virtual currency, add-on content, and in-game purchases.

Software titles published by our Rockstar Games label are primarily internally developed.

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We expect 2K to continue to develop new, successful franchises in the future.

2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock , Mafia , Sid Meier's Civilization , and XCOM franchises, as well as the Borderlands and Tiny Tina's Wonderlands franchises, which we now own following our June 2024 acquisition of Gearbox Entertainment.

2K's realistic sports simulation titles include our flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestling series, PGA TOUR 2K , and TopSpin 2K .

2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock , Borderlands , Mafia , Sid Meier's Civilization , Tiny Tina's Wonderlands , and XCOM franchises.

2K's sports simulation titles include our flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestling series, PGA TOUR 2K , and TopSpin 2K .

2K also publishes mobile titles, including WWE SuperCard and NBA 2K All-Stars .

Our Zynga label publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising.

Our Zynga label publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and advertising.

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 ten billion times, including CSR Racing , Dragon City , Empires & Puzzles , FarmVille , Game of Thrones:

Zynga's diverse portfolio of popular game franchises has been downloaded more than 10 billion times, including CSR Racing , Dragon City , Empires & Puzzles , FarmVille , Game of Thrones:

Legends, Golf Rival , Hair Challenge, Harry Potter:

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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 12.0% of our net revenue for the six months ended September 30, 2025.

Sales of Grand Theft Auto products generated 12.4% of our net revenue for the nine months ended December 31, 2025.

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

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

Such console revenue comprised 38.7% of our net revenue for the nine months ended December 31, 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 96.7% of our net revenue for the six months ended September 30, 2025.

Net revenue from digital online channels comprised 96.9% of our net revenue for the nine months ended December 31, 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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Net Bookings were as follows:

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

Three Months Ended December 31, Nine Months Ended December 31,

2025 2024 Increase/

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Net Bookings $ 1,757.1 $ 1,373.4 $ 383.7 27.9 % $ 5,140.7 $ 4,066.5 $ 1,074.2 26.4 %

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;

For the three months ended December 31, 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 Grand Theft Auto franchises;

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.

, and our Red Dead Redemption franchise.

For the nine months ended December 31, 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, Color Block Jam;

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

and our Grand Theft Auto 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 September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

2025 2024 2025 2024

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Loss before income taxes (55.8) (3.3) % (152.9) (11.1) % (185.1) (3.7) % (689.4) (17.1) %

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

Provision for (benefit from) for income taxes 37.1 2.2 % (27.7) (2.0) % 53.6 1.1 % 63.3 1.6 %

Net loss $ (92.9) (5.5) % $ (125.2) (9.1) % $ (238.7) (4.8) % $ (752.7) (18.7) %

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

Three Months Ended December 31, Nine Months Ended December 31,

2025 2024 2025 2024

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Full game and other 395.0 23.2 % 272.3 20.0 % 1,140.6 22.9 % 786.9 19.4 %

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

Three Months Ended December 31, 2025 Compared to December 31, 2024

2025 % 2024 % Increase/

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Product costs 220.9 13.0 % 200.2 14.7 % 20.7 10.3 %

Software development costs and royalties (1)

172.1 9.7 % 64.9 4.8 % 107.2 165.2 %

Internal royalties 167.4 9.9 % 103.1 7.6 % 64.3 62.4 %

Game intangibles 160.1 9.4 % 171.1 12.6 % (11.0) (6.4) %

Licenses 118.3 7.0 % 88.8 6.5 % 29.5 33.2 %

Internal royalties 78.7 4.4 % 77.2 5.7 % 1.5 1.9 %

Software development costs and royalties (1)

86.8 5.1 % 36.7 2.7 % 50.1 136.5 %

Cost of revenue 753.5 44.4 % 599.9 44.1 % 153.6 25.6 %

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(1) Includes $3.6 and $2.6 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 .

For the three months ended December 31, 2025, net revenue increased by $339.2 as compared to the prior year period.

The increase was primarily driven by higher net revenue of (i) $111.9 from our NBA 2K franchise;

(ii) $51.5 from Color Block Jam , which released in November 2024;

(iii) $43.8 from our Grand Theft Auto franchise;

(iv) $42.4 from Toon Blast!

and (v) $30.8 from our Red Dead Redemption franchise.

Net revenue from mobile increased by $134.2 and accounted for 51.0% of our total net revenue for the three months ended December 31, 2025, as compared to 53.8% for the prior year period.

The increase in net revenue from mobile was primarily driven by higher net revenue from Color Block Jam , Toon Blast!, and our Red Dead Redemption franchise.

Net revenue from console games increased by $144.2 and accounted for 38.3% of our total net revenue for the three months ended December 31, 2025, as compared to 37.4% for the prior year period.

The increase in net revenue from console games was primarily driven by higher net revenue from our NBA 2K franchise and our Borderlands franchise, the latest installment of which, Borderlands 4 , released in September 2025.

Net revenue from PC and other increased by $60.8 and accounted for 10.7% of our total net revenue for the three months ended December 31, 2025, as compared to 8.8% for the prior year period.

The increase in net revenue from PC and other was primarily driven by higher net revenue from our Grand Theft Auto and Borderlands franchises , as well as the addition of the Risk of Rain franchise from our acquisition of Gearbox in the prior year period.

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.

Net revenue from RCS increased by $216.5 and accounted for 76.8% of net revenue for the three months ended December 31, 2025, as compared to 80.0% of net revenue for the prior year period.

The increase in net revenue from RCS was primarily driven by higher net revenue from our NBA 2K franchise, Color Block Jam , and Toon Blast!.

Net revenue from full game and other increased by $122.7 and accounted for 23.2% of net revenue for the three months ended December 31, 2025 as compared to 20.0% of net revenue for the prior year period.

The increase in net revenue from full game and other was primarily driven by higher net revenue from our Grand Theft Auto , Red Dead Redemption , and Borderlands franchises.

Net revenue from digital online channels increased by $343.8 and accounted for 97.4% of our total net revenue for the three months ended December 31, 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 , our Grand Theft Auto franchise, Toon Blast!

, and our Red Dead Redemption franchise.

Net revenue from physical retail and other channels decreased by $4.6 and accounted for 2.6% of our total net revenue for the three months ended December 31, 2025, as compared to 3.6% for the same period in the prior year period.

The decrease in net revenue from physical retail and other channels was primarily driven by lower net revenue from our NBA 2K franchise.

Gross profit as a percentage of net revenue for the three months ended December 31, 2025 was 55.6% as compared to 55.9% for the prior year period.

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

Changes in foreign currency exchange rates increased net revenue by $2.6 and increased gross profit by $12.4 for the three months ended December 31, 2025 as compared to the prior year period.

Operating Expenses

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General and administrative 36.9 31.8

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.

Changes in foreign currency exchange rates increased total operating expenses by $7.5 for the three months ended December 31, 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 .

Selling and marketing expenses increased by $44.3 for the three months ended December 31, 2025, as compared to the prior year period, primarily driven by higher marketing expense for Color Block Jam and our Grand Theft Auto franchise, as well as higher personnel expense due to higher performance-based compensation.

These increases were partially offset by lower marketing expense for Match Factory!.

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.

Research and development expenses increased by $41.8 for the three months ended December 31, 2025, as compared to the prior year period, primarily driven by higher personnel expense due to higher performance-based compensation.

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.

General and administrative expenses increased by $29.0 for the three months ended December 31, 2025, as compared to the prior year period, primarily driven by an adjustment recorded to legal and settlement fees related to the IBM case against Zynga in the prior year, as well as 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.

Depreciation and amortization expenses decreased by $0.4 for the three months ended December 31, 2025, as compared to the prior year period, primarily driven by lower amortization related to acquired intangible assets due to prior year impairments, partially offset by higher IT infrastructure expense.

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.

Business reorganization decreased by $22.5 for the three months ended December 31, 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.

Interest and other, net was an expense of $17.1 for the three months ended December 31, 2025, as compared to an expense of $20.8 for the prior year period.

The net decrease in expense was primarily driven by lower interest expense due to the repayment of our 2025 Notes in April 2025 and lower outstanding debt balances (refer to Note 9 - Debt ) and foreign currency gains in the current period compared to foreign currency losses in the prior year period.

This was partially offset by lower interest income primarily due to lower interest rates.

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 provision for income taxes for the three months ended December 31, 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 $37.1 for the three months ended December 31, 2025, as compared to the benefit from income taxes of $27.7 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of (66.5)% for the three months ended December 31, 2025 was primarily due to tax expense of $35.1 related to an increase in the U.S.

and international valuation allowances, offset by tax benefits of $12.5 from tax credits and by tax expense of $19.9 related to geographic mix of earnings.

In the prior year period, when compared to the statutory rate of 21.0%, the effective tax rate of 18.1% for the three months ended December 31, 2024 was due primarily to tax benefits of $18.2 related to divestitures, tax benefits of $6.4 from employee stock-based compensation, tax benefits of $3.9 from tax credits, offset by tax expense of $18.7 related to an increase in the U.S.

and international valuation allowances and tax expense of $7.1 related to geographic mix of earnings.

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

and international valuation allowance, offset by increased tax benefits from tax credits, higher tax expense from geographic mix of earnings, and no tax benefits in the current year from divestitures as compared to the prior year.

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.

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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.

The ARPA did not have a material impact on our Condensed Consolidated Financial Statements for the three months ended December 31, 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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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.

The impact of Pillar Two was not material to the tax provision for the three months ended December 31, 2025.

On January 5, 2026, the OECD released new administrative guidance outlining a "side-by-side" arrangement following agreement on key elements by the OECD/G20 Inclusive Framework on Pillar Two.

It provides new safe harbors for U.S.

multinational companies which would exempt U.S.-parented groups from two of the three Pillar Two top up taxes, extend the current Transitional Country-by-Country Reporting Safe Harbor by one year through the end of fiscal year ending March 31, 2028, and make the Simplified Effective Tax Rate Safe Harbor permanent.

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.

For the three months ended December 31, 2025, net loss was $92.9, as compared to a net loss of $125.2 in the prior year period.

Basic and diluted loss per share for the three months ended December 31, 2025 was $0.50, as compared to basic and diluted loss per share of $0.71 in the prior year period.

Basic weighted average shares of 185.0 were 9.0 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

Nine Months Ended December 31, 2025 Compared to December 31, 2024

2025 % 2024 % Increase/

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(1) Includes $(32.6) and $8.6 of stock-based compensation expense in 2025 and 2024, respectively, in software development costs and royalties.

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:

For the nine months ended December 31, 2025, net revenue increased by $925.5 as compared to the prior year period.

The increase was primarily driven by higher net revenue of (i) $312.6 from our NBA 2K franchise;

(ii) $200.3 from Color Block Jam , which released in November 2024;

(iii) $181.0 from our Borderlands franchise , the latest installment of which, Borderlands 4 , released in September 2025;

and (iv) $92.7 from Toon Blast!

Net revenue from mobile increased by $294.8 and accounted for 50.0% of our total net revenue for nine months ended December 31, 2025, as compared to 54.2% for the prior year period.

The increase in net revenue from mobile was primarily driven by higher net revenue from Color Block Jam and Toon Blast!

Net revenue from console games increased by $414.8 and accounted for 38.7% of our total net revenue for the nine months ended December 31, 2025, as compared to 37.2% for the prior year period.

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

Net revenue from PC and other increased by $215.9 and accounted for 11.3% of our total net revenue for the nine months ended December 31, 2025, as compared to 8.6% for the prior year period.

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

Net revenue from RCS increased by $571.8 and accounted for 77.1% of net revenue for the nine months ended December 31, 2025, as compared to 80.6% of net revenue for the prior year period.

The increase in net revenue from RCS 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 $353.7 and accounted for 22.9% of net revenue for the nine months ended December 31, 2025 as compared to 19.4% of net revenue for the prior year period.

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

Net revenue from digital online channels increased by $918.0 and accounted for 96.9% of our total net revenue for the nine months ended December 31, 2025, as compared to 96.4% for the prior year period.

The increase was primarily due to higher net revenue from our NBA 2K franchise, Color Block Jam , and our Borderlands and Grand Theft Auto franchises.

Net revenue from physical retail and other channels increased by $7.5 and accounted for 3.1% of our total net revenue for the nine months ended December 31, 2025, as compared to 3.6% for the same period in the prior year period.

The increase in net revenue from physical retail and other channels was primarily driven by higher net revenue from our Borderlands and Mafia franchises, partially offset by lower net revenue from our NBA 2K and Grand Theft Auto franchises;

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.

and our WWE 2K franchise.

Gross profit as a percentage of net revenue for the nine months ended December 31, 2025 was 57.7% as compared to 55.7% for the prior year period.

net revenue, partially offset by higher amortization of capitalized software and development costs primarily due to the timing of releases, higher external royalties related to our titles, and higher internal royalties due to the timing of when royalties are earned.

Changes in foreign currency exchange rates increased net revenue by $6.9 and increased gross profit by $28.9 for the nine months ended December 31, 2025 as compared to the prior year period.

Operating Expenses

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Research and development

812.1 16.3 % 707.4 17.5 % 104.7 14.8 %

General and administrative

650.6 13.1 % 653.1 16.1 % (2.5) (0.4) %

Depreciation and amortization 148.3 3.0 % 141.6 3.5 % 6.7 4.7 %

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General and administrative 113.9 92.2

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.

Changes in foreign currency exchange rates increased total operating expenses by $19.6 for the nine months ended December 31, 2025, as compared to the prior year period.

Selling and marketing

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 .

Selling and marketing expenses increased by $97.0 for the nine months ended December 31, 2025, as compared to the prior year period, primarily driven by higher marketing expense for Color Block Jam and our Borderlands franchise, as well as higher personnel expense due to higher performance-based compensation.

These increases were partially offset by lower marketing expenses for Match Factory!

, our hyper- and hybrid-casual mobile portfolio, Game of Thrones:

Legends , and Star Wars:

Research and development

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.

Research and development expenses increased by $104.7 for the nine months ended December 31, 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 $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.

General and administrative expenses decreased by $2.5 for the nine months ended December 31, 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 $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.

Depreciation and amortization expenses increased by $6.7 for the nine months ended December 31, 2025, as compared to the prior year period, primarily due to higher IT infrastructure expense and higher leasehold improvement expense for office buildouts, partially offset by lower amortization related to intangible assets due to prior year impairments.

Business reorganization

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.

Business reorganization decreased by $92.9 for the nine months ended December 31, 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 $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.

Interest and other, net was an expense of $70.0 for the nine months ended December 31, 2025, as compared to $75.2 for the prior year period.

The net decrease in expense was primarily driven by lower interest expense due to the repayment of our 2025 Notes in April 2025 and lower outstanding debt balances (refer to Note 9 - Debt ), decrease in foreign currency losses, and changes in fair value based on the observable price changes of our long-term investments.

This was partially offset by lower interest income primarily due to lower interest rates.

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 provision for income taxes for the nine months ended December 31, 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 $53.6 for the nine months ended December 31, 2025, as compared to the provision for income taxes of $63.3 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of (29.0)% for the nine months ended December 31, 2025 was primarily driven by tax expense of $74.5 related to an increase in the U.S.

and international valuation allowances offset by tax benefits of $25.4 from tax credits and by tax expense of $28.7 related to geographic mix of earnings.

In the prior year period, when compared to the statutory rate of 21.0%, the effective tax rate of (9.2)% for the nine months ended December 31, 2024 was due primarily to a tax expense of $220.5 related to an increase in the U.S.

and international valuation allowances and tax expense of $25.2 related to geographic mix of earnings, offset by tax benefits of $18.2 related to divestitures and tax benefits of $38.8 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.

and international valuation allowance, offset by lower tax benefits from tax credits, no tax benefits in the current year from divestitures as compared to the prior year, and increased tax expense related to geographic mix of earnings.

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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 six months ended September 30, 2025.

The ARPA did not have a material impact on our Condensed Consolidated Financial Statements for the nine months ended December 31, 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 six months ended September 30, 2025.

The impact of Pillar Two was not material to the tax provision for the nine months ended December 31, 2025.

On January 5, 2026, the OECD released new administrative guidance outlining a “side-by-side” arrangement following agreement on key elements by the OECD/G20 Inclusive Framework on Pillar Two.

It provides new safe harbors for U.S.

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 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.

For the nine months ended December 31, 2025, net loss was $238.7, as compared to net loss of $752.7 in the prior year period.

For the nine months ended December 31, 2025, basic and diluted loss per share was $1.30 as compared to basic and diluted loss per share of $4.31 in the prior year period.

Basic weighted average shares of 183.4 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 September 30, 2025.

No receivables were sold under this facility during the three months ended December 31, 2025.

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

Short-term investments

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.

As of December 31, 2025, we had $199.0 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 September 30, 2025, we had $3,050.0 of Senior Notes outstanding.

As of December 31, 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 September 30, 2025, there were no borrowings under the 2022 Credit Agreement, and we had approximately $997.8 available for additional borrowings.

As of December 31, 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 September 30, 2025.

An aggregate principal amount of $29.4 of the 2026 Convertible Notes remained outstanding at December 31, 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 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.

Our five largest customers accounted for 81.0% and 81.8% of net revenue during the nine months ended December 31, 2025 and 2024, respectively.

We had four customers who accounted for 24.6%, 22.6%, 15.0%, and 12.4% of our net revenue as of December 31, 2025, and four customers who accounted for 25.1%, 21.5%, 14.8%, and 10.1% our net revenue as of December 31, 2024.

As of December 31, 2025 and March 31, 2025, five customers accounted for 80.6% and 72.1% of our gross accounts receivable, respectively.

Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 69.6% and 61.0% of such balances at December 31, 2025 and March 31, 2025, respectively.

We had three customers who accounted for 35.3%, 18.0%, and 16.3% of our gross accounts receivable as of December 31, 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 December 31, 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 September 30, 2025, the amount of cash and cash equivalents held outside of the U.S.

As of December 31, 2025, the amount of cash and cash equivalents held outside of the U.S.

by our foreign subsidiaries was $1,536.4.

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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 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.

During the three months ended December 31, 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 December 31, 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:

Six Months Ended September 30,

Nine Months Ended December 31,

(millions of dollars) 2025 2024

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Net change in cash, cash equivalents, and restricted cash and cash equivalents $ 692.6 $ 206.9

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.

At December 31, 2025, we had $2,251.8 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 ).

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

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

During the nine months ended December 31, 2025, capital expenditures were $126.0.

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

For the three months ended December 31, 2025 and 2024, 40.4% and 39.3%, 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