What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-02-04 · 104 added, 242 removed, 225 unchanged (61% of the section changed)

23 unchanged sentences

We develop, operate, and publish products principally through Rockstar Games, 2K, and Zynga.

Our products are currently designed for console gaming systems, mobile, including smartphones and tablets, and PC.

Our products are currently designed for console gaming systems, mobile, including smartphones and tablets, and personal computer ("PC").

We deliver our products through physical retail, digital download, online platforms, and cloud streaming services.

6 unchanged sentences

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, particularly in sports entertainment.

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

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

6 unchanged sentences

We expect Rockstar Games, our wholly-owned publisher of the Grand Theft Auto , L.A.

Noire , Max Payne , Midnight Club , Red Dead Redemption , and other popular franchises, to continue to be a leader in the action/adventure product category and to create groundbreaking entertainment.

Noire , Max Payne , Midnight Club , Red Dead Redemption , and other popular series, to continue to be a leader in the action/adventure product category and to create groundbreaking entertainment.

We believe that Rockstar Games has established a uniquely original, popular, cultural phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry's most iconic and critically acclaimed brand and has sold-in over 470 million units worldwide.

1 unchanged sentence

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 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.

Rockstar Games continues to invest in the series and will release Grand Theft Auto VI on November 19, 2026, during the current fiscal year.

The label released its first trailer for the title in December 2023 and the second in May 2025, and pre-orders for the title commenced in June 2026.

Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 85 million units worldwide.

4 unchanged sentences

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

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

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

1 unchanged sentence

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 10 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!

Zynga's diverse portfolio of popular game franchises has been downloaded more than 10 billion times, including Color Block Jam , CSR2 , Empires & Puzzles , Game of Thrones:

Legends , Game of Thrones Slots Casino , Golf Rival , Harry Potter:

Puzzles & Spells , Hit it Rich!

Casino , Match Factory!

, Merge Dragons!

, Merge Magic!

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

, Toon Blast , Toy Blast , Wizard of Oz Slots Casino , Words With Friends , and Zynga Poker .

Trends and Factors Affecting our Business

1 unchanged sentence

Our financial results are affected by the timing of our product releases and the commercial success of our titles.

Generally, a significant portion of our revenue has been derived from a few popular franchises, particularly around new releases within those franchises, some of which have annual or biennial releases.

Generally, a significant portion of our revenue has been derived from a few popular series, particularly around new releases within those series, some of which have annual or biennial releases.

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 12.4% of our net revenue for the nine months ended December 31, 2025.

Sales of Grand Theft Auto products generated 12.8% of our net revenue for the three months ended June 30, 2026.

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 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.

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

To date we have also announced that, during the remainder of fiscal year 2027, 2K plans to release NBA 2K27, PGA 2K27 and WWE 2K27.

Economic Environment and Retailer Performance.

2 unchanged sentences

The economic environment has affected our customers in the past and may do so in the future.

There has been increased consolidation in our industry, which is extremely competitive, and larger, better capitalized competitors will be in a stronger position to withstand prolonged periods of economic downturn and sustain their business through periods of financial

Also, bankruptcies or consolidations of our large retail customers could hurt our business, due to uncollectible accounts receivable and the concentration of purchasing power among the remaining large retailers.

1 unchanged sentence

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 38.7% 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.

Such console revenue comprised 41.8% of our net revenue for the three months ended June 30, 2026.

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 has been and could be impacted by global economic factors, including global tariff policies.

When new hardware platforms are introduced, demand for interactive entertainment developed for older platforms typically declines, which may negatively affect our business during the market transition to the new consoles.

2 unchanged sentences

However, we cannot be certain how backwards compatibility will affect demand for our products.

Further, events beyond our control may impact the availability of these new consoles, which may also affect demand for our products.

Further, events beyond our control may impact the availability or pricing of consoles, which may also affect demand for our products.

We manage our product delivery on each current and future platform in a manner we believe to be most effective to maximize our revenue opportunities and achieve the desired return on our investments in product development.

2 unchanged sentences

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 96.9% of our net revenue for the nine months ended December 31, 2025.

Net revenue from digital online channels comprised 98.3% of our net revenue for the three months ended June 30, 2026.

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

20 unchanged sentences

Net Bookings were as follows:

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

Three Months Ended June 30,

2026 2025 Increase/

(decrease) % Increase/

(decrease) 2025 2024 Increase/

(decrease) % Increase/

Net Bookings $ 1,385.9 $ 1,423.1 $ (37.2) (2.6) %

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 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.

For the three months ended June 30, 2026, Net Bookings decreased by $37.2 as compared to the prior year period.

The decrease was primarily driven by lower Net Bookings from our Grand Theft Auto series and Color Block Jam partially offset by higher Net Bookings from NBA 2K .

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 December 31, Nine Months Ended December 31,

2025 2024 2025 2024

Three Months Ended June 30,

Total net revenue $ 1,533.9 100.0 % $ 1,503.8 100.0 %

5 unchanged sentences

Depreciation and amortization 48.2 3.1 % 50.4 3.4 %

Business reorganization 0.6 — % 23.1 1.7 % (3.5) (0.1) % 89.4 2.2 %

Total operating expenses 918.0 59.8 % 923.4 61.5 %

Loss from operations (38.7) (2.3) % (132.1) (9.6) % (115.1) (2.3) % (614.2) (15.2) %

(Loss) income from operations (35.5) (2.3) % 21.6 1.4 %

Interest and other, net:

Interest income 22.8 1.5 % 16.5 1.1 %

Interest expense (30.4) (2.0) % (38.9) (2.6) %

Other income/(expense), net (6.2) (0.4) % (13.0) (0.9) %

Interest and other, net (13.8) (0.9) % (35.4) (2.4) %

Loss before income taxes (49.3) (3.2) % (13.8) (1.0) %

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

Benefit from income taxes (15.2) (1.0) % (1.9) (0.1) %

Net loss $ (34.1) (2.2) % $ (11.9) (0.9) %

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

2025 2024 2025 2024

Three Months Ended June 30,

Net revenue by platform:

8 unchanged sentences

Full game and other 244.1 15.9 % 247.7 16.5 %

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

Three Months Ended June 30, 2026 Compared to June 30, 2025

2026 % 2025 % Increase/

2 unchanged sentences

Product costs 187.8 12.2 % 210.4 14.0 % (22.6) (10.7) %

Internal royalties 167.4 9.9 % 103.1 7.6 % 64.3 62.4 %

Game intangibles 154.3 10.1 % 158.5 10.5 % (4.2) (2.6) %

Licenses 118.3 7.0 % 88.8 6.5 % 29.5 33.2 %

Software development costs and royalties (1)

135.1 8.8 % 30.1 2.0 % 105.0 348.8 %

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

Gross profit $ 945.5 55.6 % $ 759.9 55.9 % $ 185.6 24.4 %

(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 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 $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

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

(decrease) % Increase/

Selling and marketing $ 433.2 25.5 % $ 388.9 28.6 % $ 44.3 11.4 %

Research and development 282.7 16.6 % 240.9 17.7 % 41.8 17.4 %

General and administrative 218.6 12.9 % 189.6 13.9 % 29.0 15.3 %

Depreciation and amortization 49.1 2.9 % 49.5 3.6 % (0.4) (0.8) %

Business reorganization 0.6 — % 23.1 1.7 % (22.5) (97.4) %

Total operating expenses (1)

$ 984.2 57.9 % $ 892.0 65.5 % $ 92.2 10.3 %

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

Selling and marketing $ 24.2 $ 22.4

Research and development 25.6 26.1

General and administrative 36.9 31.8

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 $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 $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 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 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 $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 $17.1 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 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.

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 December 31, 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 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 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.

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

2025 % 2024 % Increase/

(decrease) % Increase/

Total net revenue $ 4,976.6 100.0 % $ 4,051.1 100.0 % $ 925.5 22.8 %

Product costs 660.6 13.3 % 616.0 15.2 % 44.6 7.2 %

Game intangibles 477.4 9.6 % 508.0 12.5 % (30.6) (6.0) %

Licenses 99.5 6.5 % 70.9 4.7 % 28.6 40.3 %

Software development costs and royalties (1)

289.0 5.8 % 177.8 4.4 % 111.2 62.5 %

Internal royalties 74.7 4.9 % 88.9 5.9 % (14.2) (16.0) %

2 unchanged sentences

(1) Includes $3.1 and $(41.0) of stock-based compensation expense in 2026 and 2025, respectively, in software development costs and royalties.

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 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 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.

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 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.

For the three months ended June 30, 2026, net revenue increased by $30.1 as compared to the prior year period.

The increase was primarily driven by higher net revenue of $89.0 from NBA 2K , partially offset by lower net revenue of $32.8 from Color Block Jam and $24.2 from our Grand Theft Auto series.

Net revenue from mobile decreased by $39.4 and accounted for 49.7% of our total net revenue for the three months ended June 30, 2026, as compared to 53.3% for the prior year period.

The decrease in net revenue from mobile was primarily driven by lower net revenue from Color Block Jam .

Net revenue from console games increased by $89.9 and accounted for 41.8% of our total net revenue for the three months ended June 30, 2026, as compared to 36.6% for the prior year period.

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

Net revenue from PC and other decreased by $20.4 and accounted for 8.5% of our total net revenue for the three months ended June 30, 2026, as compared to 10.1% for the prior year period.

The decrease in net revenue from PC and other was primarily driven by lower net revenue from our Grand Theft Auto series.

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 $33.7 and accounted for 84.1% of net revenue for the three months ended June 30, 2026, as compared to 83.5% of net revenue for the prior year period.

The increase in net revenue from RCS was primarily driven by higher net revenue from NBA 2K , partially offset by lower net revenue from Color Block Jam.

Net revenue from full game and other decreased by $3.6 and accounted for 15.9% of net revenue for the three months ended June 30, 2026 as compared to 16.5% of net revenue for the prior year period.

The decrease in net revenue from full game and other was primarily driven by lower net revenue from our Grand Theft Auto series, and PGA TOUR 2K , partially offset by higher net revenue from NBA 2K and our Borderlands franchise.

Net revenue from digital online channels increased by $30.7 and accounted for 98.3% of our total net revenue for the three months ended June 30, 2026, as compared to 98.2% for the prior year period.

The increase was primarily driven by higher net revenue from NBA 2K , partially offset by lower net revenue from Color Block Jam and our Grand Theft Auto series.

Net revenue from physical retail and other channels decreased by $0.6 and accounted for 1.7% of our total net revenue for the three months ended June 30, 2026, as compared to 1.8% for the same period in the prior year period.

Gross profit as a percentage of net revenue for the three months ended June 30, 2026 was 57.5% as compared to 62.9% for the prior year period.

The decrease in gross profit as a percentage of net revenue was primarily driven by the reversal of expense related to the forfeiture of awards in the prior year.

Changes in foreign currency exchange rates increased net revenue by $0.6 and increased gross profit by $1.7 for the three months ended June 30, 2026 as compared to the prior year period.

Operating Expenses

3 unchanged sentences

Research and development 273.8 17.8 % 256.4 17.1 % 17.4 6.8 %

812.1 16.3 % 707.4 17.5 % 104.7 14.8 %

General and administrative 226.3 14.8 % 207.4 13.8 % 18.9 9.1 %

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

Depreciation and amortization 48.2 3.1 % 50.4 3.4 % (2.2) (4.4) %

Business reorganization (3.5) (0.1) % 89.4 2.2 % (92.9) (103.9) %

Total operating expenses (1)

4 unchanged sentences

General and administrative 39.7 36.2

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.

Changes in foreign currency exchange rates increased total operating expenses by $2.7 for the three months ended June 30, 2026, as compared to the prior year period.

Selling and marketing

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:

Selling and marketing expenses decreased by $39.5 for the three months ended June 30, 2026, as compared to the prior year period, primarily driven by lower marketing expense for Color Block Jam , Match Factory!, and our Sid Meier's Civilization and Borderlands franchises.

This was partially offset by higher personnel expense.

Research and development

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.

Research and development expenses increased by $17.4 for the three months ended June 30, 2026, as compared to the prior year period, primarily driven by higher personnel expense, partially offset by the timing of additional R&D-related credits related to certain titles.

General and administrative

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.

General and administrative expenses increased by $18.9 for the three months ended June 30, 2026, as compared to the prior year period, primarily driven by (i) higher personnel expense, (ii) higher IT-related expenses for cloud-based services and IT infrastructure, and (iii) higher professional fees.

Depreciation and amortization

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 $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.

Depreciation and amortization expenses decreased by $2.2 for the three months ended June 30, 2026, as compared to the prior year period, primarily driven by lower IT infrastructure expense.

Interest and other, net

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 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, 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.

Interest and other, net was an expense of $13.8 for the three months ended June 30, 2026, as compared to an expense of $35.4 for the prior year period.

The net decrease in expense was primarily driven by (i) lower interest expense due to lower outstanding debt balances because we repaid our 2025 Notes in April 2025 and our 2026 Notes in March 2026 (refer to Note 9 - Debt ), (ii) higher interest income primarily due to higher interest rates, and (iii) a decrease in foreign currency losses.

Benefit from income taxes

The benefit from income taxes for the three months ended June 30, 2026 is based on our projected annual effective tax rate for fiscal year 2027, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The benefit from income taxes was $15.2 for the three months ended June 30, 2026, as compared to the benefit from income taxes of $1.9 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 30.8% for the three months ended June 30, 2026 was primarily driven by tax benefits of $16.9 related to geographic mix of earnings and changes in reserves.

In 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.

The change in effective tax rate, when compared to the prior year period's effective tax rate, is primarily driven by higher tax benefits from geographic mix of earnings offset by decreased tax benefits from tax credits and employee stock-based compensation.

We anticipate that additional excess tax benefits or shortfalls from employee stock compensation, tax incentives or 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.

2 unchanged sentences

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.

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.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into law.

OBBB includes significant provisions, including but not limited to (1) permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017 ("TCJA"), (2) modifications to the international provisions relating to Base Erosion Anti Abuse Act ("BEAT"), Global Intangible Low-Tax Income ("GILTI") and Foreign Derived Deduction Eligible Income ("FDDEI"), (3) permanent reinstatement deduction for domestic research expenditures and 100% bonus depreciation for certain qualified property, and (4) modifications to tax credits.

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

We have estimated the accounting for income tax effects of OBBB in our projected annual effective tax rate.

We are continuing to evaluate the impact of OBBB on the Company.

It is possible that these changes could have an adverse impact on our effective tax rate, tax payments, financial condition, or results of operations.

The tax law is complex and additional interpretive guidance may be issued that could affect the interpretations and assumptions we have made, as well as actions we may take as a result of OBBB.

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 nine months ended December 31, 2025.

The ARPA did not have a material impact on our Consolidated Financial Statements for the three months ended June 30, 2026.

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

7 unchanged sentences

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 nine months ended December 31, 2025.

The impact of Pillar Two was not material to the tax provision for the three months ended June 30, 2026.

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.

3 unchanged sentences

Net loss and Loss per share

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.

For the three months ended June 30, 2026, net loss was $34.1, as compared to a net loss of $11.9 in the prior year period.

Basic and diluted loss per share for the three months ended June 30, 2026 was $0.18, as compared to basic and diluted loss per share of $0.07 in the prior year period.

Basic weighted average shares of 186.2 were 5.4 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 and grants 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.

9 unchanged sentences

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 December 31, 2025.

No receivables were sold under this facility during the three months ended June 30, 2026.

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

Short-term investments

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.

As of June 30, 2026, we had $461.7 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 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.

As of June 30, 2026, we had $2,500.0 of Senior Notes outstanding.

Credit Agreement

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

As of June 30, 2026, there were no borrowings under the 2022 Credit Agreement, and we had approximately $997.5 available for additional borrowings.

Convertible Notes

1 unchanged sentence

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 December 31, 2025.

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

Financial Condition

5 unchanged sentences

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 81.0% 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.

Our five largest customers accounted for 82.3% and 83.5% of net revenue during the three months ended June 30, 2026 and 2025, respectively.

We had four customers who accounted for 27.6%, 21.1%, 15.0%, and 12.4% of our net revenue as of June 30, 2026, and four customers who accounted for 25.4%, 23.2%, 16.9%, and 12.9% our net revenue as of June 30, 2025.

As of June 30, 2026 and March 31, 2026, five customers accounted for 69.5% and 69.6% of our gross accounts receivable, respectively.

Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 55.6% and 57.7% of such balances at June 30, 2026 and March 31, 2026, respectively.

customers who accounted for 25.5%, 17.4%, and 12.7% of our gross accounts receivable as of June 30, 2026, and three customers who accounted for 22.7%, 21.0%, and 14.0% of our gross accounts receivable as of March 31, 2026.

We did not have any additional customers that exceeded 10% of our gross accounts receivable as of June 30, 2026, and March 31, 2026.

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.

1 unchanged sentence

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

As of June 30, 2026, the amount of cash and cash equivalents held outside of the U.S.

by our foreign subsidiaries was $1,232.0.

6 unchanged sentences

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 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.

During the three months ended June 30, 2026, we did not repurchase shares of our common stock under the program, but in the past have repurchased a total of 11.7 shares of our common stock under the program, and as of June 30, 2026, 10.0 shares of our common stock remained available for repurchase under the share repurchase program.

Our changes in cash flows were as follows:

Nine Months Ended December 31,

Three Months Ended June 30,

(millions of dollars) 2026 2025

Net cash provided by (used in) operating activities $ 388.9 $ (324.2)

Net cash used in operating activities $ (168.8) $ (44.7)

Net cash used in investing activities (52.4) (36.8)

2 unchanged sentences

Net change in cash, cash equivalents, and restricted cash and cash equivalents $ (192.0) $ 557.0

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 ).

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.

At June 30, 2026, we had $1,446.1 of cash and cash equivalents and restricted cash and cash equivalents, compared to $1,638.1 at March 31, 2026.

The decrease during the three months ended June 30, 2026 was primarily due to Net cash used in operating activities, which was primarily due to investments in software development and licenses, partially offset by sales of our products.

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

This net decrease was partially offset by the increase in Net cash provided by financing activities, primarily due to issuance of common stock under our employee stock purchase plan.

When compared to the prior year period, Net cash provided by financing activities decreased primarily due to proceeds from our underwritten public offering of common stock in the prior year.

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

1 unchanged sentence

In fiscal year 2027, we anticipate capital expenditures to be approximately $290.0.

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

During the three months ended June 30, 2026, capital expenditures were $25.0.

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 December 31, 2025 and 2024, 40.4% and 39.3%, respectively, of our net revenue was earned outside the U.S.

For the three months ended June 30, 2026 and 2025, 40.0% and 40.1%, 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.

2 unchanged sentences

Sales of our full game products are also seasonal, with peak demand typically occurring in the fourth calendar quarter during the holiday season.

For certain of our software products with multiple performance obligations, we defer the recognition of our net revenue over an estimated service period which generally ranges from six to fifteen months.

As a result, the quarter in which we generate the highest Net Bookings may be different from the quarter in which we recognize the highest amount of Net revenue.

1 unchanged sentence

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