Take-Two (TTWO) 10-Q Analysis: Q2 FY26 Revenue Jumps as Losses Shrink

Take-Two Interactive, the gaming giant behind blockbuster franchises like Grand Theft Auto, NBA 2K, and Borderlands, recently released its financial results for the second quarter of its 2026 fiscal year. Let's dive into the company's latest 10-Q filing to see how it's performing and what the numbers tell us about its strategy.

For the three months ending September 30, 2025, Take-Two reported a strong surge in revenue but remained in the red. However, the story is one of significant improvement, with losses narrowing considerably compared to the same period last year.

A Revenue Surge Driven by New Games

Take-Two's total net revenue for the quarter hit $1.77 billion, a robust 31% increase from the $1.35 billion reported in the prior-year quarter. This growth was broad-based, with strong performance across its key revenue streams.

A visual breakdown of the company's quarterly income statement helps illustrate how this revenue translates through its costs and expenses.

The key drivers of this top-line growth were:

• Full Game Sales: Revenue from "Full game and other" sales saw a massive jump to $497.9 million from $274.1 million last year. The company's management discussion noted the release of Mafia: The Old Country, NBA 2K26, and Borderlands 4 during the fiscal year, which likely fueled this increase.
• Recurrent Consumer Spending (RCS): This crucial metric, which includes in-game purchases, add-on content, and virtual currency, continued its steady climb, growing to $1.28 billion from $1.08 billion. This shows sustained engagement from players in Take-Two's live service games.
• Platform Growth: Console revenue was a standout performer, increasing from $491.1 million to $720.0 million. Mobile remains the largest segment at $821.6 million, while the PC and other category nearly doubled to $232.2 million.

The Path to Profitability

Despite the impressive revenue growth, Take-Two posted a quarterly net loss of $133.9 million, or ($0.73) per share. While still a loss, this is a significant improvement from the $365.5 million loss reported in the same quarter last year.

The narrowing loss can be attributed to two main factors: improved gross margins and better control over operating expenses.

Gross profit rose 34.7% to $980.5 million, with the gross margin expanding to 55.3% from 53.8%. This indicates the company is generating more profit from each dollar of sales.

On the expense side, total operating expenses grew by a modest 5.2% to $1.08 billion, a much slower pace than revenue growth. A key contributor here was the dramatic reduction in "Business reorganization" costs, which fell from $16.8 million last year to just $0.1 million this quarter as the company's 2024 cost-saving plan concluded.

Balance Sheet and Future Outlook

Take-Two's balance sheet remains solid. The company ended the quarter with $1.87 billion in cash and cash equivalents. It also demonstrated prudent capital management by repaying $600 million in senior notes that were due in April 2025.

Perhaps the most telling figure for the future is the continued investment in game development. The non-current "Software development costs and licenses" asset grew to $2.1 billion from $1.9 billion just six months prior, signaling a massive pipeline of future titles.

In conclusion, Take-Two's latest quarter paints a picture of a company in a high-growth, high-investment phase. The strong revenue performance, driven by both new releases and ongoing player spending, is a clear positive. The significant reduction in net loss suggests that its efforts to improve operational efficiency are bearing fruit. While profitability remains elusive for now, the company's trajectory is improving. In the competitive landscape of AAA game development, all eyes will be on Take-Two to see if its substantial investments in its upcoming game slate can successfully convert this impressive top-line growth into sustainable profits.