# How Take-Two Interactive makes money

CXProWealth Business Lens · Take-Two Interactive (TTWO) · Q1 FY2027

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-07 with the SEC (accession 0001628280-26-054870): https://www.sec.gov/Archives/edgar/data/946581/000162828026054870/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $1.5B (+2.0% on the year)
- Operating income: -$35.5M (operating margin -2.3%)
- Net income: -$34.1M (net margin -2.2%)
- Gross margin: 57.5%
- Free cash flow: -$193.8M (-12.6% of revenue)
- Cash conversion (operating cash flow / net income): 4.95x
- Capital expenditure: 1.6% of revenue

## Where the money goes (Q1 FY2027)

- Game → Total net revenue: $1.4B
- Advertising → Total net revenue: $111.1M
- Total net revenue → Cost of revenue: $651.4M
- Total net revenue → Gross profit: $882.5M
- Gross profit → Total operating expenses: $882.5M
- Total operating expenses → Selling and marketing: $369.7M
- Total operating expenses → Research and development: $273.8M
- Total operating expenses → Depreciation and amortization: $48.2M
- Total operating expenses → General and administrative: $226.3M
- Net loss → Total operating expenses: $20.3M
- Net loss → Interest and other, net: $13.8M
- Interest and other, net → Interest expense: $30.4M
- Interest and other, net → Other income/(expense), net: $6.2M
- Interest income → Interest and other, net: $22.8M
- Benefit from income taxes → Total operating expenses: $15.2M

## Where the revenue comes from

### Products and services (CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited))

| Member | Value | Share |
|---|---:|---:|
| Game | $1.4B | 92.8% |
| Advertising | $111.1M | 7.2% |

The members sum to total revenue.

### TimingOfTransferOfGoodOrService (REVENUE FROM CONTRACTS WITH CUSTOMERS - Disaggregated Revenue (Details))

| Member | Value | Share |
|---|---:|---:|
| Over time | $1.3B | 84.4% |
| Point in time | $238.9M | 15.6% |

The members sum to total revenue.

## Income statement, as filed

| Line | Q1 FY2027 | Of revenue |
|---|---:|---:|
| Total net revenue | $1.5B | 100% |
|   Game | $1.4B | 92.8% |
|   Advertising | $111.1M | 7.2% |
| Cost of revenue | $651.4M | 42.5% |
| **Gross profit** | $882.5M | 57.5% |
| Selling and marketing | $369.7M | 24.1% |
| Research and development | $273.8M | 17.8% |
| General and administrative | $226.3M | 14.8% |
| Depreciation and amortization | $48.2M | 3.1% |
| **Total operating expenses** | $918.0M | 59.8% |
| **(Loss) income from operations** | -$35.5M | 2.3% |
| Interest income | $22.8M | 1.5% |
| Interest expense | ($30.4M) | 2.0% |
| Other income/(expense), net | -$6.2M | 0.4% |
| **Interest and other, net** | -$13.8M | 0.9% |
| **Loss before income taxes** | -$49.3M | 3.2% |
| Benefit from income taxes | -$15.2M | 1.0% |
| **Net loss** | -$34.1M | 2.2% |
| Basic loss per share (in dollars per share) | -$0 | 0.0% |
| Diluted loss per share (in dollars per share) | -$0 | 0.0% |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2009 | — | $111.0M | $97.1M | $151.4M | $12.1M | $139.3M |
| FY2010 | $701.1M | -$120.2M | -$140.5M | -$210.2M | $11.2M | -$221.4M |
| FY2010 | $762.9M | -$76.1M | -$123.0M | -$135.7M | $9.9M | -$145.6M |
| FY2011 | $1.1B | $77.1M | $48.5M | $134.8M | $9.7M | $125.1M |
| FY2012 | $825.8M | -$84.3M | -$108.8M | -$85.0M | $10.8M | -$95.8M |
| FY2013 | $1.2B | $5.2M | -$29.5M | -$4.6M | $16.8M | -$21.4M |
| FY2014 | $2.4B | $415.3M | $361.6M | $700.3M | $29.8M | $670.4M |
| FY2015 | $1.1B | -$258.5M | -$279.5M | $212.8M | $49.5M | $163.3M |
| FY2016 | $1.4B | -$10.8M | -$8.3M | $261.3M | $37.3M | $224.0M |
| FY2017 | $1.8B | $91.3M | $67.3M | $407.9M | $21.2M | $386.7M |
| FY2018 | $1.8B | $135.6M | $173.5M | $493.5M | $61.6M | $432.0M |
| FY2019 | $2.7B | $206.7M | $333.8M | $843.5M | $67.0M | $776.5M |
| FY2020 | $3.1B | $425.3M | $404.5M | $685.7M | $53.4M | $632.3M |
| FY2021 | $3.4B | $629.4M | $588.9M | $912.3M | $68.9M | $843.4M |
| FY2022 | $3.5B | $473.6M | $418.0M | $258.0M | $158.6M | $99.4M |
| FY2023 | $5.3B | -$1.2B | -$1.1B | $1.1M | $204.2M | -$203.1M |
| FY2024 | $5.3B | -$3.6B | -$3.7B | -$16.1M | $141.7M | -$157.8M |
| FY2025 | $5.6B | -$4.4B | -$4.5B | -$45.2M | $169.4M | -$214.6M |
| FY2026 | $6.7B | -$104.2M | -$298.2M | $624.3M | $162.8M | $461.5M |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +18.2% (year before +5.3%): accelerating
- Operating income: — (year before —): too short a history to read
- Net income: — (year before —): too short a history to read
- Free cash flow: -115.1% (year before —): too short a history to read

## Operating figures stated in the filing

- Recurrent consumer spending share of net revenue: 84.1% (as of 2026-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Recurrent consumer spending share of net revenue: 83.5% (as of 2025-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Grand Theft Auto share of net revenue: 12.8% (as of 2026-06-30). "Sales of Grand Theft Auto products generated 12.8% of our net revenue for the three months ended June 30, 2026." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Mobile share of net revenue: 49.7% (as of 2026-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Mobile share of net revenue: 53.3% (as of 2025-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Console share of net revenue: 41.8% (as of 2026-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Console share of net revenue: 36.6% (as of 2025-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Digital online share of net revenue: 98.3% (as of 2026-06-30). "Net revenue from digital online channels comprised 98.3% of our net revenue for the three months ended June 30, 2026." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Grand Theft Auto series units sold-in: 470,000,000 units (as of 2026-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Grand Theft Auto V units sold-in: 230,000,000 units (as of 2026-06-30). "Our most recent installment, Grand Theft Auto V , which was released in 2013, has sold-in over 230 million units worldwide and includes access to Grand Theft Auto Online." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Red Dead Redemption 2 units sold-in: 85,000,000 units (as of 2026-06-30). "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." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Zynga portfolio downloads: 10,000,000,000 downloads (as of 2026-06-30). "Zynga's diverse portfolio of popular game franchises has been downloaded more than 10 billion times" (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)

## Key insights

### Margin drop reflects a one-off lift last year

Gross margin fell to 57.5% from 62.8%, which the filing attributes to a prior-year expense reversal; it was still above the three quarters in between.

Cost of revenue rose 16.6% to $651.4M while revenue grew 2.0% to $1,533.9M, so gross margin fell to 57.5% from 62.8%, a decline of 5.31 points. The filing attributes the decline primarily to "the reversal of expense related to the forfeiture of awards in the prior year." The unusual item sat in the comparison quarter, where it lowered cost, not in this one. _(from the filing)_
Measured against the quarters in between, the picture reverses. Gross margin was 55.3% in the second quarter of the last fiscal year, and gross profit was $945.5M on revenue of $1,699.0M in the third and $938.7M on $1,679.8M in the fourth, both below this quarter's 57.5%. That makes 57.5% the highest since the quarter that carried the reversal. _(from the filing)_
Analysis: the platform mix also moved in the margin's favor. Console rose to 41.8% of net revenue from 36.6% and mobile fell to 49.7% from 53.3%, and the filing says mobile carries a lower gross margin because Apple and Google fees sit in cost of revenue. The filing does not size that effect, so it cannot be separated from the reversal with the figures here. _(analysis)_

### Quarter's cash outflow equals 42% of last year's free cash flow

Free cash flow was negative $193.8M against negative $69.8M a year earlier; the filing points to investment in software development and licenses.

Operating cash flow was negative $168.8M, against negative $44.7M a year earlier, and capital spending was $25.0M, leaving free cash flow at negative $193.8M, or 12.6% of revenue. The loss from operations was $35.5M and the net loss $34.1M, so cash moved much further than reported earnings. The filing attributes the operating outflow primarily to investments in software development and licenses. _(from the filing)_
In the last fiscal year the first quarter was also the only one with negative free cash flow: negative $69.8M, then $96.5M, $236.2M and $198.6M in the next three, for $461.5M over the year. This quarter's outflow equals 42.0% of that full-year figure. _(from the filing)_
Analysis: game development is capitalized on the balance sheet and expensed later, so cash leaves well before the matching revenue and cost reach the income statement. With a major Rockstar release scheduled later in this fiscal year, an outflow at this point fits the release calendar. The test is whether the later quarters recover it, as they did last year. _(analysis)_
The filing notes that revenue on titles with ongoing services is deferred over an estimated service period, so the quarter with the highest bookings can differ from the quarter with the highest recognized revenue. Cash, revenue and reported profit therefore do not move together from quarter to quarter. _(from the filing)_

### Mobile shrank as marketing spend was pulled back

Selling and marketing fell 9.7% to $369.7M, partly on less marketing for mobile games, while mobile's share of revenue fell to 49.7% from 53.3%.

The filing attributes the selling and marketing decline primarily to lower marketing for the mobile games Color Block Jam and Match Factory! and for the Civilization and Borderlands franchises, partly offset by higher personnel expense. The line fell to 24.1% of revenue from 27.2%, a cut of 3.11 points. _(from the filing)_
Player acquisition and retention spending for mobile titles is recorded in selling and marketing. Over the same period mobile fell to 49.7% of net revenue from 53.3%, and the filing names lower revenue from Color Block Jam as the main cause. Advertising revenue, which Zynga's free-to-play games generate alongside in-game sales, fell 8.4% to $111.1M. _(from the filing)_
Without the lower selling and marketing line, operating expenses would have risen: research and development grew 6.8% and general and administrative 9.1%, while total operating expenses fell only 0.6% to $918.0M. _(from the filing)_
Analysis: the lower spend and the smaller mobile business may be one decision seen from two sides. If marketing was cut because returns on acquiring players fell, revenue followed the spend down. If it was cut because the games matured, mobile revenue should hold without the spend returning. The figures here cannot yet tell the two apart. _(analysis)_

### Competitive edge

- **Most revenue comes after the game is bought** Recurrent consumer spending was 84.1% of net revenue, up from 83.5%, so most income rests on engagement rather than on new launches.
- **Grand Theft Auto earns 12.8% with no new release** Grand Theft Auto products were 12.8% of net revenue without a new installment, and Grand Theft Auto V alone is 48.9% of series units sold-in.

### What to watch

- **A handful of titles move the whole quarter** Revenue rose 2.0% on one basketball title, offset by Color Block Jam and Grand Theft Auto, the concentration the filing names as a risk.
- **Apple and Google set the fees on mobile** Mobile was 49.7% of net revenue, and the filing says Apple and Google can change their platform fees and terms at their own discretion.
- **Studio costs grew faster than revenue** Research and development rose 6.8% and general and administrative 9.1%, against revenue growth of 2.0%, mainly on personnel, according to the filing.

## Investor view

**Recurrent in-game spending made up 84.1% of Take-Two's revenue as Grand Theft Auto VI approaches**

### How it makes money

Take-Two publishes games through three labels: Rockstar Games, a sports and core-games label, and the mobile publisher Zynga. Games brought in $1,422.8M this quarter, 92.8% of revenue, and advertising placed inside its games $111.1M, or 7.2%. Nearly all of it arrives digitally: digital online channels were 98.3% of net revenue. _(from the filing)_
The core of the model is what players spend after they own or download a game. The filing calls it recurrent consumer spending: virtual currency, add-on content, in-game purchases and in-game advertising. It was 84.1% of net revenue, against 83.5% a year earlier. Because those purchases come with ongoing service, $1,295.0M of revenue, 84.4% of the total, was recognized over time rather than at the moment of sale. _(from the filing)_
Mobile was 49.7% of net revenue and console 41.8%. Mobile games are sold mostly through Apple's App Store and Google Play, whose fees are booked in cost of revenue, so the filing says mobile revenue "generally generates a lower gross margin percentage than our Console or PC revenue." The mix between platforms therefore moves the gross margin, which was 57.5% this quarter. _(from the filing)_
Rockstar's strategy, in the filing's words, is "to develop a limited number of titles that are known for their quality and longevity in the market." The Grand Theft Auto series has sold-in over 470 million units, and Grand Theft Auto V alone, with Grand Theft Auto Online attached, over 230 million, or 48.9% of the series. With no new installment out, Grand Theft Auto products were still 12.8% of net revenue this quarter. _(from the filing)_

### What shifted

Growth came from games alone. Game revenue rose 2.9% to $1,422.8M while advertising fell 8.4% to $111.1M, cutting its share of revenue by 0.8 points to 7.2%. The filing credits the gain mainly to its NBA basketball title, offset by lower revenue from the mobile puzzle game Color Block Jam and from the Grand Theft Auto series. _(from the filing)_
The platform mix tilted toward console. Console rose to 41.8% of net revenue from 36.6%, and mobile fell to 49.7% from 53.3%. The filing ties the console gain to the NBA title and the Borderlands franchise, and the mobile decline mainly to Color Block Jam. _(from the filing)_
Gross margin was 57.5%, down from 62.8% a year earlier, as cost of revenue rose 16.6% to $651.4M. The filing attributes the decline primarily to "the reversal of expense related to the forfeiture of awards in the prior year," which lifted the earlier quarter. Each of the three quarters in between had a lower gross margin, the lowest 55.3%, so this quarter's margin was above the recent run. _(from the filing)_
Selling and marketing fell 9.7% to $369.7M, 3.1 points less of revenue, on lower marketing for Color Block Jam, Match Factory!, Civilization and Borderlands. Research and development rose 6.8% to $273.8M and general and administrative 9.1% to $226.3M, both mainly on personnel. The result was a loss from operations of $35.5M, against income of $21.6M a year earlier. _(from the filing)_
Cash moved further than earnings. Operating cash flow was negative $168.8M, against negative $44.7M a year earlier, and free cash flow was negative $193.8M, or 12.6% of revenue. The filing points to investment in software development and licenses. Below the operating line, interest and other was a $13.8M expense, down from $35.4M, after notes were repaid. _(from the filing)_

### Risks in the filing

The company names its dependence on its NBA basketball and Grand Theft Auto products and on its ability to develop other hit titles, alongside the timely release and market acceptance of its games. It says a significant portion of revenue comes from a few popular series, particularly around new releases, and that the timing of Grand Theft Auto releases may affect results from quarter to quarter and year to year. _(from the filing)_
Platform holders set terms. Apple and Google, through which a significant portion of revenue flows, "generally have the discretion to set the amounts of their platform fees" and to change their terms of service. On console, the business depends on consumer acceptance and the installed base of third-party hardware, which tariffs and other events outside the company's control can affect, and a new console generation typically reduces demand for games built for the old one. _(from the filing)_
In mobile, the filing says the cost and effectiveness of player acquisition and retention programs may change and affect operating results. It describes the industry as extremely competitive and consolidating, with larger, better capitalized competitors better placed to withstand downturns. It also names its ability to maintain acceptable pricing on its games and its dependence on key management and product development staff. _(from the filing)_
Broader risks the filing lists include international operations and geopolitical events, interest rates, inflation, currency swings, the concentration of revenue and receivables among a few large storefront and platform customers, and changes in tax law, including new US legislation and the global minimum tax, that could raise its effective tax rate or tax payments. _(from the filing)_
Two of these risks are already visible in this quarter. Hit concentration shows in revenue that moved on a handful of titles: one basketball game up, one mobile puzzle game and the Grand Theft Auto series down. The mobile acquisition risk shows in a mobile business that shrank as marketing spend was pulled back. The platform-fee risk sits inside every gross margin figure, but by the filing's account it did not drive this quarter's change. _(analysis)_

## Founder view: mechanisms

### Live services extend a game's life

Take-Two sells a game once and then sells inside it for years: virtual currency, add-on content, memberships such as GTA+, and in-game advertising. The upfront sale buys the audience; the recurring layer is where most revenue sits. A game released long ago keeps earning because the online world inside it keeps changing, so the economic unit is a running service rather than a boxed product. _(analysis)_

### Few big titles on long cycles

Rockstar develops a limited number of titles and lets each run for years. Development cost is spent long before any revenue arrives, so cash flow and reported profit swing with the release calendar rather than with demand. The concentration is deliberate: one hit with a long tail can carry the years between releases. _(analysis)_

### Test many, scale few on mobile

Zynga runs the opposite model to Rockstar. It keeps numerous games in concept development and advances only those that clear performance thresholds to soft and then worldwide launch. Paid player acquisition then scales the winners. That spend works as a dial: it rises behind a launch and falls as a game matures, and the filing books it in selling and marketing. _(analysis)_

### Platform mix sets the gross margin

Almost every sale passes through someone else's store. Apple and Google take fees that Take-Two books as cost of revenue, and the filing says this leaves mobile with a lower gross margin than console or PC. The same company can therefore report a different gross margin with no change in pricing, simply because the platform mix moved. _(analysis)_

## Member research

Signed-in members read, on the page: what Take-Two Interactive's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Take-Two Interactive 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/946581/000162828026054870/ (2026-08-07)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02