Take-Two Interactive
TTWO · NasdaqMargin 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.
Q1 FY2027, the quarter to Jun 30, 2026 (Take-Two Interactive's fiscal 2027 ends in March 2027) · 10-Q filed Aug 7, 2026
- Operating margin
- -2.3%
- Net income
- -$34.1M
- Free cash flow, quarter
- -$193.8M
Largest source of revenue: Game, 92.8% of the total.
Where Take-Two Interactive's money goes
- 01
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.
Why it matters
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.1
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.1
AnalysisAnalysis: 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.
- 02
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.
Why it matters
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.1
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.1
AnalysisAnalysis: 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.
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.1
- 03
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%.
Why it matters
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.1
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.1
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.1
AnalysisAnalysis: 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.
Sources
- 1.Take-Two Interactive 10-Q for the period to 2026-06-30 (the filing), Aug 7, 2026, read Nov 2, 2026
Have a question about Take-Two Interactive? Ask CXProWealth on ChatGPT.Free membership required.
Growth, profit and margin
Revenue went from $701.1M in FY2010 to $6.7B in FY2026, the operating margin from -17.1% to -1.6%, over 16 years.
- Revenue$6.7B
- Operating income-$104.2M
- Operating margin-1.6%
- Period
- Q1 FY2027
- Revenue
- $1.5B
- Operating income
- -$35.5M
- Operating margin
- -2.3%
- Net income
- -$34.1M
- Free cash flow
- -$193.8M
Does the profit turn into cash?
Q1 FY2027: free cash flow of -$193.8M against net income of -$34.1M in the quarter.
- Operating cash flow$624.3M
- Capital expenditure$162.8M
- Free cash flow$461.5M
- Net income-$298.2M
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Financial data and sources
How the revenue mix has shifted
Each breakdown the filing reports, as shares of revenue, for every period it restates.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited). The filing restates this breakdown for 1 period.
Click a member to isolate it across the years shown.
The figures
Margins, cash and growth for the period, each with what it was computed from.
Where revenue comes from
Every breakdown the filing reports for the period, with each item's share.
Revenue streams
| Game | $1.4B | 92.8% |
| Advertising | $111.1M | 7.2% |
TimingOfTransferOfGoodOrService
| Over time | $1.3B | 84.4% |
| Point in time | $238.9M | 15.6% |
What it costs
The cost lines beneath operating income, each as a share of revenue, then the operating result.
Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.
| Cost line | Q1 FY2027 | Of revenue | Source |
|---|---|---|---|
| Cost of revenue | $651.4M | 42.5% | Source10-Q, us-gaap:CostOfRevenue, as reported in the 10-Q filed 2026-08-07 |
| (Loss) income from operations | -$35.5M | -2.3% | Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-07 |
Operating figures the company states
From the text of the filing rather than its statements, each with the sentence that states it.
View source
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.
View source
Net revenue from digital online channels comprised 98.3% of our net revenue for the three months ended June 30, 2026.
View source
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.
View source
Sales of Grand Theft Auto products generated 12.8% of our net revenue for the three months ended June 30, 2026.
View source
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.
View source
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.
View source
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.
View source
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.
View source
Zynga's diverse portfolio of popular game franchises has been downloaded more than 10 billion times
The statements, as filed
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Income statement20 lines, as presented in the 10-Q
Cash flow statement28 lines, as presented in the 10-Q
Year to date, as a quarterly filing reports it.
Balance sheet37 lines, as presented in the 10-Q
About this data
- Source
- Take-Two Interactive 10-Q, accession 0001628280-26-054870, filed Aug 7, 2026, read on Nov 2, 2026.
- History
- From the SEC's XBRL company facts, the value from the latest filing that stated each period.
- Reading
- Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
- Version
- methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
What holds Take-Two Interactive's model up, and what could bend it
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.
The detail
The filing defines recurrent consumer spending as virtual currency, add-on content, in-game purchases and in-game advertising. It reached 84.1% of net revenue against 83.5% a year earlier, and $1,295.0M, 84.4% of revenue, was recognized over time rather than at the point of sale.1
AnalysisAnalysis: a player's time and purchases inside a running game build up, which makes that audience harder for a rival to win than a single sale. The revenue base is steadier than the release calendar suggests, though it still depends on players staying.
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.
The detail
The series has sold-in over 470 million units and Grand Theft Auto V, which includes access to Grand Theft Auto Online, over 230 million, or 48.9% of the total. Rockstar also runs the GTA+ membership program. The filing describes Rockstar's strategy as a limited number of titles known for their quality and longevity, and the second Red Dead Redemption game has sold-in more than 85 million units.1
AnalysisAnalysis: long life per title is what pays for long development cycles. A new installment starts from an audience its predecessor built and kept, rather than from zero.
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.
The detail
The filing credits the revenue increase primarily to its NBA basketball title, partly offset by lower revenue from Color Block Jam and the Grand Theft Auto series. Among its risks it names dependence on its NBA and Grand Theft Auto products and on its ability to develop other hit titles, and it says a significant portion of revenue comes from a few popular series.1
AnalysisAnalysis: the next Grand Theft Auto, which the filing says Rockstar will release in this fiscal year, concentrates that exposure further. Its reception and timing can shape the year more than any other single title.
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.
The detail
Most mobile titles are distributed through Apple's App Store and Google Play, and virtual items are bought mainly through their payment systems. The filing says the two "generally have the discretion to set the amounts of their platform fees" and records those fees in cost of revenue, which was $651.4M, 42.5% of revenue.1
The filing says the company is expanding direct-to-consumer commerce across its mobile portfolio to enhance profitability. On console it depends on third-party hardware whose installed base and pricing can be affected by tariffs and other events outside its control.1
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.
The detail
Research and development rose to $273.8M and general and administrative to $226.3M, 14.8% of revenue, both mainly on higher personnel expense; for administration the filing also cites cloud and IT infrastructure and professional fees. The loss from operations was $35.5M against income of $21.6M a year earlier.1
AnalysisAnalysis: a studio staffing up for a major release enters the launch year with a larger cost base. The payoff comes only if revenue grows faster than these lines once the release is recognized; until then they weigh on operating results.
Sources
- 1.Take-Two Interactive 10-Q for the period to 2026-06-30 (the filing), Aug 7, 2026, read Nov 2, 2026
Take-Two Interactive, further in
Member research, then your own questions on ChatGPT.
What could change the outlook
What Take-Two Interactive's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
- What Take-Two's launch year depends on
Which lines have to move, and in which quarters, for a major Rockstar release to turn a cash-hungry start into a stronger year, and where the evidence would show first.
- Is mobile maturing or fading?
How to read the link between Zynga's marketing spend and its revenue, and which signs separate a game settling into maturity from one losing its players.
Loading…
Have a question about Take-Two Interactive?
Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.
- How much of Take-Two's gross margin drop to 57.5% comes from last year's expense reversal rather than this quarter?
- Why was Take-Two's free cash flow negative $193.8M when its operating loss was only $35.5M?
- Did Take-Two's cut in mobile marketing drive mobile's share of revenue down to 49.7%?
Business Lens describes Take-Two Interactive from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.