Take-Two Interactive (TTWO 131.99, +6.18) climbed pre-market and has begun dipping down as improved guidance for the fiscal year overshadows mixed earnings and mixed
guidance for the third quarter.
The video game publisher and developer reported below-consensus second quarter earnings of $0.22 per share on a 1.1% yr/yr increase in revenue to $583.42 mln, which was ahead of estimates.
Looking ahead, Take-Two expects that earnings during the third quarter will be between $0.31 and $0.41, which is shy of market expectations, while revenue is expected to exceed estimates, coming in between $1.40 bln and $1.45 bln. The mixed outlook for the third quarter did not stop the company from increasing its guidance for the fiscal year. The company expects that full-year earnings will be between $1.73 per share and $1.98 per share, up from a previous forecast for earnings between $1.45 per share and $1.70 per share. Revenue guidance was increased to $2.80 bln to $2.90 bln from $2.70 bln to $2.80 bln.
The upbeat outlook for the fiscal year stems from strong early sales of Red Dead Redemption 2, which is the company's latest major title. The game was released for PS4 and Xbox One on October 26. The recent launch was met with very strong demand, resulting in higher unit sales through the first eight days of availability than total sales of the original Red Dead Redemption recorded through the first eight years of availability. In total, more than 17 mln copies of Red Dead Redemption 2 have been sold since the October 26 launch.
Combined with glowing reviews, the very strong launch suggests that Red Dead Redemption 2 is on its way to supplanting Grand Theft Auto V as Take-Two's main revenue generating title.
Revenue from recurrent consumer spending on virtual currency, add-on content, and other in-game purchases increased 12% to $241.41 mln, representing 49% of net revenue. Revenue from digital sales grew 18% to $358.4 mln, representing 73% of net revenue.
Gross margin improved to 52.32% from 44.42% one year ago.
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