TLDR
- GameStop reports Q3 earnings Tuesday after market close with analysts expecting $987.4 million in revenue, up 15% year-over-year
- Earnings per share projected at $0.20, more than tripling the $0.06 from last year’s Q3
- Options traders anticipate a 9.51% stock price swing following the earnings announcement
- Hardware sales jumped 31% in Q2 while collectibles surged 63%, becoming the second-largest category
- GameStop ended Q2 with $8.7 billion in cash and $528.6 million in Bitcoin holdings
GameStop reports its fiscal third-quarter earnings Tuesday after the closing bell. Wall Street expects revenue of $987.4 million, marking a 15% increase from the same period last year.
The earnings forecast sits at $0.20 per share. That’s more than triple the $0.06 reported in Q3 2024.
The video game retailer has beaten earnings estimates in recent quarters. Over the past year, GameStop has delivered quarterly bottom-line beats of 61% or better.
Options traders are bracing for movement. Based on options pricing, the market expects a 9.51% swing in either direction after earnings drop.
That’s slightly below GameStop’s average post-earnings move of 10.4% over the past three quarters. The stock gained 4.54% over the past five trading sessions but remains down 25% year-to-date.
Business Model Shifts Drive Growth
GameStop’s revenue mix has changed dramatically. Hardware sales climbed 31% in Q2, boosted by Nintendo’s Switch 2 console launch in June.
Collectibles now rank as the second-largest category. The segment exploded 63% higher in the second quarter.
Software sales tell a different story. The category that once drove GameStop’s profits fell 27% in Q2. Software now makes up less than 16% of total revenue.
Digital delivery and game streaming services have eaten into physical disc and cartridge sales. Publishers now reach players directly, cutting GameStop out of the equation.
Revenue Streak Continues
The retailer posted double-digit revenue growth for six straight quarters. This follows years of decline that saw net sales drop 59% from their 2015 peak.
Last quarter, GameStop delivered revenue of $972.2 million. That beat Wall Street’s estimate of $900 million by a wide margin.
GameStop has struggled with growth in recent years. Net sales declined for six of the last seven fiscal years.
Even the one year of positive growth came after pandemic-impacted fiscal 2020. Those fiscal 2021 sales still landed 7% below two years prior.
Analysts project similar 15% growth for the current holiday quarter ending in early February. These gains follow declines of 29%, 31%, and 20% in the last three quarters of fiscal 2024.
The positive growth still leaves revenue below levels from two years ago.
Cash Position Remains Strong
GameStop closed Q2 with $8.7 billion in cash. That’s up from $4.2 billion in the same period last year.
The company also holds Bitcoin worth $528.6 million at the end of fiscal Q2. The stock trades at a P/E ratio of 23 based on this year’s projected earnings.
GameStop is on track for its third consecutive profitable year. The market hasn’t seen that from the retailer since fiscal 2017.
This year also marks back-to-back years of earnings growth. GameStop hasn’t achieved that since fiscal 2015.
Gross margin contracted year-over-year in Q2 as the revenue mix shifted toward lower-margin hardware. But total profits continue to expand as sales volume increases.
The company has missed earnings estimates in only two of the past nine quarters.
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