TTWO 10-K & 10-Q changes, risk factors and insider trading

•The developmentdevelopment, use, and useincorporation of artificial intelligence ("AI") into our products and within our industry may present operationaloperational, reputational, financial, and reputationalcompetition risks

•The continued ability to acquire and maintain licenselicenses to intellectual property is key

•There is potential for unauthorized or fraudulent transactions of accounts and virtual items outside of our games Risks related to legal or regulatory compliance

We compete for both licenses to properties and the sale of interactive entertainment software with Sony and Microsoft, each of which is a large developer and marketer of software for its own platforms. We also compete with game publishers, such as Electronic Arts Inc.,Arts, Embracer GroupGroup, AB,Epic Games, Microsoft, Nintendo, Playrix, Playtika, Roblox, Savvy Games, Sony, Tencent, and Ubisoft Entertainment S.A.Ubisoft. We also face competition from online game developers and distributors who have primarily focused on specific international markets and with high-profile companies with significant online presences with new and expanded mobile gaming offerings, such as Apple, Google, and Microsoft. In addition, the gaming, technology/Internet, and entertainment industries have converged in recent years and larger, well-funded technology companies are pursuing and strengthening their interactive entertainment capabilities. As our business is dependent upon our ability to develop hit titles, which require increasing budgets for development and marketing, the availability of significant financial resources has become a major competitive factor in developing and marketing software games. Some of our competitors have greater financial, technical, personnel, and other resources than we do and are able to finance larger budgets for development and marketing, make higher offers to licensors and developers for commercially desirable properties, adopt more aggressive pricing policies to develop more commercially successful video game products than we do, recruit our key creative and technical talent or otherwise disrupt our operations. Internationally, local competitors may have a greater brand recognition than us in their local country and a stronger understanding of local culture and commerce. They may also offer their products and services in local languages we do not offer. Additionally, competitors may develop content that imitates or competes with our best-selling games, including by using AI to do so, potentially reducing our sales or our ability to charge the same prices we have historically charged for our products. These competing products may take a larger share of consumer spending than anticipated, which could cause our product sales to fall below expectations. Our titles also compete with other forms of entertainment, such as social media, in addition to motion pictures, television, short-form video, and audio and video products featuring similar themes, online computer programs and other entertainment, which may be less expensive or provide other advantages to consumers.

A number of software publishers who compete with us have developed and commercialized or are currently developing online and mobile games. Technological advances, including advances in AI technology, that significantly increase the availability of online and mobile games could result in a decline in our platform-based software sales and negatively affect sales of such products. Other large companies that to date have not actively focused on mobile and social games may decide to develop mobile and social games or partner with other developers. Some of these current and potential competitors have significant resources for developing or acquiring additional games, may be able to incorporate their own strong brands and assets into their games, have a more diversified set of revenue sources than we do and may be less severely affected by changes in consumer preferences, regulations or other developments that may impact our industry.

As there are relatively low barriers to entry to develop a mobile or online game, we expect new game competitors to enter the market and existing competitors to allocate more resources to develop and market competing games and applications. We also compete or will compete with a vast number of small companies and individuals who are able to create and launch games and other content for devices and platforms using relatively limited resourcesresources, including AI resources, and with relatively limited start-up time or expertise. The proliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from other developers and to compete for players without substantially increasing our marketing expenses and development costs. Increasing competition could result in loss of players, increasing player acquisition and retention costs, and loss of talent, all of which could harm our business, financial condition or results of operations.

Additionally, in order to stay competitive, our internal development studios must anticipate and adapt to rapid technological changes affecting software development, such as cloud-based game streaming,streaming and AI technologies, and evolving business models, such as free-to-play and subscription-based access to a portfolio of interactive content. Rapid changes in our industry require us to anticipate, sometimes years in advance, the ways in which our products and services will be competitive in the market. We have invested, and in the future may invest, in new business and marketing strategies, technologies, distribution methods, products, and services. However, forecasting the financial impact of any such strategic investment is inherently uncertain and volatile. Supporting a new technology or business model, for example, may require partnering with a new platform, business, or technology partner, which may be on terms that are less favorable to us than those for traditional technologies or business models. There can be no assurance that these strategic investments will achieve expected returns. Any inability to respond to technological advances and implement new technologies could render our products obsolete or less marketable. Further, the failure to pursue the development of new technology, platforms, or business models that obtain meaningful commercial success in a timely manner may negatively affect our business, resulting in increased production or development costs and more strenuous competition.

Our reputation and brand could also be adversely affected. We also may miss opportunities or fail to respond quickly enough to adopt technology or distribution methods or develop products, services, or new ways to engage with our games that become popular with consumers, which could adversely affect our financial results. In either case, our products and services may be technologically inferior to those of our competitors, more expensive to create, less appealing to consumers, or both.all of the above.

The developmentdevelopment, use, and useincorporation of artificial intelligence (“AI”) into our products and within our industry may present operationaloperational, reputational, financial, and reputationalcompetition risks.

The growth of AI technologies in our industry has influenced game production for developers and gaming experience for players. The use and incorporation of thisthese newtechnologies and emerging technology, which isare in itsthe early stages of wider-spread commercial use,use in our industry; this presents social and ethical issues that may result in legal and reputational harm and liability. Any integration of any AI technologies into our products or services may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, negative user perceptions as to automation and AI, or other complications that could adversely affect our business, reputation, or financial results. Uncertainty around new and emerging AI technologies, such as generative AI, may require additional investment in the development of appropriate protections and safeguards for handling the use of data with AI technologies, which may be costly and could increase our expenses. Further, intellectual property ownership surrounding AI technologies has not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation. While the impact of AI on our industry is still emerging and uncertain, to the extent our competitors successfully implement AI technologies into their products or services and we fail to adopt AI technologies effectively or experience delays in integrating these technologies into our operations, we may face significant risks to our competitive position, financial performance, and long-term growth prospects.

We derive a significant portion of our revenue from the sale of products made for video game platforms manufactured by third parties, such as Sony's PlayStation consoles and Microsoft's Xbox consoles, which comprised 37.3%39.0% of our net revenue by product platform for the fiscal year ended March 31, 2025.2026. The success of our business is subject to the continued popularity of these platforms and our ability to develop commercially successful products for these platforms. We also rely on the availability of an adequate supply of these video game consoles (which sometimes has been negatively affected by supply chain issues, and which has been and could be affected by an increase in tariffs or trade restrictions on component parts) and the continued support for these consoles by their manufacturers, including our ability to reach consumers via the online networks operated by these console manufacturers. Increased prices of these video game consoles could also lead to lower consumer demand. If the consoles for which we develop new software products or modify existing products do not attain significant consumer acceptance, or consumer demand for such products decreases, we may not be able to recover our development costs, which could be significant and may further incur expense to adjust our products and development efforts in response to changing consumer preferences.

Additionally, we derive a significant portion of our revenue from distribution of our games on the Apple App Store and the Google Play Store, and the virtual items we sell in our games are purchased using the payment processing systems of these platform providers. In the fiscal year ended March 31, 2025,2026, we derived 92.9%91.0% of our mobile revenue on Apple and Google platforms. We are subject to the standard policies and terms of service of third-party platforms, which govern the promotion, distribution, content and operation generally of games on the platform. Each platform provider has broad discretion to change and interpret its terms of service and other policies with respect to us and other developers, and those changes may be unfavorable to us. A platform provider may also change its fee structure, add fees associated with access to and use of its platform, alter how we are able to advertise on the platform, change how the personal information of its users is made available to application developers on the platform, limit the use of personal information for advertising purposes, or restrict how players can share information with their friends on the platform or across platforms. For example, in April 2021, Apple began requiring developers to get explicit permission from users, on an app-by-app basis, to use the identifier-for-advertisers, a device identifier assigned by Apple to each of its devices and used by advertisers to attribute app installs to advertising campaigns, target users through user acquisition, and deliver targeted ads. These requirements are known as Apple's AppTracking Transparency framework and have been maintained in subsequent versions of Apple iOS. Additionally, in February 2022, Google announced plans to make privacy-focused changes to its Android advertising identifiers after a two-year process, taking into account feedback from developers, regulators and other interested parties. Also, beginning January 2024, Google began requiring publishers and developers using certain Google advertising products to serve ads in the U.K. or European Union ("E.U.") to use a Google certified consent management platform. We continue to evaluate how these rules or changes may affect our business, operations and financial results.

SuchThe changes ofto the terms of use with third-party platforms described above may decrease the visibility or availability of our games, limit our distribution capabilities, prevent access to our existing games, reduce the amount of revenue and bookings we may recognize from in-game purchases, increase our costs to operate on these platforms or result in the exclusion or limitation of our games on such platforms. Any such changes could adversely affect our business, financial condition or results of operations.

Moreover, if we violate, or a platform provider believes we have violated, its terms of service (or if there is any change or deterioration in our relationship with these platform providers), that platform provider could limit or discontinue our access to the platform. A platform provider could also limit or discontinue our access to the platform if it establishes more favorable relationships with one or more of our competitors or it determines that we are a competitor. Any limit or discontinuation of our access to any platform could adversely affect our business, financial condition or results of operations. Furthermore, obtaining and maintaining high ratings of our games on the third-party platforms on which we operate areis important as they help drive players to find our games. If the ratings of any of our games decline or if we receive significant negative reviews that result in a decrease in our ratings, our games could be more difficult for players to find or recommend. In addition, we may be subject to negative review campaigns or defamation campaigns intended to harm our ratings. Any such decline may lead to loss of players and revenues, additional advertising and marketing costs, and reputationreputational harm.

We also derive significant revenues from distribution on third‑party mobile and web platforms, such as the Apple App Store, the Google Play Store, and Facebook, which are also our direct competitors and, in some cases, the exclusive means through which our content reaches gamers on those platforms, and most of the virtual currency we sell is purchased using these platform providers’ payment processing systems. Because of the significant use of our games on mobile devices, our application must remain interoperable with these and other popular mobile app stores and platforms, and related hardware. We are subject to the standard policies and terms of service of these platforms. These policies and terms of service govern the availability, promotion, distribution, content, and operation of applications and experiences on such platforms. Each provider of these platforms has broad discretion to change and interpret its terms of service and policies with respect to our games and those changes may be unfavorable to us. If these platforms deny access to our games, or modify their current discovery mechanisms, communication channels available to developers, operating systems, or other policies and terms of service (including fees), our business could be negatively impacted. For example, at any time, the platform providers can change their policies on how we operate on their operating system or in their application stores by applying content moderation for applications and advertising or imposing technical or code requirements. In addition, certain requirements related to content classification, age-rating and age-based access or restrictions to our games or certain features in our games, imposed by major third-party platforms, reflect how platforms are responding to evolving children's protection and online safety regulations globally. Such requirements may affect how our games are classified, distributed, accessed or presented on these platforms. These actions by the platform providers may affect our ability to collect, process, and use data as desired and could negatively impact our ability to leverage data about the experiences our games provide to players, which in turn could impact our resource planning and feature development planning for our products. These platform providers or their services may be unavailable, may not function as intended, or may experience issues with their in‑app purchasing functionality.

Some of these platforms have retained the right to change the fee structures for online distribution of both paid content and free content (including patches and corrections), and their ability to set or influence royaltycommission rates and service fees may increase our costs, which could negatively affect our operating margins. Additionally, to the extent we process payments directly or through third-party payment processors outside these platform billing systems, interruptions, fraud, chargebacks, card-network requirements, processor security incidents, additional authentication requirements, or termination of payment-processing services could impair our ability to complete transactions, increase costs, reduce approval rates, harm player trust, and adversely affect our financial results. Further, if we are unable to distribute our content in a cost-effective or profitable manner through such distribution channels, it could adversely affect our business, financial condition, and operating results. There is no guarantee that new devices, platforms, systems and software application stores will continue to support our games or that we will be able to maintain the same level of service on these new systems. If it becomes more difficult for our players to access and engage with our games, our business and player retention, growth, and engagement could be significantly harmed.

We rely on the efficient and uninterrupted operation of complex information technology systems and networks, some of which are within Take-Two and some of which are managed or hosted by third-party providers. The supply chain of hardware needed to maintain this technological infrastructure has been disrupted in the past, and geopolitical events, including the Russia-Ukraine war and the Israel-Hamaswar warin the Middle East, and any indirect effects of such events may further complicate existing supply chain constraints. All information technology systems and networks are potentially vulnerable to damage or interruption from a variety of sources, including but not limited to cyberattacks, computer viruses, malicious software, security breaches, insider threats, energy blackouts, natural disasters, terrorism, war, and telecommunication or other critical infrastructure failures. We securely store the source code for our interactive entertainment software products as it is created. A breach, whether physical, electronic, or otherwise, of the systems on which such source code and other sensitive data are stored could lead to damage to or piracy of our software. In addition, certain parties with whom we do business are given access to our sensitive and proprietary information in order to provide services and support our team. These third parties may misappropriate our information and engage in unauthorized use of it. A data intrusion into a server for a game with online features or for our proprietary online gaming service could also disrupt the operation of such game or platform. Further, the risk of such a breach may be heightened by world events, such as the Russia-Ukraine war and the Israel-Hamaswar war.in the Middle East. If we or these third parties are subject to data security breaches, we may havesuffer a loss in sales or incur increased costs arising from the restoration or implementation of additional security measures which could materially and adversely affect our business, financial condition, and operating results. Any theft and/or unauthorized use or publication of our trade secrets and other confidential business information because of such an event could adversely affect our competitive position, reputation, brand, and future sales of our products. Our business could be subject to significant disruption, and we could suffer monetary and other losses and reputational harm, in the event of such incidents and claims.

We have faced, and in the future could face, sophisticated attacks, including attacks referred to as advanced persistent threats, which arethreats-i.e., cyberattacks aimed at compromising our intellectual property and other commercially sensitive information, such as the source code and game assets for our software or confidential customer or employee information,information-which whichmay remain undetected for prolonged periods of time. InFor example, in September 2022, we experienced a network intrusion in which an unauthorized third party illegally accessed and downloaded confidential information from Rockstar Games’ systems, including early development footage for the next Grand Theft Auto. Subsequently, also in September 2022, an unauthorized third party illegally accessed credentials for a vendor platform that 2K Games uses to provide help desk support to its customers. The unauthorized third party sent a communication to certain players containing a malicious link. 2K Games immediately notified all affected users and took steps to restrict further unauthorized activity until service was restored. In connection with this activity (the “Cybersecurity Incident”), weWe have incurred certain immaterialimmaterial, incremental and one-time costs associated with these cybersecurity incidents related to consultants, experts and data recovery effortsefforts, and we expect to incur additional costs related to cybersecurity protections in the future. We have implemented and will continue to implement a variety of measures to maintain and enhance further our cybersecurity protections. See “Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Cybersecurity Incident” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 for further discussion. Our software supply chain may also be subject to attacks, which may result in future security incidents and breaches.

Information technology system disruptions, network failures, or security breaches (including the Cybersecurity Incident and similarcybersecurity incidents impacting us or our vendors, service providers, business partners, or software supply chain) have negatively affected, and in the future could negatively affect our business continuity, operations, financial results, and the reliability and stability of our products and services. These risks extend to the networks and e-commerce sites of consoleconsole, PC, and mobile platform providers and other partners who sell or host our content online. The risk of such threats is heightened by events outside of our control, such as the extended period of remote work arrangements, the Russia-Ukraine war and the Israel-Hamaswar war.in the Middle East. The risk could also be affected by events substantially within our control, such as the migration of data among data centers and to third-party hosted environments, and the performance of upgrades and maintenance on our systems. Along with our partners, we have expended, and expect to continue to expend, financial and operational resources to implement certain systems, processes, and technologies to guard against cyber risks and to help protect our data and systems. However, the techniques used to exploit, disable, damage, disrupt or gain access to our networks, our products and services, supporting technological infrastructure, intellectual property and other assets change frequently, continue to evolve in sophistication and volume, and may not be detected for long periods of time. For instance, as artificial intelligence capabilities develop rapidly, individuals or groups of hackers and sophisticated organizations may use these technologies to create new attack methods that are increasingly automated, targeted, coordinated, and more difficult to defend against.

Our systems, processes and technologies, and the systems, processes and technologies of our business partners or our third-party service providers, have not been and in the future may not be adequate to protect against all eventualities. We do not have redundancy for all our systems and our disaster recovery planning may not account for all outcomes. As our digital business grows, we will require an increasing amount of internal and external technical infrastructure, including network capacity and computing powerpower, to continue to satisfy the needs of our players. It is possible that we may fail to scale effectively and grow this technical infrastructure to accommodate increased demands, which may adversely affect the reliable and stable performance of our games and services, therefore negatively impacting our business. In addition, the costs to respond to, mitigate, or notify affected parties of cyberattacks and other security vulnerabilities are significant. Failures to prevent or mitigate security breaches or cyber risks, or detect or respond adequately to a security breach or cyber risk, could result in a loss of anticipated revenue, interruptions to our products and services, our having to incur significant remediation and notification costs, a degradation of the user experience, causing consumers to lose confidence in our products and services, and thereby harming our reputation, prompting regulatory inquiries and significant legal and financial costs. Additionally, applicable insurance policies may be insufficient to reimburse us for all such losses, and it is uncertain whether we will be able to maintain the current level of insurance coverage in the future on commercially reasonable terms or at all.

We collect and store consumer information, including personal information. We takeimplement and maintain measures designed to comply with applicable law to protect the consumer information we hold from unauthorized access or disclosure. It is possible that our security controls over consumer informationinformation, or the security controls of our business partners, vendors, or service providers, may not prevent the improper access to, use of, or disclosure of personal information. In addition, due to the high-profile nature of our products, we may draw a disproportionately higher amount of attention and attempts to breach our security controls than companies with lower profile products. A security incident, such as the Cybersecurity Incident,incident that leads to disclosure of consumer information (including personal information) has and could harm our reputation, compel us to comply with disparate breach notification laws in various locations and otherwise subject us to liability under laws that protect personal information, any of which could result in increased costs or loss of revenue.revenue and reputational harm. A resulting perception that our products or services do not adequately protect personal information could result in a loss of current or potential consumers and business partners. In addition, if any of our business partnerspartners, vendors, or service providers (or their vendors that support services ultimately provided to us) experience a security incident that leads to the disclosure of consumerour consumers' information, our reputation could be harmed, resulting in loss of revenue.

In addition, certain of our products include online functionality. The ability of our products to enable this functionality, and our ability to offer content through a video game platform's digital distribution channel, is dependent upon the continued operation and security of such platform's online network. These third-party networks, as well as our own internal systems and websites, and the related security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise, and result in someone obtaining unauthorized access to our customers'consumers' information or our data, including our intellectual property and other confidential business information, or our information technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Compounding these risks, as artificial intelligence capabilities develop rapidly, individuals or groups of hackers and sophisticated organizations,organizations may use these technologies to create new sophisticated attack methods that are increasingly automated, targeted, coordinated, and more difficult to defend against. Further, the risk of such a breach may be heightened by world events, such as the Russia-Ukraine war and the Israel-Hamaswar war.in the Middle East. If an actual or perceived breach of our safeguards occurs, we may lose business, suffer irreparable damage to our reputation, and/or incur significant costs and expenses relating to the investigation and possible litigation of claims relating to such an event.

The proportion of our revenues derived from digital content delivery, as compared to traditional retail sales, has increased significantly in recent years. The increased importance of digital content delivery in our industry, including through subscription-based access to a portfolio of interactive content, increases our potential competition, as the minimum capital needed to produce and publish a digitally delivered game is significantly less than that needed to produce and publish one that is delivered through retail distribution. This shift also requires us to dedicate capital to developing and implementing alternative marketing strategies, which may not be successful. In addition, a continuing shift to digital delivery could result in a deprioritization of our products by traditional retailers. If either occurs, we may be unable to effectively market and distribute our products, which could materially adversely affect our business, financial condition, and operating results. In addition, a continuing shift to digital delivery could result in a deprioritization of our products by traditional retailers. Also, while digitally‑distributed products generally have higher profit margins than retail sales, as business shifts to digital distribution, the volume of orders from retailers for physical discs has been, and is expected to be, reduced.

We derive revenue from advertisements and offers we serve to players. We need to maintain good relationships with advertisers to provide us with a sufficient inventory of advertisements and offers. Online advertising, including through mobile games and other mobile applications, is an intensely competitive industry. Many large companies, such as Amazon, Facebook and Google, invest significantly in data analytics to make their websites and platforms more attractive to advertisers. For our advertising business to continue to succeed, we need to continue to demonstrate the reach of our player network and success of our advertising partners. If our relationship with any advertising partners terminates for any reason, or if the commercial terms of our relationships are changed or do not continue to be renewed on favorable terms, we would need to qualify new advertising partners, which could negatively impact our revenues, at least in the short term. Alternatively, if our advertising inventory is unavailable and demand exceeds supply, our ability to generate further revenues from advertising would be limited, particularly during peak hours and in key geographies. This could have an adverse effect on our reputation and our business, financial condition, and results of operations. Further, the U.S. federal Video Privacy Protection Act ("VPPA") and some U.S. states' wiretapping type laws may pose litigation risk for online businesses like ours. For instance, in recent years, plaintiffs' lawyers have asserted claims under the VPPA or the California Invasion of Privacy Act ("CIPA"), alleging that certain online activities and data collection via cookies and similar tracking technologies violate the law. Some courts have found that such practices, without proper opt-in consent, constitute illegal eavesdropping. We have defended our practices in response to these types of claims and may be required to respond to or defend against similar claims, which may divert resources, increase compliance costs, and negatively impact our financial condition. In addition, if we include advertising in our games that players view as excessive, such advertising may materially detract from players’ gaming experiences, thereby creating player dissatisfaction, which may cause us to lose players and revenuesrevenues, and may negatively affect the in-game experience for players making purchases of virtual items in our games.

In addition, Internet-connected devices and operating systems controlled by third parties increasingly contain features that allow device users to disable functionality that allows for the delivery of targeted advertising on their devices. Device and browser manufacturers may include or expand these features as part of their standard device specifications, and state or federal regulators may mandate more user settings to limit or prohibit targeted advertising, analytics, or other data sharing with third parties.parties for users of all or certain ages. For example, Apple previously created a proprietary identifier-for-advertisers, which simplifies the process for Apple users to opt out of certain types of advertising. In April 2021, Apple began requiring developers to get explicit permission from users, on an app-by-app basis, to use the identifier-for-advertisers, a device identifier assigned by Apple to each of its devices and used by advertisers to attribute app installs to advertising, campaigns and target users through user acquisition, and deliver targeted ads. These requirements are known as Apple’s AppTracking Transparency framework and have been maintained in subsequent versions of Apple iOS. Beginning January 2024, Google began requiring publishers and developers using certain Google advertising products to serve ads in the U.K. or E.U. to use a Google-certified consent management platform. There has also been a significant increase of litigation related to data sharing with third parties, including advertising partners. This has driven a need for more specific consent from users for sharing of their personal information, user interaction, and video viewing information with third parties, and it could lead to additional changes from our third party advertising and analytics partners. If users do not elect to participate in functionality that supports the delivery of targeted advertising on their devices, our ability to deliver effective advertising campaigns on behalf of our advertisers could suffer, which could cause our business, financial condition, or results of operations to suffer.

•significant accounting charges resulting from the completion and integration of a sizable acquisition and increased capital expenditures, including potential impairment charges incurred to write down the carrying amount of intangible assets generated as a result of an acquisitionacquisition, such as the Goodwill impairment charge of approximately $3,500 we recognized during the fiscal year ended March 31, 2025;

Future acquisitions and investments could alsoresult involvein the issuance of our equity andor equity-linked securitiessecurities, (which may potentially dilutingdilute our existing stockholders),stockholders, or the incurrence of debt,additional debt. They may also expose us to contingent liabilities or other obligations. In addition, acquisitions and investments may lead to increased expenses, including amortization expenses,of acquired intangibles assets, stock-based compensation, or potential write-offs of goodwill, intangibles,intangible orassets of acquired in-process technology, or other increased cash and non-cash expenses such as stock-based compensation.technology. Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis. Our stockholders may not have the opportunity to review, vote on or evaluate future acquisitions or investments.

In addition to acquisitions, we have divested and may in the future make additional divestments of certain products and services, including by shutting down studios, that no longer fit our long-term strategies. Divestitures may adversely impact our business, operating results, and financial condition if we are unable to achieve the anticipated benefits or cost savings from such divestitures, or if we are unable to offset impacts from the loss of revenue associated with the divested product lines or technologies. In connection with these divestitures and other cost-optimization efforts, we have experienced several rounds of layoffs in the recent past, which could negatively affect our reputation and our ability to recruit new employees in the future. Any future layoffs could similarly harm our reputation and hinder our recruitment efforts.

We are subject to certain risks because of our international operations, particularly as we continue to grow our business and presence in Asia, Latin America, and other parts of the world. Changes to and compliance with a variety of foreign laws and regulations may increase our cost of doing business and our inability or failure to obtain required approvals could harm our international and domestic sales. In either the U.S. or other countries, trade legislation, such as a change in or volatility around the current tariff structures, import/export compliance laws, a change in the relationship between either us or the U.S. and any country in which we have significant operations or sales, or other trade laws or policies, could adversely affect our ability to sell or to distribute in international markets. In particular, ason February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Economic Emergency Powers Act were unconstitutional. Following the U.S. Supreme Court's decision, on February 24, 2026, the U.S., via an Executive Order signed by the President, implemented a global 10% tariff on all countries for a period of the150 datedays. However, on May 7, 2026, a panel of thisfederal Annual Reportjudges on Formthe 10-K, discussions remain ongoing in respectCourt of certainInternational tradeTrade restrictionsvoted andthat such 10% tariffs on most U.S. imports fromare Canada,illegal. China,Significant uncertainty remains regarding the status of existing and Mexico,newly asannounced welltariffs, aspotential retaliatorychanges tariffsor enacted in responsepauses to such actions.tariffs, Intariff light of these events, there continues to exist significant uncertainty about the future relationship between the U.S.levels, and whether further additional tariffs or other countriesretaliatory withactions respectmay tobe suchimposed, trademodified, policies,or treaties, and tariffs.suspended. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity and restrict our access to potential partners, suppliers or other third parties we seek to do business with and, in turn, have a material adverse effect on the business and financial condition of such third parties, which in turn would negatively impact us.

Our business may also be affected directly or indirectly by major world events, such as the Russia-Ukraine war and the Israel-Hamaswar war.in the Middle East. Such events could decrease the demand for our products and services, make it difficult or impossible for us to deliver products and services to certain of our customers, or result in restrictions in trade, all of which could negatively affect our business.

Further, the enforcement of regulations relating to mobile and other games with an online element in China remains uncertain, and further changes, either in the regulation or their enforcement could have a negative impact on our business in China. In order to operate in China, all games must have regulatory approval. A decision by the Chinese government to revoke its approval for any of our games or to decline to approve any products we desire to sell in China in the future could have a negative impact on our business. China has also enacted a new privacy law that may affect how we structure our business and process of personal information.

We are subject to a variety of laws and executive orders in the U.S. and abroad that affect our business, including state and federal laws regarding consumer protection, electronic marketing, protection of minors, data protection and privacy, competition, taxation, intellectual property, online gaming, export, and national security, which are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly laws outside the U.S. There is a risk that existing or future laws may be interpreted in a manner that is not consistent with our current practices and could have an adverse effect on our business. We incur legal compliance costs associated with our international operations and could become subject to legal penalties in foreign countries if we do not comply with local laws and regulations which may be substantially different from those in the U.S.

In many foreign countries, particularly in those with developing economies, it may be common to engage in business practices that are prohibited by U.S. and international laws and regulations, such as the Foreign Corrupt Practices Act, the U.K. Bribery Act, and by local laws, such as laws prohibiting corrupt payments to government officials. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, agents, representatives, business partners, and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business. We can be held liable for the corrupt or other illegal activities of our employees, agents, representatives, business partners or third-party intermediaries, even if we do not authorize or have knowledge of such activities. Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in countries where practices which violate such laws may be customary, will not take actions in violation of our policies. Any such violation, even if prohibited by our policies, could have a material adverse effect on our business.

We rely upon third-party digital delivery platforms, such as Microsoft's Xbox Live, PlayStation Network, Steam, Epic, and other third-party service providers, to provide connectivity from the consumer to our digital products and our online services. Connectivity issues could prevent customers from accessing this content and our ability to successfully market and sell our products could be adversely affected. Given the increasing global usage of online platforms, the risks of connectivity issues may be heightened. In addition, we could experience similar issues related to services we host on our internal servers. Such issues also could affect our ability to provide game-related services and could have a material adverse effect on our business, financial condition, and operating results.

In the U.S., if the ESRB rates a game as "AO" (age 18 and older), platform licensors may not certify the game and retailers may refuse to sell it. In addition, some consumers have reacted to re-ratings or controversial game content by refusing to purchase such games, demanding refunds for games that they had already purchased, and refraining from buying other games published by us. Many of our Rockstar titles and certain of our 2K titles have been rated "M" (age 17 and older) by the ESRB. If we are unable to obtain "M" ratings and instead receive "AO" ratings on future versions of those or similar titles as a result of changes in the ESRB's ratings standards or for other reasons, including the adoption of legislation in this area, our business and prospects could be negatively affected. If any of our games are re-rated by the ESRB or other foreign-based ratings organizations, we could be exposed to litigation, administrative fines and penalties and other potential liabilities, and our operating results and financial condition could be significantly affected.

Paying players make purchases in our games because of the perceived value of these virtual items, which is dependent on the relative ease of obtaining an equivalent good by playing our game. The perceived value of these virtual items can be impacted by various actions that we take in the games including offering discounts for virtual items, giving away virtual items in promotions or providing easier non-paid means to secure these goods. Managing game economies is difficult and relies on our assumptions and judgement.judgment. If we fail to manage our virtual economies properly or fail to promptly and successfully respond to any such disruption, our reputation may suffer and our players may be less likely to play our games and to purchase virtual items from us in the future, which would cause our business, financial condition and results of operations to suffer.

Game accounts and virtual items in our games have no monetary value outside of our games. Nonetheless, some of our players may make sales and/or purchases of game accounts or virtual items, such as virtual currency, through unauthorized third-party sellers in exchange for real currency. These unauthorized or fraudulent transactions are usually arranged on third-party websites and the virtual items offered may have been obtained through unauthorized means such as exploiting gameplay vulnerabilities in our games, from scamming our players with fake offers for virtual items or other game benefits, or from credit card fraud. We do not in any way facilitate these transactions and do not generate any revenue from them. These unauthorized purchases and sales from third-party sellers have in the past and could in the future impede our revenue and profit growth by, among other things:

We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, and Zynga. Our products are currently designed for console gaming systems, mobile, including smartphones and tablets, and PC.personal computer ("PC"). We deliver our products through physical retail, digital download, online platforms, and cloud streaming services. We are continually innovating the design and development of our products, including by investing in artificial intelligence ("AI") tools and technologies, in order to enhance game play, anticipate changes in consumer behavior, and evolve our business as new dynamics develop. Refer to Item 1 - Business for additional discussion.

Product Release Schedule. Our financial results are affected by the timing of our product releases and the commercial success of our titles. Generally, a significant portion of our revenue has been derived from a few popular franchises, particularly around new releases within those franchises, some of which have annual or biennial releases. Additionally, our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 12.6%12.4% of our net revenue for the fiscal year ended March 31, 2025.2026. The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis. Rockstar plans to release Grand Theft Auto VI on November 19, 2026.

Economic Environment and Retailer Performance. We continue to monitor various macroeconomic and geopolitical factors, such as global tariff policy,policies, that may affect our business in several areas, including consumer demand, inflation, pricing pressure on our products,products and third party hardware platforms, credit quality of our receivables, and foreign currency exchange rates. Actions we have taken to date and other potential actions we may take in the future in response to these factors could result in negative impacts in future periods.

The economic environment has affected our customers in the past and may do so in the future. There has been increased consolidation in our industry, aswhich is extremely competitive, and larger, better capitalized competitors will be in a stronger position to withstand prolonged periods of economic downturn and sustain their business through theperiods of financial volatility. Also, bankruptcies or consolidations of our large retail customers could seriously hurt our business, due to uncollectible accounts receivable and the concentration of purchasing power among the remaining large retailers.

Hardware Platforms. We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties. Such console revenue comprised 37.3%39.0% of our net revenue by product platform for the fiscal year ended March 31, 2025.2026. The success of our business is dependent upon consumer acceptance of these platforms and the continued growth in the installed base of these platforms, which has been and could be impacted by global economic factors, including global tariff policy.policies. When new hardware platforms are introduced, demand for interactive entertainment developed for older platforms typically declines, which may negatively affect our business during the market transition to the new consoles. The latest Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles). The inclusion of such features on new consoles could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products. Further, events beyond our control may impact the availability or pricing of these new consoles, which may also affect demand.demand for our products. We manage our product delivery on each current and future platform in a manner we believe to be most effective to maximize our revenue opportunities and achieve the desired return on our investments in product development. Accordingly, our strategy for these platforms is to focus our development efforts on a select number of the highest quality titles.

Player acquisition costs. Principally for our mobile titles, we use advertising and other forms of player acquisition and retention to grow and retain our player audience. These expenditures, which are recorded within SalesSelling and marketing in our Consolidated Statements of Operations, generally relate to the promotion of new game launches and ongoing performance-based programs to drive new player acquisition and lapsed player reactivation. Over time, the effectiveness or cost of these acquisition and retention-related programs may change, affecting our operating results.

During fiscal year 2025,2026, 2K released Mafia: The Old Country, NBA 2K25,2K26, TopSpinBorderlands 2K25, Sid Meier's Civilization VII, PGA TOUR 2K25,4, and WWE 2K25, and Zynga released Game of Thrones: Legends.2K26. Rockstar plans to release Grand Theft Auto VI on MayNovember 26,19, 2026.

Our net revenue for the fiscal year ended March 31, 20252026 was led by a variety of our top franchises, primarily NBA 2K, Grand Theft Auto, Borderlands, Red Dead Redemption, and WWE 2K, and Sid Meier's Civilization, as well as our top contributorsmobile contributors, primarily Toon Blast, ourMatch hyper-casual mobile portfolio,Factory!, Empires & Puzzles, Match Factory!, and WordsColor WithBlock Friends.Jam. Our net revenue for the fiscal year ended March 31, 20252026 was $5,633.6,$6,656.4, an increase of $284.0$1,022.8 or 5.3%18.2% compared to the fiscal year ended March 31, 2024.2025.

Our operating loss for the fiscal year ended March 31, 20252026 was $4,391.1$104.2 compared to operating loss of $3,590.6$4,391.1 for fiscal year ended March 31, 2024,2025, primarily duedriven to an increase inby Goodwill impairment charges of $1,203.1$3,545.2 relatedin tothe anprior additionalyear, partialwith impairmentno relatedcorresponding toexpense onein the current year, as well as, higher sales of our reporting units.products. For the fiscal year ended March 31, 2025,2026, our net loss was $4,478.9,$298.2, as compared to net loss of $3,744.2$4,478.9 in the prior year. DilutedBasic and diluted loss per share for the fiscal year ended March 31, 20252026 was $25.58,$1.62, as compared to DilutedBasic and diluted loss per share of $22.01$25.58 for the fiscal year ended March 31, 2024.2025.

We monitor Net Bookings as a key operating metric in evaluating the performance of our business. Net Bookings is defined as the net amount of products and services sold digitally or sold-in physically during the period and includes licensing fees, merchandise, in-game advertising, strategy guides, and publisher incentives. Net Bookings were as follows:

For the fiscal year ended March 31, 2025,2026, Net Bookings increased by $315.0$1,073.0 as compared to the prior year.year period. The increase was primarily duedriven toby an increase inhigher Net Bookings from Matchour Factory!;NBA 2K franchise, our Sid Meier's CivilizationBorderlands franchise, the latest installment of which, CivilizationBorderlands VII,4, released in FebruarySeptember 2025; ToonColor Blast;Block our NBA 2K franchise; and TopSpin 2K25,Jam, which released in AprilNovember 2024.2024; These increases were partially offset by a decrease in Net Bookings from Empires & Puzzles,and our Grand Theft Auto franchise, our hyper- and hybrid-casual mobile portfolio, and LEGO 2K Drive, which released in May 2023.franchise.

The following tabletables setsset forth, for the periods indicated, our statementsConsolidated Statements of operations,Operations, net revenue by platform, net revenue by distribution channel, and net revenue by content type, net revenue by platform, and net revenue by distribution channeltype:

(1) Includes $9.4$(27.9) and $24.4$9.4 of stock-based compensation expense in fiscal year 20252026 and 2024,2025, respectively.

For the fiscal year ended March 31, 2025,2026, net revenue increased by $284.0,$1,022.8, as compared to the prior year.year period. The increase was primarily duedriven toby an increase inhigher net revenue of $237.1 from Match Factory!, which released in November 2023; $127.2$416.9 from our SidNBA Meier's2K Civilizationfranchise; $210.3 from our Borderlands franchise, the latest installment of which, CivilizationBorderlands VII,4, released in FebruarySeptember 2025; and$206.6 $84.2from Color Block Jam, which released in November 2024; $121.9 from Toon Blast.Blast; Theseand increases were partially offset by a decrease in net revenue of $73.3$115.1 from our Grand Theft Auto franchise.

Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising. Net revenue from recurrent consumer spending increased by $261.1$722.0 and accounted for 79.4%78.1% of net revenue for the fiscal year ended March 31, 2025,2026, as compared to 78.8%79.4% for the prior year.year period. The increase was primarily due to an increase in net revenue from Match Factory! and Toon Blast. These increases were partially offsetdriven by a decrease inhigher net revenue from our GrandNBA Theft2K Autofranchise franchise.and Color Block Jam. Net revenue from full game and other increased by $22.9$300.8 and accounted for 20.6%21.9% of net revenue for the fiscal year ended March 31, 2025,2026, as compared to 21.2%20.6% for the prior year.year period. The increase was primarily duedriven toby anhigher increasenet revenue from our Borderlands and Grand Theft Auto franchises, and our Mafia franchise, the latest installment of which, Mafia: The Old Country released in August 2025, partially offset by lower net revenue from our Sid Meier's Civilization franchisefranchise, andthe TopSpinlatest 2K25.installment Theseof increaseswhich, wereCivilization partiallyVII, offset by a decreasereleased in netFebruary revenue from our NBA 2K franchise, a decrease as a result of a divestiture in our business, and a decrease in our Grand Theft Auto franchise.2025.

Net revenue from mobile increased by $194.0$391.0 and accounted for 52.2%50.1% of our total net revenue in the fiscal year ended March 31, 2025,2026, as compared to 51.4%52.2% in the prior year.year period. The increase was primarily duedriven toby an increase inhigher net revenue from MatchColor Factory!Block Jam and Toon Blast. These increases were partially offset by a decrease in our Grand Theft Auto franchise, Merge Dragons!, and as a result of a divestiture. Net revenue from console games decreasedincreased by $68.2$498.2 and accounted for 37.3%39.0% of our total net revenue in the fiscal year ended March 31, 2025,2026, as compared to 40.5%37.3% in the prior year.year period. The decreaseincrease was primarily duedriven toby a decrease inhigher net revenue from our Grand Theft Auto and NBA 2K franchises, and LEGOBorderlands 2K Drive, which released in May 2023. These decreases were partially offset by an increase in net revenue from TopSpin 2K25, which released in April 2024, and our Sid Meier's Civilization franchise.franchises. Net revenue from PC and other increased by $158.2$133.6 and accounted for 10.5%10.9% of our total net revenue in the fiscal year ended March 31, 2025,2026, as compared to 8.1%10.5% in the prior year.year period. The increase was primarily duedriven toby anhigher increasenet inrevenue from our Borderlands, Grand Theft Auto, and NBA 2K franchises, partially offset by lower net revenue from our Sid Meier's Civilization franchise; our Risk of Rain franchise, which was acquired in connection with our acquisition of Gearbox in June 2024 (refer to Note 20 - Acquisitions); and our Grand Theft Auto and NBA 2K franchises.franchise.

Net revenue from digital online channels increased by $319.6$1,027.9 and accounted for 96.4%97.0% of our total net revenue for the fiscal year ended March 31, 2025,2026, as compared to 95.6%96.4% in the prior year.year period. The increase was primarily due to an increase in net revenue from Match Factory!, our Sid Meier's Civilization franchise, and Toon Blast. These increases were partially offsetdriven by a decrease inhigher net revenue from our NBA 2K franchise, Color Block Jam, our Borderlands and Grand Theft Auto franchise.franchises, and Toon Blast. Net revenue from physical retail and other channels decreased by $35.6$5.1 and accounted for 3.6%3.0% of our total net revenue for the fiscal year ended March 31, 2025,2026, as compared to 4.4%3.6% for the prior year.year The decrease was primarily due to a decrease in net revenue from our NBA 2K and Red Dead Redemption franchises, and LEGO 2K Drive.period.

Gross profit as a percentage of net revenue for the fiscal year ended March 31, 20252026 was 54.3%,57.2%, as compared to 41.9%54.3% in the prior year.year period. The increase in gross profit as a percentage of net revenue was primarily driven by (i) lower amortization of intangible assets primarily due to higher impairments in the prior year and (ii) lower impairmentproduct chargescosts relatedas a percentage of net revenue, partially offset by higher amortization of capitalized software and development costs primarily due to intangiblethe assetstiming relatedof to our Zynga acquisition (refer to Note 9 - Goodwill and Intangible Assets, net).releases.

Changes in foreign currency exchange rates decreasedincreased net revenue by $2.5$9.9 and increased gross profit by $0.2,$45.4, respectively, in the fiscal year ended March 31, 20252026 as compared to the prior year.year period.

(1)Includes stock-based compensation expense, which was allocated as follows:

Foreign currency exchange rates decreasedincreased total operating expenses by $6.8$31.2 for the fiscal year ended March 31, 20252026 as compared to the prior year.year period.

Selling and marketing expenses increased by $133.5$87.1 for the fiscal year ended March 31, 20252026 as compared to the prior year period, primarily driven by higher personnel expense due to (i)higher performance-based compensation, as well as, higher overallmarketing expense for Color Block Jam and our Borderlands franchise. These increases were partially offset by lower marketing expenses for Match Factory!, Game of Thrones: Legends, and our Sid Meier's Civilization franchise, partially offset by lower marketing expenses for our hyper-casual mobile portfolio, and (ii)Star lowerWars: amortization related to our intangible assets.Hunters.

Research and development expenses increased by $57.0$69.4 for the fiscal year ended March 31, 2025,2026, as compared to the prior year period, primarily duedriven to increases inby (i) higher personnel expensesexpense due to increasedthe headcountacquisition of Gearbox in June 2024 and higher performance-based compensation, and (ii) the timing of additional R&D-related credits related to certain titles. These increases were partially offset by lower production and development expenses for titles that are not technologically feasible, partially offset by the timing of tax related credits for certain titles.feasible.

General and administrative expenses decreased by $8.9 for the fiscal yearsyear ended March 31, 20252026, as compared to the prior year period, primarily driven by lower legal fees and 2024 include occupancy expense (primarily rent, utilities and office expenses) of $73.9 and $69.9, respectively,contingencies related to ourthe developmentIBM studios.case against Zynga, partially offset by higher personnel expense due to higher performance-based compensation.

Depreciation and amortization expenses increaseddecreased by $58.2$30.9 for the fiscal year ended March 31, 2025,2026, as compared to the prior year period, primarily duedriven toby increaseslower in (i) impairment expenseamortization related to our intangible assets (referdue to Noteprior 9year -impairments, Goodwillpartially andoffset Intangibleby Assets, Net), (ii)higher IT infrastructure expense,expense and (iii)higher leasehold improvementsimprovement expense for office buildouts.

Goodwill impairment expense decreased by $3,545.2 for the fiscal yearsyear ended March 31, 20252026, andas 2024, were $3,545.2 and $2,342.1, respectively, duecompared to the prior year period, primarily driven by partial impairments recognized relatedin tothe oneprior ofyear, ourwith reportingno unitscorresponding (referexpense toin Notethe 9current - Goodwill and Intangible Assets, Net).year.

Business reorganization expense increaseddecreased by $1.9$110.9 for the fiscal year ended March 31, 2025,2026, as compared to the prior year period, primarily duedriven toby anour increasecost reduction program in employee-relatedfiscal costsyear and losses on our divestitures, partially offset by a decrease in expense due to cancellations of our titles2025 (referthe to"2024 Note 21 - Business ReorganizationPlan").

BenefitProvision fromfor income taxes

When compared to the statutory rate of 21%, the effective tax rate of 0.3%(50.8)% for the fiscal year ended March 31, 20252026 was primarily duedriven toby an expense of $718.0 from nondeductible goodwill impairments, $222.7$113.4 from an increase in the U.S. valuation allowance expense, $25.5$18.2 from an increase in the foreign valuation allowance expense, $41.4and $79.0 from our geographic mix and foreign earningsearnings, partially offset by a $54.5$45.7 benefit from tax credits anticipatedand to$39.7 beof utilized.excess benefits from employee stock compensation.

When compared to the statutory rate of 21%, the effective tax rate of (1.1)%0.3% for the fiscal year ended March 31, 20242025 was primarily duedriven toby an expense of $474.7$718.0 from nondeductible goodwill impairments, $337.2$222.7 from an increase in the U.S. valuation allowance expense, $41.6$25.5 from an increase in the foreign valuation allowance expense, $39.0and $41.4 from our geographic mix and foreign earnings, and $29.2 from a decrease in the net deferred tax asset relating to the Swiss cantonal basis step-up (as noted below) partially offset by a $63.3$54.5 benefit from tax credits anticipated to be utilized and $32.7 benefit from changes in reserves due to statute lapses.utilized.

We anticipate that additional excess tax benefits or shortfalls from employee stock compensation, tax incentives or credits, changes in valuation allowance, and changes in our geographic mix of earnings could have a significant impact on our effective tax rate in the future. In addition, we are regularly examined by domestic and foreign taxing authorities. Examinations may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe our tax positions comply with applicable tax law, and that we have adequately provided for reasonably foreseeable tax assessments. It is possible that settlement of audits or the expiration of the statute of limitations could have an impact on our effective tax rate in future periods.

The ARPA,American Rescue Plan Act of 2021 (the “ARPA”), among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations. Effective for tax years starting after December 31, 2026 (April 1, 2027 for the Company), the ARPA expands the limitation to cover the next five most highly compensated employees. The ARPA did not have a material impact on our Consolidated Financial Statements for the fiscal year ended March 31, 2025.2026. We continue to evaluate the potential impact the ARPA may have on our operations and Consolidated Financial Statements in future periods.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) includes a newcorporate alternative minimum tax ("CAMT") of 15% on the adjusted financial statement income ("AFSI") of corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period. The CAMT is effective for taxable year ending March 31, 2024. It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income. We do not estimate any tax liability relating to CAMT for the current fiscal year. We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.

The Organization for Economic Co-operation and Development ("OECD") has proposed a global minimum tax of 15% of reported profits, referred to as Pillar Two. Many countries have already implemented or are taking steps to implement Pillar Two. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly differently than the model rules and on different timelines. Many aspects of Pillar Two are effective for the fiscal year ending March 31, 2025. Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than a 15% minimum rate. The impact of Pillar Two was not material to the tax provision for the fiscal year ended March 31, 2025.2026. On January 5, 2026, the OECD released new administrative guidance outlining a “side-by-side” arrangement following agreement on key elements by the OECD/G20 Inclusive Framework on Pillar Two. It provides new safe harbors for U.S. multinational companies which would exempt U.S.-parented groups from two of the three Pillar Two top up taxes, extend the current Transitional Country-by-Country Reporting Safe Harbor by one year through the end of fiscal year ending March 31, 2028, and make the Simplified Effective Tax Rate Safe Harbor permanent. We will continue to evaluate the impact Pillar Two and any additional guidance may have on our results and operations.

For the fiscal year ended March 31, 2025,2026, net loss was $4,478.9,$298.2, as compared to a net loss of $3,744.2$4,478.9 in the prior year. Basic and diluted loss per share for the fiscal year ended March 31, 20252026 was $25.58,$1.62, as compared to basic and diluted loss per share of $22.01$25.58 for the fiscal year ended March 31, 2024.2025. Basic weighted average shares of 175.1183.9 were 5.08.8 higher as compared to the prior year period basic weighted average shares, primarily due to stockour issuedMay as2025 considerationunderwritten forpublic the acquisitionoffering of Gearbox,common stock, as well as normal stock compensation activity, including vestsvests, as well as grantsgrants, and forfeitures in the prior year being fully outstanding in the current year. See Note 12 - Loss Per Share to our Consolidated Financial Statements for additional information.

As of March 31, 2025,2026, we had $9.4$443.8 of short-term investments, which primarily consisted of bank time deposits with maturities greater than 90 days. From time to time, we may placemake additional short-term investments depending on future market conditions and liquidity needs.

A majority of our trade receivables are derived from sales to major retailers, including digital storefronts and platform partners, and distributors. Our five largest customers accounted for 81.0%,80.6%, 79.8%81.0% and 79.6%79.8% of net revenue during the fiscal yearsyear ended March 31, 2025,2026, 20242025 and 2023,2024, respectively. As of March 31, 2025,2026, and 2024,2025, five customers comprised 72.1%69.6% and 69.9%72.1% of our gross accounts receivable, respectively, with our significant customers (those that individually comprised more than 10% of our gross accounts receivable balance) accounting for 61.0%57.7% and 57.7%61.0% of such balance at March 31, 2025,2026, and 2024,2025, respectively. We had three customers who accounted for 22.7%, 21.0%, and 14.0% of our gross accounts receivable as of March 31, 2026, and three customers who accounted for 24.0%, 21.3%, and 15.7% of our gross accounts receivable as of March 31, 2025, and three customers who accounted for 21.8%, 18.1%, and 16.9% of our gross accounts receivable as of March 31, 2024.2025. We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2025,2026, and 2024.2025. Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers who sell our physical products, and our past collection experience, we believe that the receivable balances from these largest customers do not represent a significant credit risk, although we actively monitor each customer's creditworthiness and economic conditions that may affect our customers' business and access to capital. We are monitoring the current global economic conditions, including credit markets and other factors as it relates to our customers in order to manage the risk of uncollectible accounts receivable.

We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, and Zynga. Our products are currently designed for console gaming systems, mobile, including smartphones and tablets, and PC.personal computer ("PC"). We deliver our products through physical retail, digital download, online platforms, and cloud streaming services.

Our teams have established a portfolio of proprietary software content for the major hardware and mobile platforms, and we aim to be at the forefront of technological innovation. We have a diverse portfolio that spans all key platforms and numerous genres, including action, adventure, family, casual, hyper-casual, role-playing, shooter, social casino, sports, and strategy. This enables us to appeal to a wide array of consumers worldwide, ranging from game enthusiasts to casual gamers. Most of our intellectual property is internally owned and developed, which we believe best positions us financially and competitively. In addition, we selectively license selectively someseveral highly recognizable renowned brands, particularly in sports entertainment. We support our products with innovative marketing programs created by our global teams.

Rockstar Games. Rockstar Games' strategy is to develop a limited number of titles that are known for their quality and longevity in the market for which they can create sequels and incremental revenue opportunities through virtual currency, add-on content, and in-game purchases across all key platforms. Software titles published by our Rockstar Games label are primarily internally developed. We expect Rockstar Games, our wholly-owned publisher of the Grand Theft Auto, L.A. Noire, Max Payne, Midnight Club, Red Dead Redemption, and other popular franchises,series, to continue to be a leader in the action/adventure product category and to create groundbreaking entertainment. 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 460470 million units worldwide. Our most recent installment, Grand Theft Auto V, which was released in 2013, has sold-in over 220230 million units worldwide and includes access to Grand Theft Auto Online. Rockstar Games offers its GTA+ membership program, which engages its player community with an array of rotating benefits, including access to classic Rockstar Games titles. Rockstar Games continues to invest in the franchiseseries and announcedwill thatrelease Grand Theft Auto VI is planned for release on November 19, 2026, during ourthe current fiscal year 2027.year. The label released its first trailer for the title in December 2023 and the second in May 2025, and willpre-orders sharefor morethe detailstitle commenced in theJune future.2026. Red Dead Redemption 2, which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 8085 million units worldwide. Rockstar Games continues to expand on its established series by developing sequels, offering downloadable episodes, and providing additional content. Rockstar Games' titles are published across all key platforms, including mobile.

2K. Our 2K label publishes a variety of popular entertainment properties across all key platforms and across a range of genres including shooter, action, role-playing, strategy, sports, and family/casual entertainment. In recent years, 2K has expanded its offerings to include several new franchises that are expected to enhance and diversify its slate of games and provide opportunities for sequels and additional content. We expect 2K to continue to develop new, successful franchises in the future. 2K's internally owned and developed franchisesseries include the critically acclaimed, multi-million unit selling BioShock, Borderlands, Mafia, Sid Meier's Civilization, Tiny Tina's Wonderlands, and XCOM franchises. 2K's sports simulation titles include our flagship NBA 2K series,2K, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestlingwrestling, series,and PGA TOUR 2K, and TopSpin 2K. 2K also publishes mobile titles, including WWE SuperCard and NBA 2K All-Stars.

Zynga. Our Zynga label publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and advertising. Zynga's strategy is to have numerous games in concept development and to determine which titles are best suited for soft and worldwide launch based on the achievement of various milestones and key performance indicator (KPI) thresholds. Zynga's diverse portfolio of popular game franchises has been downloaded more than 10 billion times, including CSRColor Racing,Block DragonJam, City,CSR2, Empires & Puzzles, FarmVille, Game of Thrones: Legends, Game of Thrones Slots Casino, Golf Rival, Hair Challenge, Harry Potter: Puzzles & Spells, HighHit Heelsit Rich!, Casino, Match Factory!, Merge Dragons!, Merge Magic!, Monster Legends, Screw Jam, Seat Away, Toon Blast, Top Eleven, Toy Blast, TwoWizard Dots,of Oz Slots Casino, Words With Friends, and Zynga Poker.

Product Release Schedule. Our financial results are affected by the timing of our product releases and the commercial success of our titles. Generally, a significant portion of our revenue has been derived from a few popular franchises,series, particularly around new releases within those franchises,series, some of which have annual or biennial releases. Additionally, our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 12.4%12.8% of our net revenue for the ninethree months ended DecemberJune 31,30, 2025.2026. The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis. Rockstar plans towill release Grand Theft Auto VI on November 19, 2026.

WeTo date we have also announced that, during the remainder of fiscal year 2026,2027, 2K plans to release NBA 2K27, PGA 2K27 and WWE 2K26.2K27.

Hardware Platforms. We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties. Such console revenue comprised 38.7%41.8% of our net revenue for the ninethree months ended DecemberJune 31,30, 2025.2026. The success of our business is dependent upon consumer acceptance of these platforms and the continued growth in the installed base of these platforms, which has been and could be impacted by global economic factors, including global tariff policies. When new hardware platforms are introduced, demand for interactive entertainment developed for older platforms typically declines, which may negatively affect our business during the market transition to the new consoles. The latest Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles). The inclusion of such features on new consoles could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products. Further, events beyond our control may impact the availability or pricing of these new consoles, which may also affect demand for our products. We manage our product delivery on each current and future platform in a manner we believe to be most effective to maximize our revenue opportunities and achieve the desired return on our investments in product development. Accordingly, our strategy for these platforms is to focus our development efforts on a select number of the highest quality titles.

Online Content and Digital Distribution. We provide a variety of online delivered products, including direct digital downloads of our titles, and access to additional offerings through virtual currency, add-on content, in-game purchases, and in-game advertising, which drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles. Net revenue from digital online channels comprised 96.9%98.3% of our net revenue for the ninethree months ended DecemberJune 31,30, 2025.2026. We expect online delivery of games and game offerings to continue to be the primary part of our business over the long term.

For the three months ended DecemberJune 31,30, 2025,2026, Net Bookings increaseddecreased by $37.2 as compared to the prior year period. The increasedecrease was primarily driven by lower Net Bookings from our Grand Theft Auto series and Color Block Jam partially offset by higher Net Bookings from our NBA 2K and Grand Theft Auto franchises; Color Block Jam, which released in November 2024; Toon Blast!, and our Red Dead Redemption franchise.2K.

Three Months Ended DecemberJune 31,30, 20252026 Compared to DecemberJune 31,30, 20242025

(1) Includes $3.6$3.1 and $2.6$(41.0) of stock-based compensation expense in 20252026 and 2024,2025, respectively, in software development costs and royalties.

For the three months ended DecemberJune 31,30, 2025,2026, net revenue increased by $339.2$30.1 as compared to the prior year period. The increase was primarily driven by higher net revenue of (i) $111.9$89.0 from our NBA 2K2K, franchise;partially (ii)offset $51.5by lower net revenue of $32.8 from Color Block Jam,Jam whichand released in November 2024; (iii) $43.8$24.2 from our Grand Theft Auto franchise; (iv) $42.4 from Toon Blast!; and (v) $30.8 from our Red Dead Redemption franchise.series.

Net revenue from mobile increaseddecreased by $134.2$39.4 and accounted for 51.0%49.7% of our total net revenue for the three months ended DecemberJune 31,30, 2025,2026, as compared to 53.8%53.3% for the prior year period. The increasedecrease in net revenue from mobile was primarily driven by higherlower net revenue from Color Block Jam, Toon Blast!, and our Red Dead Redemption franchise.Jam. Net revenue from console games increased by $144.2$89.9 and accounted for 38.3%41.8% of our total net revenue for the three months ended DecemberJune 31,30, 2025,2026, as compared to 37.4%36.6% for the prior year period. The increase in net revenue from console games was primarily driven by higher net revenue from our NBA 2K franchise and our Borderlands franchise, the latest installment of which, Borderlands 4, released in September 2025. Net revenue from PC and other increaseddecreased by $60.8$20.4 and accounted for 10.7%8.5% of our total net revenue for the three months ended DecemberJune 31,30, 2025,2026, as compared to 8.8%10.1% for the prior year period. The increasedecrease in net revenue from PC and other was primarily driven by higherlower net revenue from our Grand Theft Auto and Borderlands franchises, as well as the addition of the Risk of Rain franchise from our acquisition of Gearbox in the prior year period.series.

Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising. Net revenue from RCS increased by $216.5$33.7 and accounted for 76.8%84.1% of net revenue for the three months ended DecemberJune 31,30, 2025,2026, as compared to 80.0%83.5% of net revenue for the prior year period. The increase in net revenue from RCS was primarily driven by higher net revenue from our NBA 2K2K, franchise,partially offset by lower net revenue from Color Block Jam, and Toon Blast!.Jam. Net revenue from full game and other increaseddecreased by $122.7$3.6 and accounted for 23.2%15.9% of net revenue for the three months ended DecemberJune 31,30, 20252026 as compared to 20.0%16.5% of net revenue for the prior year period. The increasedecrease in net revenue from full game and other was primarily driven by higherlower net revenue from our Grand Theft Auto,Auto Red Dead Redemption,series, and PGA TOUR 2K, partially offset by higher net revenue from NBA 2K and our Borderlands franchises.franchise.

Net revenue from digital online channels increased by $343.8$30.7 and accounted for 97.4%98.3% of our total net revenue for the three months ended DecemberJune 31,30, 2025,2026, as compared to 96.4%98.2% for the prior year period. The increase was primarily driven by higher net revenue from our NBA 2K2K, franchise,partially offset by lower net revenue from Color Block Jam,Jam and our Grand Theft Auto franchise, Toon Blast!, and our Red Dead Redemption franchise.series. Net revenue from physical retail and other channels decreased by $4.6$0.6 and accounted for 2.6%1.7% of our total net revenue for the three months ended DecemberJune 31,30, 2025,2026, as compared to 3.6%1.8% for the same period in the prior year period. The decrease in net revenue from physical retail and other channels was primarily driven by lower net revenue from our NBA 2K franchise.

Gross profit as a percentage of net revenue for the three months ended DecemberJune 31,30, 20252026 was 55.6%57.5% as compared to 55.9%62.9% for the prior year period. The decrease in gross profit as a percentage of net revenue was primarily driven by (i)the higher amortizationreversal of capitalizedexpense software and development costs primarily duerelated to the timingforfeiture of releases and (ii) higher internal royalties due to the timing of when royalties are earned, partially offset by lower amortization of intangible assets, primarily due to impairmentsawards in the prior year.

Changes in foreign currency exchange rates increased net revenue by $2.6$0.6 and increased gross profit by $12.4$1.7 for the three months ended DecemberJune 31,30, 20252026 as compared to the prior year period.

Changes in foreign currency exchange rates increased total operating expenses by $7.5$2.7 for the three months ended DecemberJune 31,30, 2025,2026, as compared to the prior year period.

Selling and marketing expenses increaseddecreased by $44.3$39.5 for the three months ended DecemberJune 31,30, 2025,2026, as compared to the prior year period, primarily driven by higherlower marketing expense for Color Block JamJam, Match Factory!, and our GrandSid TheftMeier's AutoCivilization franchise,and asBorderlands wellfranchises. asThis higher personnel expense due to higher performance-based compensation. These increases werewas partially offset by lowerhigher marketingpersonnel expense for Match Factory!.expense.

Research and development expenses increased by $41.8$17.4 for the three months ended DecemberJune 31,30, 2025,2026, as compared to the prior year period, primarily driven by higher personnel expenseexpense, duepartially offset by the timing of additional R&D-related credits related to highercertain performance-based compensation.titles.

General and administrative expenses increased by $29.0$18.9 for the three months ended DecemberJune 31,30, 2025,2026, as compared to the prior year period, primarily driven by an adjustment recorded to legal and settlement fees related to the IBM case against Zynga in the prior year, as well as(i) higher personnel expenseexpense, due to(ii) higher performance-basedIT-related compensation.expenses for cloud-based services and IT infrastructure, and (iii) higher professional fees.

Depreciation and amortization expenses decreased by $0.4$2.2 for the three months ended DecemberJune 31,30, 2025,2026, as compared to the prior year period, primarily driven by lower amortization related to acquired intangible assets due to prior year impairments, partially offset by higher IT infrastructure expense.

Interest and other, net was an expense of $17.1$13.8 for the three months ended DecemberJune 31,30, 2025,2026, as compared to an expense of $20.8$35.4 for the prior year period. The net decrease in expense was primarily driven by (i) lower interest expense due to thelower repaymentoutstanding ofdebt balances because we repaid our 2025 Notes in April 2025 and lowerour outstanding2026 debtNotes balancesin March 2026 (refer to Note 9 - Debt), and(ii) foreign currency gains in the current period compared to foreign currency losses in the prior year period. This was partially offset by lowerhigher interest income primarily due to lowerhigher interest rates.rates, and (iii) a decrease in foreign currency losses.

ProvisionBenefit forfrom income taxes

The provisionbenefit forfrom income taxes for the three months ended DecemberJune 31,30, 20252026 is based on our projected annual effective tax rate for fiscal year 2026,2027, adjusted for specific items that are required to be recognized in the period in which they are incurred. The provisionbenefit forfrom income taxes was $37.1$15.2 for the three months ended DecemberJune 31,30, 2025,2026, as compared to the benefit from income taxes of $27.7$1.9 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of (66.5)%30.8% for the three months ended DecemberJune 31,30, 20252026 was primarily due to tax expense of $35.1 related to an increase in the U.S. and international valuation allowances, offsetdriven by tax benefits of $12.5 from tax credits and by tax expense of $19.9$16.9 related to geographic mix of earnings.earnings and changes in reserves.

In the prior year period, when compared to the statutory rate of 21.0%,21%, the effective tax rate of 18.1%13.8% for the three months ended DecemberJune 31,30, 20242025 was primarily due primarily to tax benefits of $18.2 related to divestitures, tax benefits of $6.4 from employee stock-based compensation, tax benefits of $3.9 from tax credits, offset by tax expense of $18.7$5.6 related to an increase in the U.S. and international valuation allowances and tax$2.9 expense of $7.1 related toby geographic mix of earnings.earnings and changes in reserves, offset by tax benefits of $4.9 from employee stock-based compensation, tax benefits of $2.6 from tax credits.

The change in effective tax rate, when compared to the prior year period's effective tax rate, is primarily driven by higher tax expensebenefits from changesgeographic inmix theof U.S. and international valuation allowance,earnings offset by increaseddecreased tax benefits from tax credits, higher tax expense from geographic mix of earnings,credits and noemployee taxstock-based benefits in the current year from divestitures as compared to the prior year.compensation.

We anticipate that additional excess tax benefits or shortfalls from employee stock compensation, tax incentives or credits, and changes in our geographic mix of earnings could have a significant impact on our effective tax rate in the future. In addition, we are regularly examined by domestic and foreign taxing authorities. Examinations may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe our tax positions comply with applicable tax law, and that we have adequately provided for reasonably foreseeable tax assessments. It is possible that settlement of audits or the expiration of the statute of limitations could have an impact on our effective tax rate in future periods.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into lawlaw. andOBBB includes significant provisions, suchincluding asbut thenot limited to (1) permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act,Act of 2017 ("TCJA"), (2) modifications to the international taxprovisions framework,relating acceleratedto deductionsBase Erosion Anti Abuse Act ("BEAT"), Global Intangible Low-Tax Income ("GILTI") and Foreign Derived Deduction Eligible Income ("FDDEI"), (3) permanent reinstatement deduction for domestic research expenditures,expenditures permanently reinstatingand 100% bonus depreciation,depreciation for certain qualified property, and (4) modifications to tax credits. The legislation has multiple effective dates, with certain provisions effective in the fiscal year endingended March 31, 2026 and others implemented in future periods. TheWe have estimated the accounting for income tax effects of OBBB in our projected annual effective tax rate. We are continuing to evaluate the impact of OBBB hason beenthe reflectedCompany. inIt is possible that these changes could have an adverse impact on our estimated annualized effective tax rate, andtax reducedpayments, ourfinancial forecastedcondition, U.S.or cashresults of operations. The tax liability.law Itis didcomplex not,and however,additional impactinterpretive ourguidance U.S.may deferredbe taxissued assetsthat orcould liabilitiesaffect sincethe interpretations and assumptions we continuehave tomade, maintainas well as actions we may take as a fullresult valuationof allowance against U.S. net deferred tax assets.OBBB.

The American Rescue Plan Act of 2021 (the “ARPA”), among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations. Effective for tax years starting after December 31, 2026 (April 1, 2027 for the Company), the ARPA expands the limitation to cover the next five most highly compensated employees. The ARPA did not have a material impact on our Condensed Consolidated Financial Statements for the three months ended DecemberJune 31,30, 2025.2026. We continue to evaluate the potential impact the ARPA may have on our operations and Consolidated Financial Statements in future periods.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) includes a corporate alternative minimum tax ("CAMT") of 15% on the adjusted financial statement income ("AFSI") of corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period. It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income. We do not estimate any tax liability relating to CAMT for the current fiscal year. We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.

The Organization for Economic Co-operation and Development ("OECD") has proposed a global minimum tax of 15% of reported profits, referred to as Pillar Two. Many countries have already implemented or are taking steps to implement Pillar Two. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly differently than the model rules and on different timelines. Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than a 15% minimum rate. The impact of Pillar Two was not material to the tax provision for the three months ended DecemberJune 31,30, 2025.2026. On January 5, 2026, the OECD released new administrative guidance outlining a "“side-by-side"” arrangement following agreement on key elements by the OECD/G20 Inclusive Framework on Pillar Two. It provides new safe harbors for U.S. multinational companies which would exempt U.S.-parented groups from two of the three Pillar Two top up taxes, extend the current Transitional Country-by-Country Reporting Safe Harbor by one year through the end of fiscal year ending March 31, 2028, and make the Simplified Effective Tax Rate Safe Harbor permanent. We will continue to evaluate the impact Pillar Two and any additional guidance may have on our results and operations.

For the three months ended DecemberJune 31,30, 2025,2026, net loss was $92.9,$34.1, as compared to a net loss of $125.2$11.9 in the prior year period. Basic and diluted loss per share for the three months ended DecemberJune 31,30, 20252026 was $0.50,$0.18, as compared to basic and diluted loss per share of $0.71$0.07 in the prior year period. Basic weighted average shares of 185.0186.2 were 9.05.4 shares higher as compared to the prior year period basic weighted average shares, primarily due to our equity issuance, as well as normal stock compensation activity, including vests, grants,vests and forfeituresgrants in the prior year being fully outstanding in the current year. See Note 10 - Loss Per Share to our Condensed Consolidated Financial Statements for additional information.