(Reuters) -Swedish gaming company Embracer reported a first-quarter operating profit and forecast annual earnings well below market expectations on Thursday, hit by catalogue softness in PC and console games.
That softness was due to launches of competing games that took up players’ time and attention in the quarter, leading to a slowdown in gamer acquisition for Embracer’s “Kingdom Come Deliverance II”, launched in February, it said.
MARKET REACTION
Shares of the Tomb Raider franchise owner fell more than 21% in early Stockholm trading and will see their biggest one-day drop in two years if the losses persist.
WHY IT’S IMPORTANT
As the pandemic-era surge in gaming recedes, delayed game releases and rising PC and console prices, exacerbated by U.S. import duties, are dampening the industry’s growth, with worsening consumer sentiment pushing developers to rethink their business models.
BY THE NUMBERS
Embracer reported an adjusted operating profit of 75 million Swedish crowns ($7.9 million) for its fiscal first quarter, compared to analysts’ consensus of 141 million crowns. It expects its second-quarter result to be at a similar level, while analysts had forecast 359 million crowns.
It guided for annual adjusted operating earnings of at least 1 billion crowns, while analysts it had polled were expecting more than double that.
KEY QUOTE
“We’ve always said this will be a quieter year for us … without any significant own name major releases,” the company’s new CEO Phil Rogers told Reuters in an interview.
CONTEXT
Embracer last year decided to split into three listed companies after being hit by development delays, weak demand and the collapse of a planned strategic partnership.
Last month, its French peer Ubisoft said it planned to split its business into “creative houses” based on specific genres.
WHAT’S NEXT
Following the February listing of Embracer’s board game division into Asmodee, Rogers will be overseeing the spin-off of Coffee Stain Group towards the end of 2025 and the transformation of the rest of the company, to be renamed Fellowship Entertainment.
($1 = 9.5418 Swedish crowns)
(Reporting by Vera Dvorakova and Leo Marchandon in Gdansk, editing by Milla Nissi-Prussak)
