Key Highlights
- Embracer Group shares surged up to 19.5% following Q1 revenue of SEK 3.94 billion, surpassing analyst expectations of SEK 3.61 billion
- Cash EBIT turned positive at SEK 47 million, reversing a SEK 99 million deficit from the prior-year period
- PC/Console segment revenue climbed 68%, powered by Gothic 1 Remake’s impressive 500,000-unit debut week
- Adjusted operating profit reached SEK 151 million, significantly exceeding the SEK 69 million analyst consensus
- Management reaffirmed full-year Cash EBIT guidance of at least SEK 1 billion for fiscal 2026/27
Swedish gaming conglomerate Embracer Group delivered a robust opening quarter on Thursday, with revenue of SEK 3.94 billion handily surpassing the SEK 3.61 billion analyst consensus. Investors responded enthusiastically, pushing shares up as much as 19.5% before settling in the 7-9% range during midday trading.
Embracer Group AB (publ), THQQF
The company recorded 24% year-over-year revenue growth, with organic expansion reaching 33%. Performance was particularly strong within the Embracer operating division, where the Entertainment & Services and PC/Console units delivered standout results.
The Gothic 1 Remake emerged as the quarter’s star performer. The title moved 500,000 units during its launch week alone, propelling PC/Console revenue to SEK 728 million compared to SEK 433 million in the year-ago period. Revenue from new releases in this segment skyrocketed to SEK 310 million from just SEK 69 million previously.
Chief Executive Phil Rogers indicated to Reuters that the company’s extensive restructuring efforts have largely concluded. “The groundwork we feel is done,” Rogers explained, referencing transformation initiatives undertaken across the previous four to five quarters.
The Cash EBIT metric flipped to positive territory at SEK 47 million versus a SEK 99 million loss during the comparable quarter last year. This improvement stemmed from enhanced sales performance, superior gross margin expansion, and reduced capital spending within the core Embracer segment.
Earnings Picture Shows Mixed Results
Despite the revenue success, several profitability metrics fell short of expectations. EBIT registered a loss of SEK 79 million, contrasting with analyst projections of an SEK 80 million gain. EBITDA of SEK 697 million also trailed the SEK 871 million consensus forecast.
Adjusted EBIT landed at SEK 151 million, below the SEK 248 million consensus, although it significantly exceeded the company-compiled estimate of SEK 69 million. Cash EBIT of SEK 47 million similarly underperformed the SEK 129 million analyst target.
On a per-share basis, EPS of SEK 0.18 exceeded the SEK 0.08 consensus estimate. Adjusted EPS of SEK 1.04 likewise outperformed the SEK 0.80 consensus.
Free cash flow after adjusting for working capital came to SEK 3 million, representing a substantial improvement from the negative SEK 383 million recorded in the prior-year quarter.
Forward-Looking Outlook
Management reiterated its full-year Cash EBIT projection of at least SEK 1 billion for the 2026/27 fiscal year. Company executives indicated growing confidence in achieving this target following the first-quarter performance.
Results are expected to be weighted toward the fiscal year’s second half. Both Metro 2039 and Tomb Raider: Legacy of Atlantis are slated for February 2027 releases. Rogers emphasized that the annual target remains within reach even if either of these major titles experiences a launch delay.
Entertainment & Services division revenue expanded to SEK 1.768 billion from SEK 967 million, supported by fresh releases and robust back-catalogue performance at PLAION Partners.
Analysts at Redeye observed that quarterly results exceeded expectations, with both the Fellowship division and the broader Embracer operations surpassing their Cash EBIT projections.
The anticipated Fellowship Entertainment spin-off continues progressing according to plan, with completion targeted for calendar year 2027. Additionally, Embracer is executing a share repurchase program valued at up to SEK 750 million, scheduled to run through March 31, 2027.
Profit before tax totaled SEK 69 million, topping the SEK 50 million consensus, while net profit of SEK 39 million fell marginally short of the SEK 44 million analyst expectation.
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