Embracer Group (EMBRAC) Q1 25/26 earnings summary

Executive summary

• Q1 net sales were SEK 3,355 million, down 31% year-over-year and 2% organically, reflecting divestments and softer catalog performance.

• Adjusted EBIT was SEK 75 million, down from SEK 579 million last year, or SEK 250 million when factoring divestments.

• The group is in a transition year, focusing on core IPs, operational discipline, and preparing for the Coffee Stain Group spin-off in 2025.

• Strategic shift includes a new CEO, planned rebranding to Fellowship Entertainment, and emphasis on collaboration.

• Free cash flow (TTM) improved to SEK 1,248 million from SEK -196 million, excluding discontinued operations.

Financial highlights

• Gross margin for the quarter was 69%, with Q1 net sales at SEK 3,355 million.

• Adjusted EBIT margin dropped to 2% in Q1 FY 2025/26.

• Net cash position at June 30, 2025, was SEK 4.9 billion, with available funds of SEK 12.7 billion.

• Free cash flow after working capital was SEK -223 million in Q1.

• Marketing spend was SEK 222 million, or 10% of net sales, down year-over-year.

Outlook and guidance

• FY 2025/26 adjusted EBIT is expected to be at least SEK 1 billion, with Q2 adjusted EBIT expected to be roughly in line with Q1.

• No material changes to management expectations for FY 2026/27 and FY 2027/28; nine AAA games are in the pipeline.

• Guidance reflects potential release shifts, slower mobile growth, negative FX effects, and lower catalog sales.

• Increased release cadence and lower fixed costs are expected to improve free cash flows in FY 2027 and beyond.

• Coffee Stain Group is performing in line with expectations.