Embracer Group (EMBRAC) Q3 25/26 earnings summary

Executive summary

• Q3 net sales were SEK 5,176 million, down 26% year-over-year and 8% organically, mainly due to divestments and a slow quarter for new releases, but results exceeded management expectations.

• Adjusted EBIT was SEK 528 million, a 44% decrease year-over-year, but ahead of plan and improved over Q1 and Q2, with core IPs like Kingdom Come: Deliverance, Dead Island, and Tomb Raider driving outperformance.

• Coffee Stain Group was spun off and reclassified as discontinued operations, impacting year-on-year comparisons and segment results.

• Strategic focus sharpened on an IP-first approach, operational discipline, and targeted cost initiatives, including divestment of non-strategic businesses.

• Free cash flow for the trailing twelve months was SEK -15 million, a significant improvement from SEK -399 million in the prior period.

Financial highlights

• Net sales: SEK 5,176 million, impacted by SEK 900 million from divestments and SEK 400 million from FX effects.

• Adjusted EBIT: SEK 528 million, with margin at 13%, showing sequential improvement.

• Gross profit margin: 55%, down from 58% year-over-year, but up 3 points excluding divestments.

• Free cash flow after working capital: SEK -75 million for the quarter, with TTM showing significant improvement.

• Net cash position at quarter-end: SEK 2.9 billion, with available funds of SEK 5.8 billion.

Outlook and guidance

• Adjusted EBIT forecast for FY 2025/26 is at least SEK 750 million, revised from SEK 1.0 billion due to the Coffee Stain Group spin-off; on a comparable basis, this is a modest upgrade.

• Management sees upside potential in underlying business performance and expects a confident earnings inflection for next year, supported by a major in-house title and several mid-sized releases.

• Long-term focus on increasing CapEx allocation to core IPs, targeting 80% over time (currently at 40%).