Embracer beats quarterly profit expectations ahead of Coffee Stain spin-off

(Reuters) -Swedish gaming company Embracer reported a 79% drop in its quarterly adjusted operating profit but beat market expectations ​on Thursday, as its core games boosted player engagement ahead of ‌its planned Coffee Stain spin-off.

CONTEXT

The Tomb Raider franchise owner is splitting into three listed companies ‌after its acquisition spree was cut short by a combination of development delays, a post-pandemic demand slump, and a failed partnership deal.

It spun off board game company Asmodee earlier this year and is planning to list its independent game studios ⁠under Coffee Stain Group on ‌the Stockholm bourse by the end of 2025.

WHY IT’S IMPORTANT

Growth in the video game market has slowed down as consumers rein ‍in spending where they can. This has led game studios to focus more on already successful intellectual properties (IPs) rather than developing wholly new titles.

Video game groups are also ​rethinking their business models and the production process of their games. France’‌s Ubisoft in July announced a plan to split into “creative houses” based on gaming genres.

KEY QUOTE

“We can really see gamers coming back in and deeper engagement from new and existing players over Q2,” Embracer CEO Phil Rogers told Reuters.

BY THE NUMBERS

Adjusted operating profit slumped to 109 million Swedish crowns ⁠($11.6 million) in the second ​quarter of its financial year, while analysts ​polled by Embracer were expecting 101 million crowns on average.

WHAT’S NEXT

Embracer expects to release nine high-budget, so-called AAA, ‍games over the next ⁠two financial years, it said in August.

The game maker plans to change its name to Fellowship Entertainment alongside the start of its new financial ⁠year on April 1, 2026, it said in Thursday’s earnings statement.

($1 = ‌9.4155 Swedish crowns)

(Reporting by Vera Dvorakova in Gdansk, editing ‌by Anna Pruchnicka and Milla Nissi-Prussak)