Embracer, the Swedish games developer, has reported a slightly weaker-than-expected operating profit for the October to December period, causing its shares to plummet by over 16 per cent. Despite an increase of 7 per cent in adjusted operating profit to 2.15 billion Swedish crowns ($204.40 million), the company fell short of analysts’ forecasts of 2.21 billion crowns according to a company-provided consensus.
The company cited a softer outlook for PC/Console in the 2023/2024 period, recent game performance, and pipeline shifts in the fourth quarter as factors contributing to potentially reaching the lower end of its forecasted adjusted operating profit range of 7.0 billion to 9.0 billion crowns. Despite undergoing restructuring, Embracer acknowledged the possibility of missing its March net debt target of 8 billion crowns but affirmed its commitment to a 12-month leverage goal and maximizing shareholder value.
CEO Lars Wingefors highlighted the mobile games segment’s strong performance, with record-high profitability and a 2 per cent year-over-year growth in profits, attributed in part to a strategic shift towards more recurring games.
Embracer initially benefited from increased demand during COVID-19 lockdowns but has since faced challenges such as development delays and falling demand, with some new titles receiving poor reception. In response to setbacks, including a failed $2 billion partnership deal in May and the recent discontinuation of a new “Deus Ex” game, Embracer has pursued cost-saving measures and redirected resources towards original franchises.
In contrast, French rival Ubisoft, reporting its Q3 results on February 8, expressed optimism as net bookings exceeded guidance, driven by new releases and back catalogue sales, indicating resilience within the gaming industry despite challenges.
Overall, the gaming industry is facing its own set of challenges amidst a rapidly evolving landscape. It’s clear that Embracer is taking steps to address these challenges and pivot their strategy to ensure continued growth and success. However, it’s also evident that competition within the industry is fierce, with companies like Ubisoft showing resilience and finding new avenues for growth. This highlights the need for companies like Embracer to remain agile and adaptable in order to thrive in a constantly changing market.