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Take-Two Interactive stock falls amid mixed first-quarter earnings report

Yahoo Finance tech reporter Dan Howley breaks down video game developer Take-Two Interactive's mixed earnings report amid slowing trends in the gaming industry.

Video Transcript

SEANA SMITH: Shares of Take-Two Interactive off just about 5 and 1/2% following the company's earnings release. Dan Howley has that for us. Dan.

DAN HOWLEY: --or EPS of 8.54 for adjusted, 9.42-- sorry. $0.94 for adjusted, $0.85-- excuse me, $0.85 for adjusted and $0.94 for GAAP on EPS. But we're looking here. They reported GAAP losses per share of $0.76. Obviously, a big miss there, but they did beat on revenue. They had $1 billion in revenue, almost $1.1 billion in revenue. They were expected to have $984 million in revenue. And they're looking at fiscal year revenue of $5.8 billion to $5.9 billion, original estimates for $5.4 billion.

But they also had to announce that they were pushing back one of their games called "Marvel Midnight Suns." That could be impacting their next year revenue positively, but negatively impacting this year's full year revenue. We're seeing lower EPS, then, for Q2 as well. They're expecting a loss per share of between $0.86 and $0.96. And that's just interesting because we're coming around a time where you're starting to see more big headline games come out.

But for Take-Two, really, their bread and butter for now has been "Grand Theft Auto" and the releases they have for "Grand Theft Auto." And they did have one recently. So to see them with these kinds of results is a little disconcerting, to say the least.

SEANA SMITH: It certainly is there, Dan. And this also coincides with the news that we got out from NVIDIA this morning when they announced early weakness in their gaming business is one of the things that they cited just in terms of their guidance here going forward, also for their second quarter revenue miss. What are you seeing, just more broadly, in the gaming space? Because we have Electronic Arts out just about a week or so ago, now another huge miss here from Take-Two. Certainly, we're seeing softness here across the industry.

DAN HOWLEY: Yeah, it's not just those two either. It's Sony, it's Microsoft, it's Activision Blizzard, it's Nintendo. All of these companies are seeing a year over year decline from their prior highs. And really, it's two things. It's actually a few things. It's that we had the pandemic, so, so many people were buying games. Last year, we had huge new titles coming out that people were really interested in. People were sitting on their couches more rather than getting out.

And we've seen that in the amount of interactivity from different consoles or from different platforms. Microsoft and Sony both pointing out that there's less player engagement going on. So that means with less engagement, there's less people spending on games like "Grand Theft Auto," for instance. But then we also have the shortage in chips. That means that hardware sales are going to run low. And then, oh, yeah, inflation worries, so people are not spending $70 on a video game. They may be deciding, well, I'd rather go on a night out, rather than spend $70 in one shot.

So it's just a bunch of different factors kind of coming together to really damage the industry. But that's not to say that it's a long-term deal. It's just we saw that growth really explode. And so we're seeing it kind of pulled forward now. We're dealing with that year over year decline. But going forward, it should be a good 2023.

DAVE BRIGGS: It seemed inevitable. Some interesting developments, though, Netflix talking about upping their games. And of course, TikTok, everyone's got a TikTok problem. Now they're wanting in that space. Yahoo Finance tech reporter Dan Howley, good to see you--