Gaming major Embracer misses Q3 operating profit estimate

Embracer Q3 results: Embracer, a Swedish games developer, indicated a potential shortfall in its debt reduction target while maintaining its full-year forecast, despite reporting slightly weaker-than-expected operating profit for October to December period. company's shares plummeted by over 16 per cent at 09:22 GMT, marking worst day since May 2023, and have subsequently lost more than half of ir value.

Although Embracer's justed operating profit for quarter increased by 7 per cent to 2.15 billion Swedish crowns ($204.40 million), it fell short of analysts' forecasts of 2.21 billion crowns according to a company-provided consensus.

Embracer cited a softer outlook for PC/Console in 2023/2024 period, recent game performance, and pipeline shifts in fourth quarter as factors contributing to potentially reaching lower end of its forecasted justed operating profit range of 7.0 billion to 9.0 billion crowns.

Despite undergoing restructuring, Embracer acknowledged 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.

While Jefferies characterised third-quarter results as "soft," CEO Lars Wingefors highlighted 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, like broer gaming sector, 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 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 gaming industry despite challenges.

(With Reuters inputs)