Take-Two Interactive (NASDAQ: TTWO) makes some of the most important and best-selling video games on the market, but the company’s return over the past five years would leave investors wanting to play a game other than the stock market.

With a paltry total return of 20%, the company has greatly underperformed in the communication services sector. The Communication Services Select Sector SPDR Fund (NYSEARCA: XLC) has provided a total return of 82% over that span.

Let’s look into Take-Two's operations and get a better understanding of how its business works. We’ll examine how the company is growing, and think about how the upcoming release of the most anticipated game in its history, Grand Theft Auto VI (GTA VI), could affect the share price.

Take-Two Has Ventured Into a New Playing Field

Take-Two breaks down its revenue into several key streams: Mobile, Console, PC, and Other. The mobile division brings in revenue based on in-game purchases and advertisements from mobile phone games. For the company overall, various types of in-game revenue typically account for the majority of total revenue.

However, specific to the console and PC divisions, the company’s revenues are periodically spiked by “full-game” purchases. This timing is based on the release dates of new blockbuster games. It makes these games for the latest PlayStation, Xbox, or Nintendo Switch consoles and PCs.

The company has historically made some of the most sought-after games. Red Dead Redemption 2 (RDR2) and Grand Theft Auto V (GTA V) are ranked as the seventh and third best-selling games of all time, respectively. Revenues spiked by 153% in the quarter when RDR2 was released.

In fiscal 2024, mobile revenue accounted for 51% of total revenue, while console revenue made up 41%. However, this distribution is a relatively new development. In fiscal 2022, console revenue made up 72% of the total. The large jump in mobile revenue is largely due to the firm’s acquisition of Zynga in 2022, which helped to 6x the revenue in that division by March 2023.

Take-Two’s Share Price Remains Stable Despite Profit Losses

An interesting story for Take-Two Interactive is how the shares have performed over the past two years. Since March 2022, the company’s profit has essentially inverted. In that quarter, the company’s last twelve-month normalized net income was $355 million. After the most recent earnings release, the figure sits at—$336 million. Yet, the share price has been nearly flat over that period, falling just over 2%.

With such a massive decline in profits and a shift from making money to losing money, I would expect a more significant decline in the shares. So, what are some factors that might be helping to maintain the share price despite this? Looking at the last twelve months' revenue, we see that since March of 2022, it has grown substantially by around $2 billion.

However, this growth appears largely inorganic, driven predominantly by the acquisition of Zynga. This means the company’s products aren’t seeing rapid demand growth; they simply purchased revenue from another company.

It’s also evident that Take-Two hasn’t been able to do much to grow the Zynga business since the acquisition. Sales in the mobile division have been essentially flat since March 2023. It would be hoped the company could find a way to combine its strong intellectual property and gaming expertise to grow mobile revenues. The fact that it hasn’t been able to do so is not a great sign.

GTA VI Launch: Limited Boost Likely, but Take-Two’s Stock Still Has Growth Potential

A likely reason for the stability in the stock price is the upcoming release of Grand Theft Auto VI in the fall of 2025. Regarded by some as perhaps the “most highly anticipated video game in history," it is possible the market has baked in a good amount of its projected sales into the stock price. Consensus forecasts show revenues increasing by 44% in 2026 because of this, and adjusted earnings more than tripling.

In the 52 weeks after GTA V came out, the company's shares returned 28%. However, the company’s forward price-to-earnings (P/E) ratio at the beginning of that period was around 10% of what it is now, and it increased by five times over that period. With its currently high forward P/E ratio of 59x, it's hard to say shares will get a big boost again based on the release of GTA VI. However, the average Wall Street price target does show an implied upside of 16% in the stock.