Despite a sharp decline in sales and EBIT, the Embracer Group has reported a stronger third quarter of the fiscal year than the previous two. Higher-than-expected engagement and earnings were driven by the Kingdom Come: Deliverance, Dead Island and Tomb Raider IPs.
In the third quarter, Embracer Group delivered net sales of SEK 5,176 million (-26% year on year; ~€490 million), with adjusted EBIT of SEK 528 million (-44%; ~€50 million) and EBITDAC of SEK 410 Million (~€38.8 million). This corresponds to an adjusted EBIT margin of 10% (14%). This represents "a clear improvement compared to Q1 and Q2 and ahead of our expectations," said Phil Rogers, Group CEO. The quarter's performance was driven by core IPs, including Kingdom Come: Deliverance, Dead Island and Tomb Raider, which drove higher engagement and earnings than expected. Kingdom Come: Deliverance II had a standout quarter, with the release of the third expansion, Mysteria Ecclesiae, combined with marketing, influencer campaigns and seasonal promotions, generating strong sales. The game has now sold over 5 million copies in its first year.
Sales split per operating segment
At the end of December, the group had 87 games in development. 4,739 developers are employed (compared to 5,508 the previous year). The total headcount is 6,369 (down from 7,558 the previous year). During Q3 of FY 2025/26, the Embracer Group reclassified the Coffee Stain Group as non-current assets held for distribution, discontinuing operations as a consequence of the spin-off and listing that took place on 11 December 2025.
The publisher's key release is Reanimal (developed by Tarsier), which is set to launch on 13 February 2026. Screamer (developed by Milestone and published by Plaion) will also be released at the end of the quarter. Phil Rogers provides the following outlook for the full financial year: "We now expect adjusted EBIT of at least SEK 750 Million (~€74.3) for FY 2025/26. The forecast compares to our previous expectation of at least SEK 1.0 billion, which included Coffee Stain Group for the full FY 2025/26. On a comparable basis, excluding Coffee Stain Group, our latest forecast represents a modest upgrade to our underlying expectations. The release date of Gothic 1 Remake is moved to June 5th, giving time for final polishing. We continue to see upside potential to our forecast from the underlying business performance."
They are working towards becoming a disciplined, IP-first group in the long term: "To further improve profitability and cash flow generation, we continue to execute on three strategic priorities: IP-led focus, operational discipline and targeted cost initiatives. During the quarter, we divested several non-strategic and unprofitable businesses in third-party publishing and work-for-hire, improving focus and capital efficiency. These assets jointly had a negative Adjusted EBIT of around SEK -178 million on a trailing twelve month basis. The divestments also free up resources to deploy in higher-return areas, or to return to shareholders. We are continuously targeting a reduction in both opex and capex through next financial year, as we reduce exposure to non-core IP and as we complete consolidation initiatives. Simplifying and adapting our organization’s size and shape around a more focused portfolio will be key to making better decisions quicker, and to improving profitability."
Regarding AI, he says: "We view AI as a tool to support and empower our teams. World-building, storytelling, and creative direction will remain firmly human-led, ensuring that creativity and originality continue to define our experiences."
