The Second Quarter of 2025 Was a Mixed Bag for Embracer

The Embracer Group has published its Interim Report Q2 (July to September 2025). Net sales decreased by -19% (6% organic growth) to €348 million (SEK 3,850 million). EBIT amounted to -€7 million (SEK -73 million), an EBIT margin of -2% (1%). Adjusted EBIT decreased by -79% to €10 million (SEK 109 million), corresponding to an Adjusted EBIT margin of 3% (11%). On 13 November 2025, the exchange rate is approximately: 1 SEK = 0.091 EUR.

Sales split per operating segment:

• PC/Console Games: decreased by -13% (-4% organic growth) to €168 million (SEK 1,853 million)
• Mobile Games: decreased by -61% (1% organic growth) to €49 million (SEK 535 million)
• Entertainment & Services: increased by 17% (25% organic growth) to €132 million (SEK 1,462 million)

Phil Rogers, Group CEO: "Our Q2 results were in line with our moderate expectations, and our full-year outlook remains intact. Our focus on three key priorities remains: investing in our core IPs, operational discipline, and targeted cost initiatives. This quarter shows progress, but also where focus is still needed. We're committed to building a more cohesive organization, strengthening profitability and unlocking long-term value. Coffee Stain Group's upcoming Capital Markets Event will be an important milestone as the company prepares for its spin-off, targeted for December."

Rogers says that Mobile Games and Entertainment & Services performed well this quarter, but profitability within PC/Console was weak overall. The core IPs, including The Lord of the Rings and Kingdom Come: Deliverance, delivered solid results above expectations. The launch of the second DLC for Kingdom Come: Deliverance 2 (Legacy of the Forge) catalysed new and existing player engagement. The third DLC, Mysteria Ecclesiae, was released this week. The RPG has now sold four million units. Conversely, there were weak performances among new releases this quarter, including Killing Floor 3 and several smaller titles. Rogers: "Tripwire Interactive, the studio behind Killing Floor 3, continues to demonstrate a strong commitment through consistent updates and active community engagement. As we move forward, we will consistently monitor player engagement and determine the best ways to support Killing Floor 3, ensuring our approach reflects community feedback and builds as a sustainable service model."

Nevertheless, management continues to be confident about its outlook for the year as a whole. The aim is to deliver at least SEK 1.0 billion (approximately €91 million) in Adjusted EBIT for the current financial year, including the financial contribution from Coffee Stain Group, which remains on track for a separate listing in December. "For Q3, we expect performance to be somewhat stronger than in Q2. This is primarily driven by a stronger expected seasonal performance within Entertainment & Services offset by a continued limited profitability within PC/Console," Rogers says. One of the positive examples mentioned is Fellowship (Early Access: 16 October).

However, the fourth quarter (January to March 2026) is expected to be better. Embracer's "impactful mid-sized PC/Console releases this year", including Reanimal and the Gothic 1 Remake (both of which are published by THQ Nordic), are scheduled for release in the fourth quarter of the year.

Rogers: "Looking further ahead, we are excited about our pipeline, with a range of major projects based on our core IPs scheduled to launch over the upcoming three years. An improved release slate will be one key to drive stronger profit and cash generation ahead."

The Embracer Group will change its name on 1 April 2026 at the earliest, which marks the start of its new financial year. The Group CEO comments: "As we evolve into Fellowship Entertainment, our commitment to an IP-first strategy remains at the core of everything we do. This focus drives us to structure the group around our strongest franchises and creative talent. To realize this vision, we continue our work to streamline processes while ensuring that our internal experts are clearly identified and leveraged across the entire group in a smart and efficient way. We are evolving from a decentralized structure toward a more cohesive way of working. As part of this evolution, we are making progress on improving profitability and freeing up capital for higher-return opportunities. We see additional scope to continue reallocating capex to our core IPs. While we are still in the early stages of this journey, we are confident that these changes will unlock significant long-term value for the group."