GameStop Corp. (NYSE:GME) reported second-quarter net income of $298.7 million, up from $168.6 million a year earlier, even as revenue fell to $790.2 million from $972.2 million. According to The Wall Street Journal, the video-game retailer also raised its full-year adjusted EBITDA outlook to more than $650 million, up from a previous target of more than $600 million.
The results were helped by gains tied to GameStop’s equity stake in eBay, but the bigger operating story was the rapid expansion of its collectibles business. Revenue from collectibles rose 57% year over year to about $356.3 million and now accounts for 45.1% of total sales. That shift helped lift gross margin to 43.7% from 29.1% a year earlier.
On the bullish side, GameStop’s pivot toward higher-margin collectibles is already improving operating performance despite lower sales. Adjusted EBITDA climbed to roughly $174 million from $75.7 million a year earlier. Operating income reached $160.2 million, marking the highest second-quarter figure in the company’s history.
GameStop also improved its balance sheet during the quarter. The company retired about $1.4 billion of convertible notes and reduced long-term debt to around $2.8 billion. Management also has a $2 billion share-repurchase authorization, which could provide another route to return capital to shareholders if cash generation remains solid.
At the same time, risks remain. GameStop’s core video-game business continues to shrink sharply, with video-game revenue falling to about $263.2 million from $494.6 million a year earlier. The nearly 19% drop in total revenue was driven by store closures, the divestiture of French operations, and a tougher comparison against last year’s Nintendo Switch 2 launch.
Reported earnings were also heavily influenced by investment-related items rather than core retail operations alone. GameStop recorded about $238 million in net gains tied to its eBay investment, while posting an approximately $75 million loss on digital assets and related receivables. That highlights how the company’s investment portfolio can create significant swings in reported profit.
The key question now is whether the collectibles segment can keep growing fast enough to offset weakness in the legacy business. If growth in that category slows, GameStop may struggle to maintain the stronger margins and profitability underpinning its improved full-year outlook.
Insider Monkey’s data also point to slightly weaker hedge fund interest. The number of hedge funds holding GameStop fell to 26 in the second quarter from 29 in the first, while the value of those positions declined to $252.5 million from $293.1 million. By comparison, hedge fund position value in Best Buy rose to $1.41 billion from $883.8 million, with the holder count staying roughly stable at 44.
Overall, stronger margins, record second-quarter operating income, and a higher EBITDA outlook suggest that GameStop’s shift toward collectibles can improve profitability. But the large contribution from investment gains and the ongoing contraction of its traditional video-game business mean the company still has to prove that its turnaround is sustainable.
