Embracer beats second-quarter earnings expectations as planned spin-off moves forward

Embracer Group reported stronger second-quarter results than analysts expected, with cash operating earnings rising to approximately $20.4 million (SEK 203 million) for the July-to-September period. Revenue reached around $414.5 million, up 14% year over year, while adjusted operating profit climbed to $30.8 million.

The results also brought an update on the planned spin-off of Fellowship Entertainment. Embracer says preparations for the separation and a potential listing in 2027 remain on track. The quarter's headline beat came from cash EBIT, which differs from the company's reported and adjusted operating profit.

Cash earnings improved sharply from last year

Cash EBIT rose from a loss of $6.6 million a year earlier to $20.4 million (SEK 203 million). Adjusted EBIT increased from a $0.1 million loss to $30.8 million (SEK 307 million), while reported EBIT reached $12.2 million (SEK 121 million), compared with a loss of $14.2 million in the same quarter last year.

Each measure reflects a different aspect of Embracer’s financial performance. Reuters reported that cash EBIT exceeded analyst expectations of $11.4 million (SEK 114 million). The figures show a clear improvement in profitability, although growth was uneven across the company’s business segments.

Sales growth came from different parts of the group

Net sales increased 14% year over year, while organic growth, which excludes changes such as acquisitions and divestments, reached 20%. The Embracer operating segment generated approximately $309.5 million (SEK 3.082 billion) in revenue, up 21%, while Fellowship Entertainment recorded $105 million (SEK 1.045 billion), down 3%.

Fellowship Entertainment's quarter was supported by licensing royalties, particularly from Magic: The Gathering | The Hobbit. Embracer also reported growth in its mobile and entertainment and services businesses, with revenue in both categories rising by around 40%.

Lower costs and recent restructuring also shaped the result

Embracer credited its improved earnings in part to cost actions and divestments made over the past year. The group has spent several years restructuring its business, selling assets and reducing its workforce as it tries to lower costs and focus its remaining operations.

That background helps explain why the earnings improvement is not solely a measure of stronger game sales. Embracer’s results reflect both the performance of its games and the financial effects of changes to the company’s structure. The increase in cash flow from operating activities, which reached $73.4 million, offers another sign that the quarter generated more cash than the same period last year.

Fellowship’s separation is moving into its next phase

The planned spin-off is intended to separate Fellowship Entertainment from the rest of Embracer. The company says the work so far has involved advisers, governance, financing, organizational structure, and plans for how its studios will collaborate after the separation.

Embracer now expects to move toward capital-markets planning and listing readiness as the process continues. The separation is planned for 2027, but the company has not yet provided a final date or a complete picture of how the new entity will be structured. Until those details are settled, the spin-off remains a plan in progress rather than a completed change for players or shareholders.

Embracer is maintaining its annual forecast

After the first half of its financial year, Embracer reiterated its forecast for at least $100 million in cash EBIT during fiscal 2026–27. It also expects third-quarter cash EBIT to be broadly in line with last year, balancing contributions from upcoming games against sales mix and a strong prior-year catalog comparison.

The company says it expects four game releases across the next two quarters. Those include Metro 2039 and Tomb Raider: Legacy of Atlantis, both expected in February. The earnings beat gives Embracer a stronger starting point for the second half, but the forecast and spin-off timeline will depend on the company delivering those releases and maintaining the improved cash performance.