Ubisoft Reports Significant Operating Loss but Expects a Rebound
On Wednesday, Ubisoft released its financial results for the fiscal year 2025-26, showing a non-IFRS operating loss of 1,044.7 million euros and a decline in net bookings by 17.4% to 1,525.1 million euros. The video game publisher describes this short-term financial performance as a result of transformational decisions, including a refocused portfolio, cost reductions, and continued investments ahead of major upcoming releases.
A Limited Release Schedule Weighs on Revenues
The net bookings for the fiscal year 2025-26 amounted to 1,525.1 million euros, down 17.4% compared to 1,846.4 million euros in 2024-25. This contraction primarily reflects a depleted new release schedule. The back-catalog segment stood at 1,281.8 million euros, slightly down by 1.1%, but its share of total net bookings increased from 70.2% to 84.0%, indicating a loyal player base that was insufficient to offset the absence of new major titles. The fourth quarter exceeded targets with net bookings of 415 million euros, about 25 million euros above the guidance (around 390 million euros), driven by better-than-expected back-catalog performances. However, year-over-year, Q4 dropped by 54%, reflecting a high comparison base due to the launch of Assassin's Creed Shadows and significant partnerships in the previous Q4.
Restructuring Heavily Impacts Margins
The non-IFRS operating result plummeted to -1,044.7 million euros from -15.1 million euros in 2024-25. This deterioration of over 1,000 million euros encompasses deliberate choices: discontinuation of 7 projects and postponement of 6 games in the portfolio, restructuring charges, and massive R&D investments (1,855.9 million euros non-IFRS, or 121.7% of net bookings) aimed at building a larger pipeline for 2027-28. The fixed cost base decreased by 118 million euros (-8%) to 1,435 million euros, with a cumulative reduction since 2022-23 of 325 million euros. Ubisoft aims for an additional reduction of 185 million euros by March 2028, to reach a target base of 1,250 million euros annually.
Tencent's Cash Injection Supports the Transition
The completion of the partnership with Tencent brought in 1,160 million euros in cash, significantly reducing the non-IFRS net debt from 885 million euros (March 31, 2025) to 187 million euros (March 31, 2026). This improvement in financial position facilitates navigating through a 2026-27 year expected as a 'low point' in the free cash-flow trajectory, with consumption limited to a maximum of 500 million euros. For 2027-28, Ubisoft anticipates a return to positive free cash-flow and a positive non-IFRS EBIT, followed by robust free cash-flow generation in 2028-29. The publisher expects a cumulative positive free cash-flow over the period from 2026-27 to 2028-29.
