Embracer Group’s Q2 2024 financial results have sent shockwaves through the gaming industry, revealing sharp declines in multiple key areas, particularly within its core PC/console games division. The Swedish conglomerate, which has rapidly expanded in recent years, now finds itself grappling with tough headwinds, from underwhelming game releases to internal restructuring and layoffs.
A Bleak Quarter: Sales Down 21%, PC/Console Games Hit Hard
For the three-month period ending September 30, 2024, Embracer reported net sales of SEK 8.55 billion ($774 million), marking a significant 21% drop year-on-year. Within this, the company’s PC/console games segment saw a staggering 46% decline, bringing in SEK 2.12 billion ($192 million) compared to the same period last year. This sharp drop in revenue was primarily attributed to a lack of major new releases, as well as a lukewarm reception to titles like Disney Epic Mickey: Rebrushed.
“Q2 FY25 has been a particularly tough comparison to the same quarter last year, which saw the release of Remnant 2 and Payday 3 — both of which performed well commercially,” Embracer said in its financial report.
Mobile games also took a hit, with sales declining by 8% year-on-year to SEK 1.35 billion ($122 million), while the company’s back catalogue underperformed as well, with sales dropping 21%. The divestment of high-profile assets like Gearbox and parts of Saber Interactive were cited as contributing factors to this downturn.
A Bleak Half-Year: Net Loss Soars to SEK 2.58 Billion ($233 Million)
Looking at the six-month period ending September 30, Embracer’s net sales totaled SEK 14.4 billion ($1.30 billion), a 23% year-on-year decline. The company reported a net loss of SEK 2.58 billion ($233 million), compared to a net profit of SEK 1.69 billion ($153 million) in the same period last year. This steep loss underscores the severity of the ongoing challenges the company is facing.
PC/console game sales for the half-year were particularly dismal, down 40% year-on-year to SEK 4.77 billion ($432 million), with mobile games also seeing a smaller decline of 6%. Despite the struggles in the gaming segment, Embracer did report “solid earnings growth” at Asmodee, its tabletop games division. However, even Asmodee’s sales were down 6% year-on-year, amounting to SEK 3.82 billion ($345 million).
Major Staff Reductions, Studio Closures, and Restructuring
Embracer’s Q2 results also highlight significant cuts in its workforce. The company’s development staff has been slashed by more than 40%, from 10,654 developers to just 6,250. Total headcount has similarly dropped from 15,701 to 10,450, reflecting the company’s ongoing efforts to streamline operations in the face of financial challenges. This follows a year-long restructuring program, which saw over 1,400 jobs eliminated and several studios shuttered.
Further layoffs have occurred at specific studios, such as Wisconsin-based Lost Boys Interactive, which saw cuts in September. Embracer has repeatedly acknowledged that these tough decisions are necessary to improve margins and reposition the company for future growth, particularly ahead of planned spin-offs like Asmodee.
“We are firmly addressing the unacceptable margins caused by high fixed operating costs,” commented CEO Lars Wingefors. “We have many efficient companies with industry-leading margins, but we recognize that certain parts of our PC/console and Entertainment & Services segments are underperforming, especially with delays and low returns on investment for smaller releases.”
A Critical Year Ahead: Kingdom Come Sequel and More Delays
Looking ahead, Embracer has tempered expectations for the rest of the financial year. The company is projecting “lower earnings year-on-year” due to the delay of several key titles originally slated for release in the second half of 2024. A glimmer of hope comes in the form of Kingdom Come: Deliverance 2, the highly anticipated sequel to the medieval RPG. The game, developed by Warhorse Studios, is now expected to launch on February 11, 2025, and is positioned as a major release for Embracer’s gaming portfolio.
However, with multiple high-profile delays and ongoing challenges in its key segments, Embracer will have to rely on the success of a few select titles — including Kingdom Come 2 — to turn its financial fortunes around.
The Bigger Picture: Embracer’s Path Forward
In the midst of these difficulties, Embracer is attempting to shore up its long-term position. The company announced the divestment of its mobile publishing arm, Easybrain, in a $1.2 billion deal with Miniclip. This sale is part of Embracer’s broader strategy to reduce debt and focus on more profitable segments. Additionally, the company reaffirmed its intention to spin off Asmodee, a move that is still on track to occur this financial year.
Despite the gloomy financial results, Wingefors remains optimistic about Embracer’s potential: “Over the past 15 months, we have created a stronger foundation for long-term value creation. We have made significant strides in lowering our net debt and capital expenditures, and we’re confident that we’ll emerge stronger once these spin-offs are complete.”
Embracer’s future hinges on its ability to adapt to a rapidly changing industry and deliver successful games — not just for 2025 but in the years to come. The company is facing unprecedented challenges, but the full scope of its restructuring and portfolio shifts will unfold over the next several months, as it seeks to regain investor confidence and stabilize its operations.
Conclusion: A Pivotal Moment for Embracer Group
Embracer Group’s financial results for Q2 2024 have exposed the cracks in its rapid expansion strategy, with severe declines in both revenue and workforce. While the company has taken significant steps to reduce costs and refocus its operations, the path to recovery is fraught with uncertainty. The success of its upcoming titles, especially Kingdom Come: Deliverance 2, will be crucial in determining whether Embracer can regain momentum or continue to struggle in the face of a challenging market and internal upheaval. The next few months will be critical in shaping Embracer’s future trajectory, as it navigates through restructuring, layoffs, and the ever-shifting landscape of the gaming industry.