Take-Two Interactive Software Inc. (NASDAQ:TTWO)

The financial data reveals significant fluctuations and a deteriorating trend in key performance indicators over the periods analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrated substantial growth from 2020 to 2021, increasing from approximately $331 million to $783 million. However, this positive trend reversed dramatically beginning in 2022, with NOPAT declining sharply to a loss of about $1.24 billion in 2023, followed by further losses in 2024 and 2025, reaching approximately $4.54 billion in negative NOPAT by 2025.

Cost of Capital

The cost of capital remained relatively stable throughout the periods, fluctuating slightly between approximately 11.18% and 12.3%. The minor decrease in cost of capital during 2023 (to around 11.18%) did not correspond with improved profitability, indicating other factors adversely affecting overall performance.

Invested Capital

Invested capital showed consistent growth from 2020 to 2023, rising from approximately $2.83 billion to a peak of about $14.06 billion in 2023. After this peak, invested capital declined sharply to about $7.7 billion by 2025. This initial increase might suggest efforts to expand or invest heavily in assets, while the subsequent decrease could indicate asset sales, write-downs, or other capital adjustments.

Economic Profit

Economic profit exhibited volatility and overall deterioration. Initially, economic profit improved from a small loss of approximately $16 million in 2020 to a gain of about $401 million in 2021. Thereafter, economic profit worsened substantially, turning negative in 2022 and then plunging further to losses exceeding $5.4 billion by 2025. This trajectory indicates that the returns on invested capital failed to cover the company’s cost of capital for several years, leading to significant value destruction.

Overall, the company experienced a notable decline in profitability starting in 2022, despite relatively stable cost of capital and significant changes in invested capital. The large negative economic profit starting in 2023 suggests inefficiency in utilizing capital and a failure to generate sufficient returns on investments. The downward trends in both NOPAT and economic profit raise concerns about operational effectiveness and capital allocation strategies during the latter years analyzed.

Net Income (Loss)

Net income demonstrated notable fluctuations over the six-year period. Initially, the company experienced an increase from $404,459 thousand in 2020 to a peak of $588,886 thousand in 2021. However, in 2022 net income declined to $418,022 thousand. Starting in 2023, the trend reversed sharply into negative territory, with losses of $1,124,700 thousand, which further deepened significantly in 2024 and 2025 to $3,744,200 thousand and $4,478,900 thousand respectively. This indicates a substantial deterioration in profitability during the latter years.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a similar pattern as net income, indicating alignment in operating performance and overall profitability. It rose from $331,110 thousand in 2020 to a high of $782,700 thousand in 2021, followed by a decline to $410,045 thousand in 2022. From 2023 onward, NOPAT turned negative and worsened substantially, reaching -$1,240,989 thousand in 2023, then declining further to -$3,779,593 thousand in 2024 and -$4,540,136 thousand in 2025. This reflects not only a reduction in operating efficiency but also an increasing operating loss burden.

Overall Trend and Insights

Both net income and NOPAT reveal a trajectory of initial growth followed by a steep decline culminating in sizeable losses in the recent years. The peak performance year was 2021, after which profitability metrics declined sharply. The progression into negative results and the magnitude of losses in the last three years suggest significant challenges impacting earnings and operating outcomes. The consistent pattern between net income and NOPAT changes indicates that these losses are driven by core operational issues rather than solely one-off or non-operating items. This financial trajectory may warrant further detailed investigation into the underlying causes and the sustainability of the company’s operations.

Provision for (benefit from) income taxes

The provision for income taxes shows notable volatility over the periods analyzed. Initially, the provision increased from 53,980 thousand USD in 2020 to a peak of 88,930 thousand USD in 2021, followed by a significant decrease to 47,376 thousand USD in 2022. A marked shift occurs in 2023, with a sizable negative provision of -213,400 thousand USD, indicating a benefit rather than a charge. This is followed by a reversal back to a positive provision, 41,400 thousand USD in 2024, and a slight reduction to -12,400 thousand USD in 2025, suggesting fluctuations in taxable income or tax strategies impacting the provision.

Cash operating taxes

Cash operating taxes exhibited an increasing trend up to 2021, growing from 32,663 thousand USD in 2020 to 51,128 thousand USD in 2021. Subsequently, a decrease is observed in 2022 to 37,943 thousand USD. However, a substantial surge occurs in 2023, with cash taxes rising to 195,321 thousand USD, sustaining elevated levels in the following years with 163,663 thousand USD in 2024 and 145,564 thousand USD in 2025. This pattern suggests increased cash tax payments possibly driven by growing taxable income or changes in tax regulations or payments timing.

Total reported debt & leases

The total reported debt and leases exhibit a significant upward trend over the analyzed periods. Starting at approximately 177 million USD in 2020, this figure increased gradually to about 250 million USD by 2022. Thereafter, a pronounced surge is observed, with the amount rising sharply to around 3.49 billion USD in 2023 and continuing to escalate to over 4.1 billion USD by 2025. This dramatic increase indicates a substantial expansion in the company's leverage and long-term commitments during the latter years.

Stockholders’ equity

Stockholders' equity shows a rising trend from 2020 through 2023, increasing from approximately 2.54 billion USD to a peak of about 9.04 billion USD. However, this peak is followed by a marked decline in the subsequent years, with equity falling to roughly 5.67 billion USD in 2024 and further decreasing to approximately 2.14 billion USD by 2025. This volatility suggests significant fluctuations in retained earnings, asset revaluations, or capital changes occurring within this period.

Invested capital

Invested capital demonstrates growth from 2020 to 2023, rising from near 2.83 billion USD to a high of about 14.06 billion USD. After this peak, invested capital decreases notably to around 7.7 billion USD by 2025. The substantial rise and subsequent decline reflect notable changes in the company's total capital employed in operations, likely influenced by the patterns observed in both debt levels and equity.

Economic Profit

The economic profit shows significant volatility over the analyzed period. Initially, there was a negative economic profit of approximately -16 million US dollars in 2020. This metric improved dramatically in 2021, reaching a positive peak of 401 million US dollars. However, this positive performance was not sustained, as economic profit turned negative again starting from 2022, with losses deepening considerably in the subsequent years, reaching nearly -5.4 million US dollars by 2025. This decline indicates increasing challenges in generating returns above the cost of capital.

Invested Capital

Invested capital exhibited a fluctuating but overall rising trend until 2023, increasing from about 2.8 billion US dollars in 2020 to a peak of approximately 14.1 billion US dollars in 2023. Following this peak, there is a notable decrease in invested capital in the last two years, declining to 7.7 billion US dollars by 2025. The substantial growth followed by contraction in invested capital suggests periods of aggressive investment followed by asset divestiture or impairment.

Economic Spread Ratio

The economic spread ratio mirrors the trend in economic profit, showing negative returns in most periods. It started at -0.57% in 2020, sharply improved to 12.93% in 2021, indicating value creation. However, it turned negative again from 2022 onward, with a steep decline to -70.55% by 2025. This deterioration highlights an increasing gap between the return on invested capital and the cost of capital, signaling a deteriorating profitability position over time.

Overall Revenue Trend

The adjusted net revenue demonstrates a general upward trend over the observed periods. It increased significantly from approximately 3.03 billion USD in the first period to a peak of about 5.53 billion USD by the period ending March 31, 2023. Although a slight decline is observed in the following year to around 5.34 billion USD, the revenue subsequently recovers to approximately 5.64 billion USD in the final period.

Economic Profit Dynamics

The economic profit exhibits considerable volatility across the years. Initially, a negative economic profit of about 16 million USD is recorded, followed by a notable improvement to a positive figure exceeding 400 million USD in the next period. However, this positive performance is not sustained, as the economic profit sharply declines, turning negative again and progressively worsening in the subsequent years, reaching a deficit exceeding 5.4 billion USD by the last period.

Profitability Margins

Economic profit margin percentages align closely with the trend in economic profit, reflecting significant fluctuations. The margin starts slightly negative, moves to a strong positive 11.36% in the second period, indicating healthy profitability. Afterward, it reverses dramatically to negative territory and deepens substantially, indicating deteriorating profitability. By the final periods, the margins are severely negative, nearing -96%, which signals substantial financial inefficiencies or losses relative to revenue.

Summary of Financial Performance

Despite revenue growth, the company faced increasing challenges in converting sales into economic profit after an initial successful period. The pronounced decline in economic profit and margin from the third period onward suggests rising costs, operational inefficiencies, or other financial burdens outweighing revenue gains. This trend raises concerns about sustainability and highlights the need for strategic review to reverse profitability declines.