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

The analysis of the financial metrics reveals significant fluctuations and trends over the observed periods. Key financial indicators show substantial changes that warrant careful consideration regarding the company's profitability and capital efficiency.

Net Operating Profit After Taxes (NOPAT)

There was a notable increase in NOPAT from 2020 to 2021, reaching a peak of approximately $783 million in 2021. However, from 2022 onwards, NOPAT experienced a steep decline, turning negative in 2023 and continuing to decline through 2025, reaching approximately -$4.54 billion. This downward trajectory indicates deteriorating operational performance and profitability in recent years.

Cost of Capital

The cost of capital remained relatively stable over the period, fluctuating mildly between 11.11% and 12.23%. This suggests that the company’s capital expense remained consistent, without significant volatility affecting financing costs.

Invested Capital

Invested capital showed a strong upward trend initially, increasing from roughly $2.83 billion in 2020 to a peak of about $14.06 billion in 2023. However, following this peak, invested capital decreased significantly in 2024 and 2025 to around $7.7 billion. This pattern suggests substantial investment buildup followed by a notable disinvestment or asset reduction in the later years.

Economic Profit

Economic profit improved considerably in 2021 to approximately $403 million but returned to negative territory in 2022 and worsened sharply thereafter. By 2023 through 2025, economic profit showed large negative values, reaching near -$5.4 billion by 2025. This decline reflects that the company's returns failed to cover its cost of capital, indicating value destruction for shareholders during this period.

In summary, the company exhibited strong operational profitability and positive economic profit in 2021, supported by steady invested capital growth. Nevertheless, the subsequent years saw a marked deterioration in profitability and economic value, alongside a reduction in invested capital. The sustained negative economic profit and NOPAT indicate challenges in generating returns above the cost of capital, necessitating strategic reassessment to improve financial performance and shareholder value creation.

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 demonstrates significant volatility over the examined periods. Initially, it reflects a negative value, indicating a loss of approximately 13.9 million US dollars in the year ending March 31, 2020. This is followed by a notable positive spike to around 403 million US dollars in the subsequent year. However, a sharp reversal occurs thereafter, with economic profit plummeting into increasing negative territory, reaching approximately -2.8 billion, -5.0 billion, and -5.4 billion US dollars in the succeeding years. This trend suggests a progressively deteriorating ability to generate returns above the cost of capital after the 2021 peak.

Invested Capital

Invested capital exhibits a strong upward trend until the year ending March 31, 2023, increasing from approximately 2.8 billion to 14.1 billion US dollars, thus more than quadrupling within four years. However, after peaking in 2023, invested capital decreases markedly to approximately 10.7 billion and then further down to 7.7 billion in the subsequent two years. This dynamic indicates substantial investment activity followed by partial divestiture or asset reduction in recent periods.

Economic Spread Ratio

The economic spread ratio aligns closely with the pattern of economic profit. The ratio, initially negative at -0.49%, peaks at a considerably positive 13.01% in 2021, signaling effective value creation during that year. Subsequently, the ratio sharply declines into negative territory, dropping to -2.34% and then to increasingly large negative values of -19.93%, -46.47%, and -70.48%. This trend underscores an escalating inefficiency in earning returns relative to the cost of capital, especially in the later years, indicating significant challenges in generating economic value despite substantial invested capital.

Adjusted Net Revenue

There is a general upward trend in adjusted net revenue over the observed periods. Starting at approximately 3.03 billion US dollars in 2020, it increased to about 5.64 billion US dollars by 2025. Despite a slight decrease in 2022 compared to 2021, the revenue shows significant growth towards the later years, particularly between 2022 and 2023 where it rises from 3.48 billion to 5.53 billion US dollars. This indicates the company’s ability to increase its revenue base substantially over the examined timespan.

Economic Profit

The economic profit demonstrates a fluctuating yet deeply negative trend from 2022 onwards. Initially negative in 2020 at approximately -14 million US dollars, it rises sharply in 2021 to a positive 403 million US dollars. However, from 2022 onwards, economic profit declines sharply into negative territory and deteriorates markedly through subsequent years, reaching about -5.43 billion US dollars by 2025. This suggests increasing costs or capital charges exceeding the operating profit, indicating operational inefficiencies or considerable investments impacting profitability.

Economic Profit Margin

The economic profit margin mirrors the pattern observed in economic profit, moving from negative figures (-0.46%) in 2020 to a positive peak (11.42%) in 2021, then declining substantially in the following years. By 2023, this margin plummets to -50.7%, deepening further to -96.23% by 2025. These negative margins indicate that the company's economic profit is not only decreasing but doing so at an accelerating rate relative to revenue, which may suggest rising expenses, decreased operational efficiency, or increased cost of capital outpacing any growth in net revenue.