GameStop (GME), the video game retailer that became famous during the 2021 meme-stock craze, is making headlines again. This time it's thanks to its strong earnings report, a trend of insider stock purchases, and a more confident outlook for the rest of the year.
A Surprisingly Strong Quarter
On September 8, GameStop released its second-quarter results for fiscal 2026, and the numbers told both a bull and bear story. On one hand, sales kept shrinking. Revenue came in at $790.2 million, down 19% from $972.2 million a year earlier.
The company blamed the drop on planned store closures, the sale of its business in France, and the fact that last year's quarter had gotten a boost from the launch of the Nintendo Switch 2.
On the other hand, profits jumped. Net income came in at $298.7 million, up from about $168.6 million a year ago. Operating income climbed to $160.2 million, the highest ever recorded by GameStop in a second quarter. Adjusted EBITDA, a measure of profitability, more than doubled to $174 million from $75.7 million.
A big part of that profit boost came from GameStop's large investment in eBay (EBAY). The company holds about 43.4 million eBay shares, worth close to $4.9 billion. Gains tied to that stake, including an unrealized gain on the shares themselves and a gain on a related derivative position, added significantly to the bottom line.
It's worth noting that these gains were mostly excluded when GameStop calculated its "adjusted" earnings figures, since they come from investments rather than day-to-day business.
Collectibles Are Now the Star of the Show
Perhaps the most interesting shift in GameStop's business is happening in its collectibles category, which includes things like trading cards, toys, and other pop-culture merchandise. Sales in this category jumped 57% year-over-year to $356.3 million.
Collectibles now make up 45.1% of GameStop's total revenue, up from just 23.4% a year ago. That means collectibles have overtaken traditional video game sales as the company's single biggest source of revenue, a major change for a business that used to be defined almost entirely by game and console sales.
Meanwhile, traditional video game sales fell to $263.2 million from $494.6 million, and sales of pre-owned and refurbished products also declined. The shift shows GameStop is leaning harder into a different kind of retail business than the one that made it famous.
Management Raises Its Outlook
Encouraged by the quarter's results, GameStop raised its full-year guidance for adjusted EBITDA. The company now expects to earn over $650 million for the year, up from its earlier forecast of more than $600 million, which had itself only been set back in June.
Raising guidance twice in a few months is a signal that management feels confident about where the business is heading.
Meanwhile, insider activity is on the rise. On the same day the results came out, GameStop director Lawrence Cheng bought 55,000 shares worth about $1.03 million. Shortly after, another director, James Grube, purchased 10,255 shares worth $196,000.
Then, on September 10, CEO Ryan Cohen made an even bigger move, buying one million shares on the open market for about $20.4 million, Barron's reported. Director Alain Attal also picked up 5,000 shares that same day.
When company insiders, especially the CEO, spend millions of their own money buying shares, it's often seen as a vote of confidence. GameStop's stock rose 4% in pre-market trading following news of Cohen's purchase.
What All This Means
GameStop has also been working to strengthen its financial position. In early September, the company said it had completed exchanges that retired about $1.4 billion in convertible notes, cutting its long-term debt down to $2.8 billion.
The company still holds a substantial cash cushion, with about $5.4 billion in cash, cash equivalents, marketable securities, and related assets as of early August.
GameStop's story right now is a mix of decline and reinvention. Its old business, selling new and used video games, keeps shrinking. But its collectibles business is growing fast, its balance sheet is getting stronger, and its investment in eBay has become a major source of profit.
Patient investors who track earnings, insider activity, among others, will likely find that this remains the best trading strategy for navigating a stock as volatile as GameStop.
Comments
Log in or sign up to join the conversation.