Embracer Group’s Bold Transformation Sets the Stage for Future Value Creation

Embracer CEO Lars Wingefors mentions the sector is showing “promising” signs following a harsh restructuring initiative that resulted in the company conducting widespread layoffs, shutting down multiple studios, and eliminating a significant number of projects before dividing into three distinct companies.

As highlighted in the company’s financial report for the quarter concluding December 31, 2024, net sales dipped by 3 percent year-over-year to SEK 7.4 billion ($683.2 million).

This was primarily due to a 23 percent decline in net sales across the PC/Console Games segment, following Embracer’s divestment of significant subsidiaries Saber Interactive and Gearbox Entertainment–both of which are still included in comparative metrics.

Despite these individual declines, Embracer reported organic growth of 7 percent in Q3 due to “several successful releases,” such as Kingdom Come: Deliverance 2 (developed by in-house studio Warhorse).

The Swedish conglomerate indicated that the sequel is nearing 2 million in sales and displayed an “exceptionally robust performance” on Steam, with over 250,000 peak concurrent players.

It noted that the title has “significantly exceeded” expectations and anticipates it will continue to generate substantial revenues for years to come. Embracer believes its PC/Console Games segment demonstrates resilience despite “limited new releases.”

“In the PC/Console Games segment, organic growth stood at -1 percent due to limited new releases during the quarter, as well as in previous quarters. Adjusted EBIT grew by 17 percent year-over-year in Q3,” the financial report states.

“The Adjusted EBIT margin improved to 21 percent, fueled by solid performance across most key businesses. The quarterly results were bolstered by lucrative external development projects, several subscription agreements, primarily related to the Goat Simulator franchise and Dead Island 2, along with strong holiday catalog performance for many of our games.”

Embracer asserts its project lineup is ‘one of the most effectively invested in the industry’

Embracer conveyed optimism in its Mobile Games segment, expecting it will enter “growth mode” during the upcoming fiscal year, implying improved user acquisition rates and a positive ROI.

“In the Mobile Games segment, organic growth surged to 3 percent year-over-year from -7 percent in the prior quarter. The Adjusted EBIT margin was noticeably lower year-over-year at approximately 24 percent, influenced by increased user acquisition costs and difficult comparisons from last year’s record-high profitability,” the report continues.

“DECA Games, which includes CrazyLabs, returned to a substantial single-digit organic growth, while divested mobile assets experienced slightly negative growth. CrazyLabs reported improved performance after acquiring the publishing rights for Bus Frenzy–Traffic Jam, which has scaled to become another successful hybrid casual game alongside Alien Invasion.”

Looking forward, Embracer currently has 10 triple-A titles in development for console and PC platforms, two of which are slated to release by the end of the next fiscal year. However, it does not anticipate launching any “significant” PC/Console projects during Q1 FY25/26.

The firm also believes it has an “exciting” slate of mid-sized releases in progress, including projects such as Gothic 1 Remake, Reanimal, Fellowship, Deep Rock Galactic: Rogue Core, Titan Quest II, and more.

These projects are being developed by 7,873 personnel across 75 internal studios. This represents a significant reduction from the headcount reported in Q3 of last year, when Embracer indicated it had 12,695 employees.

“We are enthusiastic about our future and our current game pipeline, which we consider is one of the most effectively invested in the industry. We presently have over 5,000 game developers engaged on our upcoming game lineup,” the report concludes, reflecting on Embracer’s future opportunities.

“Looking ahead to the upcoming three fiscal years, FY 2025/26, FY 2026/27, and FY 2027/28, we currently have 10 AAA games in development, of which eight are from internal studios and two from external studios. This number excludes releases within the current quarter or any projects funded by third parties. However, we want to emphasize that there may be flexibility to allow more time for development if deemed necessary to optimize both quality and overall ROI, as we did for both Dead Island 2 and Kingdom Come: Deliverance II.”

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