Notes to Condensed Consolidated Financial Statements (Unaudited)
(in millions, except per share amounts)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Take-Two Interactive Software, Inc. (the "Company," "we," "us," or similar pronouns) was incorporated in the state of Delaware in 1993. We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, and Zynga. Our products are designed for console gaming systems, mobile, including smartphones and tablets, and PC. We deliver our products through physical retail, digital download, online platforms, and cloud streaming services.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements are unaudited and include the accounts of the Company and its wholly-owned subsidiaries and, in our opinion, reflect all normal and recurring adjustments necessary for the fair presentation of our financial position, results of operations, and cash flows. Interim results may not be indicative of the results that may be expected for the full fiscal year. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of these Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in these Condensed Consolidated Financial Statements and accompanying notes. As permitted under U.S. GAAP, interim accounting for certain expenses, including income taxes, is based on full year assumptions when appropriate. Actual results could differ materially from those estimates, which may affect economic conditions in a number of different ways and result in uncertainty and risk.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), although we believe that the disclosures are adequate to make the information presented not misleading. These Condensed Consolidated Financial Statements and accompanying notes should be read in conjunction with our annual Consolidated Financial Statements and the notes thereto, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025. Certain immaterial reclassifications have been made to prior period amounts to conform to the current period presentation.
Recently Issued Accounting Pronouncements
Government Grants
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The ASU establishes the accounting and presentation for government grants received by a business entity. ASU 2025-10 is effective for fiscal years beginning after December 15, 2028 (April 1, 2029 for the Company) and interim periods within fiscal years beginning after December 15, 2029 (April 1, 2030 for the Company). We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements and related disclosures.
Internal-Use Software
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU amends the existing standard to remove all references to prescriptive and sequential software development project stages. Under this guidance, eligible software development costs will begin capitalization when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. In evaluating whether it is probable the project will be completed, management is required to consider whether there is significant uncertainty associated with the development activities of the software.
ASU 2025-06 is effective for fiscal years beginning after December 15, 2027 (April 1, 2028 for the Company) and interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual reporting period. Entities may adopt the guidance using a prospective, retrospective, or modified retrospective approach. We are currently
evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements and related disclosures, including the appropriate transition method.
Expense Disaggregation Disclosures
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional, disaggregated disclosure about certain income statement expense line items. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 (April 1, 2027 for the Company) and interim periods within fiscal years beginning after December 15, 2027 (April 1, 2028 for the Company). We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements and related disclosures.
Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (April 1, 2025 for the Company). The amendments in this ASU are required to be applied on a prospective basis and retrospective adoption is permitted. ASU 2023-09 only affects financial statement disclosures, which are not required until year-end for fiscal 2026, and does not affect our Consolidated Financial Statements.
2. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
Timing of recognition
Net revenue recognized at a point in time is primarily comprised of the portion of revenue from software products that is recognized when the customer takes control of the product (i.e. upon delivery of the software product).
Net revenue recognized over time is primarily comprised of revenue from our software products that include game related services, separate virtual currency transactions, and in-game purchases, which are recognized over an estimated service period. Net revenue recognized over time also includes in-game advertising, which is recognized over a contractual term.
Net revenue by timing of recognition was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | 2025 | | 2024 | | 2025 | | 2024 |
| Net revenue recognized: | | | | | | | | |
| Over time | | $ | 1,376.3 | | | $ | 1,111.9 | | | $ | 3,902.5 | | | $ | 3,325.8 | |
| Point in time | | 322.7 | | | 247.9 | | | 1,074.1 | | | 725.3 | |
| Total net revenue | | $ | 1,699.0 | | | $ | 1,359.8 | | | $ | 4,976.6 | | | $ | 4,051.1 | |
Content
Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising.
Full game and other revenue primarily includes the initial sale of full game software products, which may include offline and/or significant game related services.
Net revenue by content was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | 2025 | | 2024 | | 2025 | | 2024 |
| Net revenue recognized: | | | | | | | | |
| Recurrent consumer spending | | $ | 1,304.0 | | | $ | 1,087.5 | | | $ | 3,836.0 | | | $ | 3,264.2 | |
| Full game and other | | 395.0 | | | 272.3 | | | 1,140.6 | | | 786.9 | |
| Total net revenue | | $ | 1,699.0 | | | $ | 1,359.8 | | | $ | 4,976.6 | | | $ | 4,051.1 | |
Platform
Net revenue by platform was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | 2025 | | 2024 | | 2025 | | 2024 |
| Net revenue recognized: | | | | | | | | |
| Mobile | | $ | 865.8 | | | $ | 731.6 | | | $ | 2,489.1 | | | $ | 2,194.3 | |
| Console | | 652.1 | | | 507.9 | | | 1,922.7 | | | 1,507.9 | |
| PC and other | | 181.1 | | | 120.3 | | | 564.8 | | | 348.9 | |
| Total net revenue | | $ | 1,699.0 | | | $ | 1,359.8 | | | $ | 4,976.6 | | | $ | 4,051.1 | |
Distribution Channel
Our products are delivered through digital online services (digital download, online platforms, and cloud streaming) and physical retail and other. Net revenue by distribution channel was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | 2025 | | 2024 | | 2025 | | 2024 |
| Net revenue recognized: | | | | | | | | |
| Digital online | | $ | 1,654.5 | | | $ | 1,310.7 | | | $ | 4,824.2 | | | $ | 3,906.2 | |
| Physical retail and other | | 44.5 | | | 49.1 | | | 152.4 | | | 144.9 | |
| Total net revenue | | $ | 1,699.0 | | | $ | 1,359.8 | | | $ | 4,976.6 | | | $ | 4,051.1 | |
Deferred Revenue
We record deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations. The balance of deferred revenue, including current and non-current balances as of December 31, 2025 and March 31, 2025 were $1,312.8 and $1,108.9, respectively. For the nine months ended December 31, 2025, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.
During the three months ended December 31, 2025 and 2024, $153.2 and $142.1, respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period. During the nine months ended December 31, 2025 and 2024, $1,008.6 and $966.7, respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.
As of December 31, 2025, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $1,427.8, which includes our deferred revenue balances and amounts to be invoiced and recognized as revenue in future periods. We expect to recognize approximately $1,351.9 of this balance as revenue over the next 12 months, and the remainder thereafter. This balance does not include an estimate for variable consideration arising from sales-based royalty license revenue in excess of the contractual minimum guarantee.
As of December 31, 2025 and March 31, 2025, our contract asset balances were $87.3 and $80.8, respectively.
Accounts Receivable sale program
On May 19, 2025, we entered into an arrangement to sell designated pools of high credit quality accounts receivable under an uncommitted accounts receivables purchase facility in an initial aggregate amount of up to $215.0 to an unaffiliated financial institution on a true sale basis. As these accounts receivable are sold without recourse, we do not retain the associated risks of lack of payment due to insolvency of the account debtors following the transfer of such accounts receivable to such financial institution. We will continue to collect cash from our account debtors and remit to the financial institution. We will derecognize the carrying value of the financial assets transferred and recognize a net gain or loss on the sale under Interest and other, net on our Consolidated Statements of Operations. The proceeds from these arrangements will be reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows.
No receivables were sold under this facility during the nine months ended December 31, 2025. We may utilize this facility in future periods depending on cash flow needs and market conditions.
3. MANAGEMENT AGREEMENT
We have a management agreement (the "2022 Management Agreement") with ZMC Advisors, L.P. (“ZMC”), which became effective May 23, 2022 and replaced our previous management agreement. Pursuant to the 2022 Management Agreement, ZMC will continue to provide financial and management consulting services to the Company through March 31, 2029, Strauss Zelnick continues to serve as Executive Chairman and Chief Executive Officer of the Company, and Karl Slatoff continues to serve as President of the Company. The 2022 Management Agreement provides for an annual management fee of $3.3 for the term of the agreement and a maximum annual bonus opportunity of $13.2 for the term of the agreement, based on the Company achieving certain performance thresholds. In connection with the 2022 Management Agreement, we have granted and expect to grant time-based, market-based, and performance-based restricted units to ZMC.
In consideration for ZMC's services, we recorded consulting expense within General and administrative expenses on our Condensed Consolidated Statements of Operations of $5.4 and $2.5 during the three months ended December 31, 2025 and 2024, respectively, and $12.0 and $7.6 during the nine months ended December 31, 2025 and 2024, respectively. We recorded stock-based compensation expense for restricted stock units granted to ZMC, which is also included in General and administrative expenses, of $16.2 and $14.7 during the three months ended December 31, 2025 and 2024, respectively, and $47.2 and $41.8 during the nine months ended December 31, 2025 and 2024, respectively.
In connection with the 2022 Management Agreement, we granted restricted stock units (in thousands) to ZMC as follows:
| | | | | | | | | | | |
| | Nine Months Ended December 31, |
| | 2025 | | 2024 |
| Time-based | 74 | | | 102 | |
Market-based(1) | 224 | | | 311 | |
Performance-based(1) | 75 | | | 104 | |
| Total Restricted Stock Units | 373 | | | 517 | |
(1) Represents the maximum of shares eligible to vest
Time-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2026 will vest on June 1, 2026, June 1, 2027, and June 1, 2028, and those granted in fiscal year 2025, partially vested on June 1, 2025 and will also vest in part on June 1, 2026 and June 1, 2027. Time-based restricted stock units granted in fiscal year 2024, partially vested on June 1, 2024 and June 1, 2025 and will also vest in part on June 1, 2026.
Market-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2026 are eligible to vest on June 1, 2028, those granted in fiscal year 2025 are eligible to vest on June 1, 2027, and those granted in fiscal year 2024 are eligible to vest on June 1, 2026. Market-based restricted stock units are eligible to vest based on the Company's Total Shareholder Return (as defined in the relevant grant agreement) relative to the Total Shareholder Return (as defined in the relevant grant agreement) of the companies that constitute the NASDAQ 100 index under the 2022 Management Agreement (as defined in the relevant grant agreement) as of the grant date measured over a three-year period, as applicable. To earn the target number of market-based restricted stock units (which represents 50% of the number of the market-based restricted stock units set forth in the table above), the Company must perform at the 50th percentile, with the maximum number of market-based restricted stock units earned if the Company performs at the 75th percentile.
Performance-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2026 are eligible to vest on June 1, 2028, those granted in fiscal year 2025 are eligible to vest on June 1, 2027, and those granted in fiscal year 2024 are eligible to vest on June 1, 2026. The performance-based restricted stock units are tied to "RCS" (as defined in the relevant grant agreement) and are eligible to vest based on the Company's achievement of certain performance metrics (as defined in the relevant grant agreement) of "RCS" measured over a three-year period. The target number of performance-based restricted stock units that may be earned pursuant to these grants is equal to 50% of the grant amounts set forth in the above table (the numbers in the table represent the maximum number of performance-based restricted stock units that may be earned). At the end of each reporting period, we assess the probability of each performance metric and upon determination that certain thresholds are probable, we record expense for the unvested portion of the shares of performance-based restricted stock units.
The unvested portions of time-based, market-based and performance-based restricted stock units held by ZMC were 1.3 and 1.4 as of December 31, 2025 and March 31, 2025, respectively. During the nine months ended December 31, 2025, 0.5 restricted stock units previously granted to ZMC vested, and 0.0 restricted stock units were forfeited by ZMC.
4. FAIR VALUE MEASUREMENTS
Recurring fair value measurements
The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, prepaid expenses and other, accounts payable, and accrued expenses and other current liabilities, approximate fair value because of their short maturities.
We follow a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of "observable inputs" and minimize the use of "unobservable inputs." The three levels of inputs used to measure fair value are as follows:
•Level 1—Quoted prices in active markets for identical assets or liabilities.
•Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data.
•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.
The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which is measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2025 |
| | | | Quoted prices
in active
markets for
identical
assets
(level 1) | | Significant
other
observable
inputs
(level 2) | | Significant
unobservable
inputs
(level 3) | | Total |
| Assets: | | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | | |
| Money market funds | | | $ | 1,046.5 | | | $ | — | | | $ | — | | | $ | 1,046.5 | |
| Bank-time deposits | | | 538.5 | | | — | | | — | | | 538.5 | |
| Short-term investments: | | | | | | | | | |
| Bank-time deposits | | | 199.0 | | | — | | | — | | | 199.0 | |
| Restricted cash and cash equivalents: | | | | | | | | | |
| Money market funds | | | 11.9 | | | — | | | — | | | 11.9 | |
| Bank-time deposits | | | 1.3 | | | — | | | — | | | 1.3 | |
| Restricted cash and cash equivalents, long term: | | | | | | | | | |
| Money market funds | | | 78.6 | | | — | | | — | | | 78.6 | |
| | | | | | | | | |
| Other assets: | | | | | | | | | |
| Private equity | | | — | | | — | | | 24.5 | | | 24.5 | |
| Equity securities | | | 9.1 | | | — | | | — | | | 9.1 | |
| | | | | | | | | |
| Total financial assets | | | $ | 1,884.9 | | | $ | — | | | $ | 24.5 | | | $ | 1,909.4 | |
| | | | | | | | | |
| Liabilities: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Short-term debt, net: | | | | | | | | | |
| Convertible notes | | | — | | | 32.6 | | | — | | | 32.6 | |
| Total financial liabilities | | | $ | — | | | $ | 32.6 | | | $ | — | | | $ | 32.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2025 |
| | | Quoted prices in active markets for identical assets (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total |
| Assets: | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Money market funds | | $ | 842.6 | | | $ | — | | | $ | — | | | $ | 842.6 | |
| Bank-time deposits | | 296.4 | | | — | | | — | | | 296.4 | |
| Short-term investments: | | | | | | | | |
| Bank-time deposits | | 9.4 | | | — | | | — | | | 9.4 | |
| Restricted cash and cash equivalents: | | | | | | | | |
| Money market funds | | 12.0 | | | — | | | — | | | 12.0 | |
| Bank-time deposits | | 1.9 | | | — | | | — | | | 1.9 | |
| Restricted cash and cash equivalents, long term: | | | | | | | | |
| Money market funds | | 88.2 | | | — | | | — | | | 88.2 | |
| Other assets: | | | | | | | | |
| Equity securities | | 7.3 | | | — | | | — | | | 7.3 | |
| Private equity | | — | | | — | | | 24.3 | | | 24.3 | |
| Total financial assets | | $ | 1,257.8 | | | $ | — | | | $ | 24.3 | | | $ | 1,282.1 | |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| Accrued expenses and other current liabilities: | | | | | | | | |
| Foreign currency forward contracts | | $ | — | | | $ | 0.1 | | | $ | — | | | $ | 0.1 | |
| Long-term debt, net: | | | | | | | | |
| Convertible notes | | — | | | 28.5 | | | — | | | 28.5 | |
| Total financial liabilities | | $ | — | | | $ | 28.6 | | | $ | — | | | $ | 28.6 | |
We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the nine months ended December 31, 2025.
Nonrecurring fair value measurements
We hold equity investments in certain unconsolidated entities without a readily determinable fair value. These strategic investments represent less than a 20% ownership interest in each of the privately-held affiliates, and we do not maintain significant influence over or control of the entities. We have elected the practical expedient in Topic 321, Investments-Equity Securities, to measure these investments at cost less any impairment, adjusted for observable price changes, if any. Based on these considerations, we estimate that the carrying value of the acquired shares represents the fair value of the investment. At December 31, 2025, and March 31, 2025, we held $18.0 and $8.0, respectively, of such investments in Other assets within our Condensed Consolidated Balance Sheet.
5. SHORT-TERM INVESTMENTS
Our Short-term investments consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2025 |
| | | | | Gross
Unrealized | | |
| | | Cost or
Amortized Cost | | Gains | | Losses | | Fair Value |
| Short-term investments | | | | | | | | |
| Bank time deposits | | $ | 199.0 | | | $ | — | | | $ | — | | | $ | 199.0 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Total Short-term investments | | $ | 199.0 | | | $ | — | | | $ | — | | | $ | 199.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2025 |
| | | | | Gross
Unrealized | | |
| | | Cost or
Amortized Cost | | Gains | | Losses | | Fair Value |
| Short-term investments | | | | | | | | |
| Bank time deposits | | $ | 9.4 | | | $ | — | | | $ | — | | | $ | 9.4 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Total Short-term investments | | $ | 9.4 | | | $ | — | | | $ | — | | | $ | 9.4 | |
The following table summarizes the contracted maturities of our short-term investments at December 31, 2025: | | | | | | | | | | | | | | |
| | | December 31, 2025 |
| | | Amortized
Cost | | Fair
Value |
| Short-term investments | | | | |
| Due in 1 year or less | | $ | 199.0 | | | $ | 199.0 | |
| | | | |
| | | | |
| Total Short-term investments | | $ | 199.0 | | | $ | 199.0 | |
6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Our risk management strategy includes the use of derivative financial instruments to reduce the volatility associated with changes in foreign currency exchange rates on earnings, cash flows, and certain balance sheet amounts. We do not enter into derivative financial contracts for speculative or trading purposes. We recognize derivative instruments as either assets or liabilities on our Consolidated Balance Sheets, and we measure those instruments at fair value. We classify cash flows from derivative transactions as cash flows from operating activities in our Consolidated Statements of Cash Flows.
Foreign currency forward contracts
The following table shows the gross notional amounts of foreign currency forward contracts: | | | | | | | | | | | | | | |
| | December 31, 2025 | | March 31, 2025 |
| Forward contracts to sell foreign currencies | | $ | 323.7 | | | $ | 299.8 | |
| Forward contracts to purchase foreign currencies | | 116.9 | | | 97.0 | |
For the three months ended December 31, 2025 and 2024, we recorded a gain of $0.8 and a gain of $9.5, respectively, and for the nine months ended December 31, 2025 and 2024, we recorded a loss of $12.2 and a gain of $9.7, respectively, related to foreign currency forward contracts in Interest and other, net on our Condensed Consolidated Statements of Operations. Our foreign currency exchange forward contracts are not designated as hedging instruments under hedge accounting and are used to reduce the impact of foreign currency on certain balance sheet exposures. These instruments are generally short-term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates.
7. SOFTWARE DEVELOPMENT COSTS AND LICENSES
Details of our capitalized software development costs and licenses were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2025 | | March 31, 2025 |
| | | Current | | Non-current | | Current | | Non-current |
| Software development costs, internally developed | | $ | 41.1 | | | $ | 2,169.2 | | | $ | 62.9 | | | $ | 1,845.6 | |
| Software development costs, externally developed | | 0.2 | | | 44.9 | | | 0.5 | | | 39.7 | |
| Licenses | | 8.9 | | | 30.6 | | | 17.4 | | | 7.3 | |
| Software development costs and licenses | | $ | 50.2 | | | $ | 2,244.7 | | | $ | 80.8 | | | $ | 1,892.6 | |
During the three months ended December 31, 2025 and 2024, we recorded software development impairment charges of $3.3 and $1.5, respectively. The impairment charges during the three months ended December 31, 2025 were recorded within Cost of revenue and were primarily related to a decision not to proceed with further development of certain interactive entertainment software products. The impairment charges during the three months ended December 31, 2024 were recorded within Business reorganization and were primarily related to our cost reduction program in fiscal year 2025 (the "2024 Plan").
During the nine months ended December 31, 2025 and 2024, we recorded software development impairment charges of $(0.9) and $36.3, respectively. The impairment charges during nine months ended December 31, 2025 were recorded within Cost of revenue and Business reorganization, and were primarily due to (i) the recovery of previously incurred costs related to the termination of development of one of our titles in connection with the 2024 Plan and (ii) a decision not to proceed with further development of certain interactive entertainment software products. The impairment charges during the nine months ended December 31, 2024 were recorded within Cost of revenue and Business reorganization, and were primarily related to the 2024 Plan.
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following: | | | | | | | | | | | | | | |
| | | December 31, 2025 | | March 31, 2025 |
| Compensation and benefits | | $ | 348.0 | | | $ | 268.3 | |
| Software development royalties | | 263.0 | | | 419.8 | |
| Licenses | | 126.3 | | | 91.4 | |
| Marketing and promotions | | 77.1 | | | 77.0 | |
| Refund liability | | 49.2 | | | 32.8 | |
| Deferred acquisition payments | | 38.2 | | | 35.9 | |
| Interest payable | | 27.3 | | | 39.2 | |
| | | | |
| | | | |
| | | | |
| Tax payable | | 43.2 | | | 41.5 | |
| Other | | 127.9 | | | 121.7 | |
| Accrued expenses and other current liabilities | | $ | 1,100.2 | | | $ | 1,127.6 | |
9. DEBT
The components of Long-term debt, net on our Condensed Consolidated Balance Sheet were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Annual Interest Rate | | Maturity Date | | December 31, 2025 | | Fair Value (Level 2) |
| 2027 Notes | | 3.70% | | April 14, 2027 | | 600.0 | | | 598.0 | |
| 2028 Notes | | 4.95% | | March 28, 2028 | | 800.0 | | | 816.1 | |
| 2029 Notes | | 5.40% | | June 12, 2029 | | 300.0 | | | 310.9 | |
| 2032 Notes | | 4.00% | | April 14, 2032 | | 500.0 | | | 485.8 | |
| 2034 Notes | | 5.60% | | June 12, 2034 | | 300.0 | | | 313.7 | |
| Total | | | | | | $ | 2,500.0 | | | $ | 2,524.5 | |
| Unamortized discount and issuance costs | | | | | | (13.0) | | | |
| Long-term debt, net | | | | | | $ | 2,487.0 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Annual Interest Rate | | Maturity Date | | March 31, 2025 | | Fair Value (Level 2) |
| 2027 Notes | | 3.70% | | April 14, 2027 | | 600.0 | | | 590.8 | |
| 2028 Notes | | 4.95% | | March 28, 2028 | | 800.0 | | | 808.5 | |
| 2029 Notes | | 5.40% | | June 12, 2029 | | 300.0 | | | 308.3 | |
| 2032 Notes | | 4.00% | | April 14, 2032 | | 500.0 | | | 468.6 | |
| 2034 Notes | | 5.60% | | June 12, 2034 | | 300.0 | | | 308.9 | |
| 2026 Convertible Notes | | 0.00% | | December 15, 2026 | | 28.5 | | | 28.5 | |
| Total | | | | | | $ | 2,528.5 | | | $ | 2,513.6 | |
| Unamortized discount and issuance costs | | | | | | (15.9) | | | |
| Long-term debt, net | | | | | | $ | 2,512.6 | | | |
The components of Short-term debt, net on our Condensed Consolidated Balance Sheet were as follows:
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| | | Annual Interest Rate | | Maturity Date | | December 31, 2025 | | Fair Value (Level 2) |
| 2026 Notes | | 5.00% | | March 28, 2026 | | $ | 550.0 | | | $ | 551.3 | |
| 2026 Convertible Notes | | 0.00% | | December 15, 2026 | | 32.6 | | | 32.6 | |
| Total | | | | | | $ | 582.6 | | | $ | 583.9 | |
| Unamortized discount and issuance costs | | | | | | (0.4) | | | |
| Short-term debt, net | | | | | | $ | 582.2 | | | |
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| | | Annual Interest Rate | | Maturity Date | | March 31, 2025 | | Fair Value (Level 2) |
| 2025 Notes | | 3.55% | | April 14, 2025 | | $ | 600.0 | | | $ | 599.9 | |
| 2026 Notes | | 5.00% | | March 28, 2026 | | 550.0 | | | 552.7 | |
| Total | | | | | | $ | 1,150.0 | | | $ | 1,152.6 | |
| Unamortized discount and issuance costs | | | | | | (1.5) | | | |
| Short-term debt, net | | | | | | $ | 1,148.5 | | | |
The interest expense as it relates to our debt is recorded within Interest and other, net in our Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2025 and 2024, respectively, and was as follows:
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| | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | 2025 | | 2024 | | 2025 | | 2024 |
| 2025 Notes | | — | | | 5.3 | | | 0.8 | | | 16.0 | |
| 2026 Notes | | 6.9 | | | 6.9 | | | 20.6 | | | 20.6 | |
| 2027 Notes | | 5.6 | | | 5.6 | | | 16.7 | | | 16.7 | |
| 2028 Notes | | 9.9 | | | 9.9 | | | 29.7 | | | 29.7 | |
| 2029 Notes | | 4.1 | | | 4.1 | | | 12.2 | | | 8.9 | |
| 2032 Notes | | 5.0 | | | 5.0 | | | 15.0 | | | 15.0 | |
| 2034 Notes | | 4.2 | | | 4.2 | | | 12.6 | | | 9.2 | |
| Total | | $ | 35.7 | | | $ | 41.0 | | | $ | 107.6 | | | $ | 116.1 | |
The following table outlines the aggregate amount of maturities of our borrowings, as of December 31, 2025:
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| Fiscal Year Ending March 31, | | Maturities |
| 2026 (remaining) | | $ | 550.0 | |
| 2027 | | 29.4 | |
| 2028 | | 1,400.0 | |
| 2029 | | — | |
| 2030 | | 300.0 | |
| Thereafter | | 800.0 | |
| Total | | 3,079.4 | |
| Fair value adjustments | | 3.2 | |
| Total face value | | $ | 3,082.6 | |
Senior Notes
On June 12, 2024, we completed our offering and sale of $600.0 aggregate principal amount of our senior notes, consisting of $300.0 principal amount of our 5.400% Senior Notes due 2029 (the "2029 Notes") and $300.0 principal amount of our 5.600% Senior Notes due 2034 (the "2034 Notes"). The 2029 Notes and 2034 Notes (the "New Notes") were issued as additional notes under the existing Indenture. Debt issuance costs of $5.4 and original issuance discount of $1.1 were incurred in connection with the 2029 Notes and 2034 Notes. These debt issuance costs and original issuance discount are included as a reduction of the debt within Long-term debt, net on our Condensed Consolidated Balance Sheet and will be amortized into Interest and other, net in our Condensed Consolidated Statements of Operations over the contractual term of the New Notes.
On April 14, 2023, we completed our offering and sale of $1,000.0 aggregate principal amount of our senior notes, consisting of $500.0 principal amount of our 5.000% Senior Notes due 2026 (the "2026 Notes") and $500.0 principal amount of our 4.950% Senior Notes due 2028 (the "2028 Notes"). On January 8, 2024, we completed our add-on offering and sale of $350.0 aggregate principal amount of our senior notes, consisting of $50.0 principal amount of additional 2026 Notes and $300.0 principal amount of additional 2028 Notes (the "Add-On Offering Notes").
On April 14, 2022, we completed our offering and sale of $2,700.0 aggregate principal amount of our senior notes, consisting of $1,000.0 principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600.0 principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600.0 principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”), and $500.0 principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and together with the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2028 Notes, 2029 Notes, and 2034 Notes, the "Senior Notes").
The Senior Notes were issued under an indenture, dated as of April 14, 2022 (the “Base Indenture”), between the Company and The Bank of New York Mellon, as trustee (the “Trustee”) and (i) a first supplemental indenture, with respect to the 2024 Notes, (ii) a second supplemental indenture, with respect to the 2025 Notes, (iii) a third supplemental indenture, with respect to the 2027 Notes, (iv) a fourth supplemental indenture, with respect to the 2032 Notes, (v) a fifth supplemental indenture, with respect to the 2026 Notes, (vi) a sixth supplemental indenture, with respect to the 2028 Notes, (vii) a seventh supplemental indenture, with respect to the 2029 Notes, and (viii) an eighth supplemental indenture, with respect to the 2034 Notes (collectively, the “Supplemental Indentures” and together with the Base Indenture, the “Indenture”), between the Company and the Trustee.
The proceeds from the issuances of the Senior Notes in April 2022 were used to finance a portion of our acquisition of Zynga, and the proceeds from the subsequent issuance of Senior Notes were used, or are expected to be used, to repay certain of our debt or for general corporate purposes.
The Senior Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations. We will pay interest on the 2026 Notes and 2028 Notes semi-annually on March 28 and September 28 of each year, commencing September 28, 2023. We will pay interest on each of the 2025 Notes, 2027 Notes, and 2032 Notes semi-annually on April 14 and October 14 of each year, commencing October 14, 2022. We will pay interest on each of the 2029 Notes and 2034 Notes semi-annually on June 12 and December 12 of each year, commencing on December 12, 2024. During the nine months ended December 31, 2025, we made interest payments of $119.4.
The Senior Notes are not entitled to any sinking fund payments. We may redeem each series of the Senior Notes at any time in whole or from time to time in part at the applicable redemption prices set forth in each Supplemental Indenture. Upon the occurrence of a Change of Control Repurchase Event (as defined in each of the Supplemental Indentures) with respect to a series of the Senior Notes, each holder of the Senior Notes of such series will have the right to require the Company to purchase that holder’s Notes of such series at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase, unless the Company has exercised its option to redeem all the Senior Notes.
In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company, all outstanding Senior Notes will become due and payable immediately. If any other event of default specified in the Indenture occurs and is continuing with respect to any series of the Senior Notes, the Trustee or the holders of at least 25% in aggregate principal amount of that series of the outstanding Notes may declare the principal of such series of Senior Notes immediately due and payable.
The Indenture contains certain limitations on the ability of the Company and its subsidiaries to grant liens without equally securing the Senior Notes, or to enter into certain sale and lease-back transactions. These covenants are subject to a number of important exceptions and limitations, as further provided in the Indenture.
During the three months ended December 31, 2025 and 2024, we recognized $1.2 and $1.5, respectively, of amortization of debt issuance costs and $0.1 and $0.1, respectively, of amortization of the original issuance discount. During the nine months ended December 31, 2025 and 2024, we recognized $3.7 and $4.5, respectively, of amortization of debt issuance costs and $0.4 and $0.4, respectively, of amortization of the original issuance discount.
Retirement of Senior Notes
On April 14, 2025, we repaid our 2025 Notes with a principal amount of $600.0, with proceeds from the New Notes.
Credit Agreement
On May 19, 2025, we entered into an Amendment No. 3 (the "Amendment") to our credit agreement, dated as of May 23, 2022, (as amended, the "2022 Credit Agreement"), which increased the commitments to the unsecured five-year revolving credit facility (the “Revolving Credit Facility”) from $750.0 to $1,000.0, with sublimits for borrowings and letters of credit denominated in Pounds Sterling, Euros and Canadian Dollars in an aggregate face amount of up to $200.0. The 2022 Credit Agreement will continue to provide uncommitted incremental capacity permitting the incurrence of up to an additional amount not to exceed the greater of $250.0 and 35.0% of the Company's Consolidated Adjusted EBITDA (as defined in the 2022 Credit Agreement).
Under the Amendment, the maturity date was extended to May 19, 2030 but retains the extension option permitting us, subject to certain requirements, to arrange to extend the Revolving Credit Facility for an additional one-year term which may be exercised no more than two times under the 2022 Credit Agreement.
Loans under the 2022 Credit Agreement will bear interest at a rate of (a) 0.000% to 0.625% above an alternate base rate (6.75% at December 31, 2025) or (b) 1.000% to 1.625% above Secured Overnight Financing Rate ("SOFR"), approximately 3.69% at December 31, 2025, which rates are determined by the Company's credit rating.
The 2022 Credit Agreement also includes, among other terms and conditions, a maximum leverage ratio covenant, as well as customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur subsidiary indebtedness, grant liens, and dispose of all or substantially all assets, in each case subject to certain exceptions and baskets. In addition, the 2022 Credit Agreement provides for events of default customary for a credit facility of this size and type, including, among others, non-payment of principal and interest when due thereunder, breaches of representations and warranties, noncompliance with covenants, acts of insolvency, cross-defaults to material indebtedness, and material judgment defaults (subject to certain limitations and cure periods).
Upon execution of the 2022 Credit Agreement, we incurred $4.9 of debt issuance costs that were capitalized within Other assets on our Consolidated Balance Sheet and will be amortized on a straight-line basis over the term of the 2022 Credit Agreement, with the expense recorded within Interest and other, net in our Consolidated Statements of Operations. During the three months ended December 31, 2025 and 2024, we amortized $0.2 and $0.2, respectively of these debt issuance costs and during the nine months ended December 31, 2025 and 2024, we amortized $0.5 and $0.5, respectively, of these debt issuance costs.
As of December 31, 2025, there were no borrowings under the 2022 Credit Agreement, and we had approximately $997.8 available for additional borrowings.
Information related to availability on our 2022 Credit Agreement for each period was as follows:
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| | December 31, 2025 | | March 31, 2025 |
| Available borrowings | | $ | 997.8 | | | $ | 747.8 | |
| Outstanding letters of credit | | 2.2 | | | 2.2 | |
Convertible Notes
In conjunction with the acquisition of Zynga on May 23, 2022, we entered into (a) the First Supplemental Indenture (the “2024 Supplemental Indenture”) to the Indenture, dated as of June 14, 2019 (the “2024 Indenture”), between Zynga and Computershare Trust Company, N.A. (as successor to Wells Fargo Bank, National Association) (the “Convertible Notes Trustee”), relating to Zynga’s 0.25% Convertible Senior Notes due 2024 (the “2024 Convertible Notes”), and (b) the First Supplemental Indenture (the “2026 Supplemental Indenture” and, together with the 2024 Supplemental Indenture, the “Supplemental Indentures”) to the Indenture, dated as of December 17, 2020 (the “2026 Indenture” and, together with the 2024 Indenture, the “Indentures”), between Zynga and the Convertible Notes Trustee, relating to Zynga’s 0.00% Convertible Senior Notes due 2026 (the “2026 Convertible Notes” and, together with the 2024 Convertible Notes, the “Convertible Notes”). As of the closing date of the acquisition, approximately $690.0 aggregate principal amount of the 2024 Convertible Notes was outstanding and approximately $874.5 aggregate principal amount of the 2026 Convertible Notes was outstanding.
Following the acquisition and according to the Supplemental Indentures, we assumed all of Zynga’s rights and obligations under the Indentures, and the Company guaranteed the payment and other obligations of Zynga under the Convertible Notes. As a result of our acquisition of Zynga, the right to convert each one thousand dollar principal amount of such Convertible Notes into shares of Zynga common stock was changed into a right to convert such principal amount of such Convertible Notes into the number of units of Reference Property equal to the conversion rate in effect immediately prior to the closing, in each case pursuant to the terms and procedures set forth in the applicable Indenture. A unit of Reference Property is defined in each Indenture as 0.0406 shares of Take-Two common stock and $3.50 in cash, without interest, plus cash in lieu of any fractional shares of Take-Two common stock.
The acquisition of Zynga constituted a Fundamental Change, a Make-Whole Fundamental Change, and a Share Exchange Event (each as defined in the Indentures) under the Indentures. The effective date of the Fundamental Change, Make-Whole Fundamental Change and Share Exchange Event in respect of the Convertible Notes was May 23, 2022, and the related tender and conversion periods expired on June 22, 2022. As a result, each holder of Convertible Notes had the right to tender its Convertible Notes to the Company for cash or surrender its Convertible Notes for conversion into the Reference Property at the applicable conversion rate, in each case pursuant to the terms and procedures set forth in the applicable Indenture.
As of the expiration of the Fundamental Change, Make-Whole Fundamental Change, and Share Exchange Event, (a) $0.3 aggregate principal amount of the 2024 Convertible Notes and (b) $845.1 aggregate principal amount of the 2026 Convertible Notes were tendered for cash. In addition, (a) $668.3 aggregate principal amount of the 2024 Convertible Notes, and (b) no 2026 Convertible Notes were surrendered for conversion into the applicable Reference Property. In total, we paid $321.6 for the tendered or converted 2024 Convertible Notes, including interest, and $845.1 for the tendered 2026 Convertible Notes in cash, and we issued 3.7 shares of our common stock upon the conversion of the 2024 Convertible Notes. After settlement of all Convertible Notes tendered or surrendered for conversion, and after giving effect to the maturity of the 2024 Convertible Notes described below, no 2024 Convertible Notes remained outstanding and $29.4 aggregate principal amount of the 2026 Convertible Notes remained outstanding at December 31, 2025.
The 2026 Convertible Notes constitute senior unsecured indebtedness of Zynga, ranking pari passu with all of our other existing and future senior unsecured unsubordinated obligations of Zynga. As a result, the 2026 Convertible Notes are structurally senior to the indebtedness of the Company as to Zynga, its subsidiaries, and their respective assets. As noted above, the Company also guaranteed the payment and other obligations of Zynga under the Convertible Notes. The Company's guarantees of the 2026 Convertible Notes are the Company's senior unsecured obligations and rank equally with all of the Company's other existing and future senior unsecured unsubordinated obligations.
Under the terms of the applicable Indentures, prior to the close of business on the business day immediately preceding September 15, 2026 with respect to the 2026 Convertible Notes, the Convertible Notes will be convertible only under the following circumstances:
• during any calendar quarter, if the value of a unit of Reference Property (based on the last reported sales price of our common stock), for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the applicable series of the 2026 Convertible Notes, on each applicable trading day;
• during the five business-day period after any five consecutive trading-day period in which the trading price per one thousand dollar principal amount of each applicable series of the 2026 Convertible Notes for such trading day was less than 98% of the product of the value of a unit of Reference Property (based on the last reported sale price of our common stock) and the conversion rate of the applicable series of the 2026 Convertible Notes, on each such trading day;
• if we call the 2026 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the respective redemption date; or
• upon the occurrence of specified corporate events described in the respective Indentures.
Upon any conversion, holders will receive either cash or a combination of cash and shares of Take-Two common stock, at our election. As of December 31, 2025, the conditions allowing holders of the 2026 Convertible Notes to convert their series of the Convertible Notes have not been met, and, therefore, they are not yet convertible.
We have elected to account for these Convertible Notes, which are considered derivatives, using the fair value option (Level 2) under ASC 825, as the Convertible Notes were initially recognized at fair value under the acquisition method of accounting in connection with the Zynga Acquisition and we do not expect significant fluctuations in fair value through maturity. We initially recorded $778.6 as the acquisition date fair value for the 2024 Convertible Notes and $874.5 for the 2026 Convertible Notes. The fair value was determined as the expected cash payment and value of shares to be issued to settle the Convertible Notes.
The 2024 Convertible Notes matured on June 1, 2024. During the nine months ended December 31, 2024, we paid $8.3 for converted 2024 Convertible Notes, including interest, and we issued 0.1 shares of our common stock upon conversion of the 2024 Convertible Notes.
The 2026 Convertible Notes mature on December 15, 2026, unless earlier converted, redeemed, or repurchased in accordance with their terms, prior to the maturity date. The 2026 Convertible Notes do not bear regular interest, and the principal amount does not accrete. An aggregate principal amount of $29.4 of the 2026 Convertible Notes remained outstanding at December 31, 2025. We recorded $32.6 as the fair value of the remaining outstanding 2026 Convertible Notes, within Short-term debt, net, in our Condensed Consolidated Balance Sheet as of December 31, 2025. During the three months ended December 31, 2025 and 2024, we recognized a loss of 1.2 and a loss of 1.1, respectively and during the nine months ended December 31, 2025 and 2024, we recognized a loss of $4.0 and loss of $0.8, respectively, within Interest and other, net in our Condensed Consolidated Statements of Operations.
10. LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per share: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | | 2025 | | 2024 | | 2025 | | 2024 |
| Computation of Basic and diluted loss per share | | | | | | | | |
| Net loss | | $ | (92.9) | | | $ | (125.2) | | | $ | (238.7) | | | $ | (752.7) | |
| Weighted average shares outstanding—basic | | 185.0 | | | 176.0 | | | 183.4 | | | 174.5 | |
| Basic and diluted loss per share | | $ | (0.50) | | | $ | (0.71) | | | $ | (1.30) | | | $ | (4.31) | |
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We incurred a net loss for the three and nine months ended December 31, 2025 and 2024; therefore, the diluted weighted average shares outstanding excludes the effect of unvested common stock equivalents because their effect would be antidilutive. For the three months ended December 31, 2025, we had 1.4 potentially dilutive shares from share-based awards and 0.1 of shares from Convertible Notes that are excluded due to the net loss for the period. For the nine months ended December 31, 2025, we had 1.7 potentially dilutive shares from share-based awards and 0.1 of shares from Convertible Notes that are excluded due to the net loss for the period.
During the nine months ended December 31, 2025, 2.2 restricted stock awards vested, we granted 2.8 unvested restricted stock awards, and 0.9 unvested restricted stock awards were forfeited. The forfeiture of awards resulted in the reversal of expense of $44.7 and amounts capitalized as software development costs of $11.9.
On May 22, 2025, we issued 5.5 shares of our common stock, at a price to the public of $225.00 per share, resulting in $1,192.8 of proceeds net of underwriting fees and expenses. We intend to use the net proceeds from this offering for general corporate purposes, which may include the repayment of outstanding debt and future acquisitions.
11. COMMITMENTS AND CONTINGENCIES
We have entered into various agreements in the ordinary course of business that require substantial cash commitments over the next several years. Other than agreements entered into in the ordinary course of business and in addition to the agreements requiring known cash commitments as reported in Note 14 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, we did not have any significant changes to our commitments since March 31, 2025. Legal and Other Proceedings
We are, or may become, subject to demands and claims (including intellectual property and employment related claims) and are involved in routine litigation in the ordinary course of business which we do not believe to be material to our business or financial condition or results of operations. We have appropriately accrued amounts related to certain of these claims and legal and other proceedings. While it is reasonably possible that a loss may be incurred in excess of the amounts accrued in our financial statements, we believe that such losses, unless otherwise disclosed, would not be material.
12. INCOME TAXES
The provision for income taxes for the three months ended December 31, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they are incurred. The provision for income taxes was $37.1 for the three months ended December 31, 2025, as compared to the benefit from income taxes of $27.7 for the prior year period.
When compared to the statutory rate of 21%, the effective tax rate of (66.5)% for the three months ended December 31, 2025 was primarily driven by tax expense of $35.1 related to an increase in the U.S. and international valuation allowances, offset by tax benefits of $12.5 from tax credits, and by tax expense of $19.9 related to geographic mix of earnings.
The provision for income taxes for the nine months ended December 31, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they are incurred. The provision for income taxes was $53.6 for the nine months ended December 31, 2025, as compared to the provision for income taxes of $63.3 for the prior year period.
When compared to the statutory rate of 21%, the effective tax rate of (29.0)% for the nine months ended December 31, 2025 was primarily driven by tax expense of $74.5 related to an increase in the U.S. and international valuation allowances, offset by tax benefits of $25.4 from tax credits, and by tax expense of $28.7 related to geographic mix of earnings.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into law and includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, accelerated deductions for domestic research expenditures, permanently reinstating 100% bonus depreciation, and modifications to tax credits. The legislation has multiple effective dates, with certain provisions effective in fiscal year ending March 31, 2026 and others implemented in future periods. The impact of OBBB has been reflected in our estimated annualized effective tax rate, and reduced our forecasted U.S. cash tax liability. It did not, however, impact our U.S. deferred tax assets or liabilities since we continue to maintain a full valuation allowance against U.S. net deferred tax assets.
The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) includes a corporate alternative minimum tax ("CAMT") of 15% on the adjusted financial statement income ("AFSI") of corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period. It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income. We do not estimate any tax liability relating to CAMT for the current fiscal year. We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.
The Organization for Economic Co-operation and Development ("OECD") has proposed a global minimum tax of 15% of reported profits, referred to as Pillar Two. Many countries have already implemented or are taking steps to implement Pillar Two. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly differently than the model rules and on different timelines. Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than a 15% minimum rate. The impact of Pillar Two was not material to the tax provision for the three and nine months ended December 31, 2025. On January 5, 2026, the OECD released new administrative guidance outlining a “side-by-side” arrangement following agreement on key elements by the OECD/G20 Inclusive Framework on Pillar Two. It provides new safe harbors for U.S. multinational companies which would exempt U.S.-parented groups from two of the three Pillar Two top up taxes, extend the current Transitional Country-by-Country Reporting Safe Harbor by one year through the end of fiscal year ending March 31, 2028, and make the
Simplified Effective Tax Rate Safe Harbor permanent. We will continue to evaluate the impact Pillar Two and any additional guidance may have on our results and operations.
We are regularly examined by domestic and foreign taxing authorities. Examinations may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe our tax positions comply with applicable tax law, and that we have adequately provided for reasonably foreseeable tax assessments. It is possible that settlement of audits or the expiration of the statute of limitations may have an impact on our effective tax rate in future periods.
13. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION
We have one operating and reportable segment. Our operations involve similar products and customers worldwide. Revenue earned is primarily derived from the sale of software titles, which are developed internally and by third parties. Our Chief Executive Officer, who is our Chief Operating Decision Maker ("CODM"), manages our operations on a consolidated basis. Our CODM uses consolidated net income (loss) – supplemented by sales information by product category, major product title, and platform – for the purpose of evaluating performance and allocating resources. All significant expense categories are presented on our Condensed Consolidated Statements of Operations. Our other segment items include Depreciation and amortization, Business reorganization, Interest and other, net, and Provision for (benefit from) for income taxes. The measure of segment assets are reported on the Condensed Consolidated Balance Sheet as Total assets. The CODM does not review segment assets at a level other than that presented on the Condensed Consolidated Balance Sheet.
Geography
We attribute net revenue to geographic regions based on software product destination. Net revenue by geographic region was as follows:
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| | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | 2025 | | 2024 | | 2025 | | 2024 |
| Net revenue recognized: | | | | | | | | |
| United States | | $ | 1,012.2 | | | $ | 825.7 | | | $ | 2,948.7 | | | $ | 2,460.7 | |
| International | | 686.8 | | | 534.1 | | | 2,027.9 | | | 1,590.4 | |
| Total net revenue | | $ | 1,699.0 | | | $ | 1,359.8 | | | $ | 4,976.6 | | | $ | 4,051.1 | |
14. ASSET ACQUISITION
On October 27, 2025, we purchased a building located in Los Angeles, California, for total cash consideration of $32.0.
On November 13, 2025, we purchased an office space located in New York, New York, for total cash consideration of $6.1.
Both transactions were treated as asset acquisitions, in which the cash consideration and direct transaction costs were allocated on a relative fair value basis to identified assets. The following table summarizes the acquisition date fair value of tangible assets, which are included within Fixed assets, net on our Condensed Consolidated Balance Sheets, acquired:
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| Fair Value | Weighted average useful life |
| Building | $ | 27.8 | | 30 years |
| Land | 10.3 | N/A |
| Total | $ | 38.1 | | |
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