Source: Inderes

Starbreeze's Q1 results missed our expectations across the board. The miss was driven primarily by weaker-than-anticipated PAYDAY franchise performance, which continues to struggle with player engagement despite recent content updates, game improvements, and progression system overhaul. At the same time, heavy amortization and restructuring items weighed on the bottom line. We think the below-estimate outcome raises the uncertainty regarding the company's ability to achieve its stated goal of cash-flow positivity in 2026 and suggests that the franchise stabilization we had cautiously anticipated is not yet materializing.

Broad-based PAYDAY softness drives the revenue miss

Starbreeze reported Q1 revenue of 27 MSEK (Q1’25: 68 MSEK), falling about 16% short of our 32 MSEK estimate. The sharp year-on-year decline was largely anticipated due to a tough comparison period that included PAYDAY 3's addition to PlayStation Plus and higher contributions from the KRAFTON work-for-hire partnership, which still generated 6 MSEK during the quarter and therefore reflected a longer tail than we had anticipated. However, the core PAYDAY franchise (Q1’26: 21 MSEK) drove the top-line miss against our estimate of 27 MSEK. PAYDAY 3 revenue remained depressed at 10 MSEK, trailing our 12 MSEK estimate, which we believe signals that the Skills 2.0 release (December, 2025) and the monthly update cadence established in late H2'25 have yet to translate into a meaningful inflection in player engagement and monetization. Furthermore, PAYDAY 2 delivered 11 MSEK, below our ~15 MSEK estimate and somewhat softer than the run-rate seen in recent quarters following the introduction of the subscription model in Q3'25.

Elevated amortization and restructuring costs sink profitability

Operating profit (EBIT) plunged to -56 MSEK (Q4'25: -62 MSEK, Q1'25: -29 MSEK), landing significantly below our -34.0 MSEK expectation. While the lower revenue level contributed to the miss, the shortfall versus our estimate was also driven by 9 MSEK of restructuring costs related to completed personnel changes and higher-than-expected amortization (49 MSEK vs our estimate of 28 MSEK for PD3 amortization). Consequently, reported EBITDA came in at -4 MSEK compared to our -2 MSEK estimate, though the company noted that underlying EBITDA adjusted for restructuring items was positive at 5.5 MSEK. SG&A came in at 16 MSEK, meaningfully below the Q4'25 level (-28 MSEK), signaling that the rightsizing measures initiated in Q4 are starting to materialize, with management noting that the full effect from the implemented changes will be visible from Q3 onwards.

Cash flow from operating activities after working capital changes was +2 MSEK (Q4'25: -3 MSEK, Q1'25: -12 MSEK), with investments totaling -27 MSEK, leading to free cash flow of -25 MSEK (Q4'25: -29 MSEK). The cash balance decreased by -28 MSEK to 75 MSEK (Q4'25: 103 MSEK), with virtually no debt excluding leasing obligations. While operating cash flow turned positive, the continued investment burden in own game development keeps free cash flow firmly negative, and with the cash balance now at 75 MSEK, the path toward the 2026 cash flow positivity target looks increasingly tight in our view. The expected full effect of the cost actions from Q3, combined with a stabilization in PAYDAY 3 monetization, will be critical to bridge the gap, in our view.

Expanding the IP while waiting for core execution

The Q1 results confirm the difficult transitional period we had anticipated as Starbreeze operates without meaningful work-for-hire revenue and with PAYDAY 3 struggling to find its footing. Heading into the report, our FY26 estimates stood at 164 MSEK revenue and -60 MSEK EBIT, reflecting a view that PD3 would stabilize at depressed levels and that cost reductions would partially offset the revenue headwind. Given the weaker-than-expected revenue generation from the core games and the elevated amortization levels, we foresee downward pressure on our estimates. Strategically, Starbreeze continues to broaden the franchise through external partnerships, including a transmedia collaboration with VICE Studios, a VR title with Fast Travel Games, and Gamefan for Roblox. While we view these initiatives as sensible ways to leverage the brand without heavy internal capital commitments, we expect their near-term financial impact to be minimal. The investment case remains firmly tied to the turnaround of PAYDAY 3, where tangible evidence of sustained player retention is still lacking.