Starbreeze Q3’25 preview: After turning the page on Baxter, execution is now key

Source: Inderes 

Starbreeze will release its Q3 report on Tuesday, November 11th. The quarter will be dominated by the announced discontinuation of Project Baxter, which will result in a non-cash impairment of ~255 MSEK, which will significantly weigh on reported Q3 earnings. Excluding the impairment, we expect adjusted EBIT of around -4 MSEK, representing an improvement year-on-year driven by higher expected revenues and lower normalized amortization. Revenue growth (37% y/y) is expected to be primarily driven by the KRAFTON work-for-hire partnership, but we also expect growth in PAYDAY-related revenue due to the acquisition of full publishing rights. Following the strategic pivot to focus entirely on the PAYDAY franchise, we will be watching closely for updates on execution progress, the PAYDAY (3) roadmap, and potential updates on the work-for-hire pipeline.

Year-on-year revenue growth is expected to be primarily driven by work-for-hire

We estimate Q3 revenue at 59 MSEK (Q3'24: 43 MSEK), representing 37% year-on-year growth. The strong top-line growth is largely explained by revenue contribution from the KRAFTON partnership, which contributed zero revenue in Q3'24, and is expected to generate around 20 MSEK in Q3'25, making it the quarter's largest revenue driver.

PAYDAY 3 revenue is expected to remain relatively stable year-on-year at 25 MSEK (Q2'25: 18 MSEK, Q3'24: 23 MSEK) but show growth on a quarter-on-quarter basis. We expect q/q growth to be driven by some tail-effect from the late Q2 heist release that likely only had a modest impact on last quarter’s figures, as well as larger effects from the full publishing rights acquisition contribution, which we believe only marginally benefited Q2. The September launch of the "Delivery Charge" should also contribute to q/q growth. The modest y/y growth primarily reflects the increased game sales contribution from the acquisition of publishing rights, as player activity has remained low. We expect PAYDAY 2 revenue to hold steady at 9 MSEK (Q2'25: 8 MSEK), with the new subscription service (launched in late September) contributing only marginally to Q3 given its timing. We note that the company’s franchise sale on all PAYDAY games, which resulted in temporary spikes in CCU on Steam and sold copies, should also support increased sales and could, in fact, provide some upside risks to our Q3 revenue estimates.

Third-party publishing revenue is expected to continue to decrease (Q3’25: 5 MSEK, Q2’25: 7 MSEK), consistent with the company's stated shift away from this area. In addition, we expect FX headwinds from the stronger Swedish krona to slightly weigh on reported revenue.

Baxter write-down will weigh significantly on reported EBIT, but underlying losses are expected to narrow

Following the early October announcement to discontinue Project Baxter, Starbreeze will record a non-cash impairment of approximately 255 MSEK in Q3, and we expect reported EBIT to come in at -259 MSEK (Q3'24: -55 MSEK). Adjusted EBIT (excluding the Baxter impairment) is expected to land around -4 MSEK, a notable improvement from Q3'24's adjusted EBIT of -63 MSEK. This improvement is expected to primarily be driven by higher revenues and a lighter normalized amortization burden, as the heavy D&A period related to PAYDAY 3 has passed.

The Baxter discontinuation will result in a ~44 reduction of headcount, with part of the team also being redeployed to PAYDAY projects. This will lower the cost base and reduce future investment needs, supporting management's ambition to reach cash-flow positivity in 2026, though we note that this now hinges entirely on successful PAYDAY execution going forward.

Execution progress, PAYDAY roadmap, and updates on work-for-hire pipeline will be our focus areas

Following the strategic shift announced in early October, we updated our estimates (see our update from October 7 here). For 2025e, we expect revenue of 238 MSEK (FY24: 186 MSEK) and adjusted EBIT of -23 MSEK (FY24: –229 MSEK). With Baxter removed, our FY26 revenue forecast decreased by 26% to 273 MSEK, with an estimated EBIT of 52 MSEK.

The investment case now rests primarily on the turnaround potential of the PAYDAY franchise. Content delivery in both Q3 and the early part of Q4 has been relatively limited, with player activity remaining at low levels, so we will look for more detailed commentary on execution progress, the PAYDAY (3) roadmap, the timing of accelerating content cadence, and the steps necessary to achieve cash-flow positivity in 2026. Any updates on the work-for-hire pipeline will also be of interest, since we currently model future external projects at 60–70 MSEK per year, similar to the scale of the KRAFTON partnership, which is soon approaching completion.