Starbreeze Q3’25 flash comment: Revenue in line, but profitability weaker than expected

Source: Inderes

Starbreeze delivered Q3 revenue in line with expectations, though adjusted profitability was below our estimates, primarily due to higher-than-expected amortization. As anticipated, the Baxter discontinuation drove a significant impairment that dominated headline results. While revenue from PAYDAY 2 surprised on the upside, PAYDAY 3 revenue fell clearly short of our estimates. The report offered limited updates on the execution roadmap and forward-looking statements, leaving key questions around the timing of accelerated content cadence and the work-for-hire pipeline still to be addressed. We hope to get more clarity around these subjects during the earnings call, which begins at 10 a.m. CEST.

Revenue composition shows PAYDAY 2 strength, but PAYDAY 3 disappointed

Q3 revenues reached 58 MSEK (Q2’25: 54 MSEK, Q3’24: 43 MSEK), which was in line with our estimates and 37% higher than last year. The year-on-year revenue growth primarily stems from the work-for-hire partnership with KRAFTON, which contributed 20 MSEK to revenue and matched our estimates. Revenue from PD3 decreased by -23% year-on-year to 18 MSEK (Q3’24: 23 MSEK) and was flat quarter-on-quarter. This was well below our estimated 25 MSEK and is particularly notable considering the late Q2 heist release that we believed only had a small impact on the previous quarter’s figures, the September heist launch and franchise sale during the end of quarter, but more importantly that Q3 reflected a full quarter of Starbreeze’s 100% ownership of the publishing rights, meaning that they retain all game-related sales rather than sharing them with PLAION as in the previous structure.

However, PD2 revenue was the clear positive surprise at 15 MSEK (Q2’25: 8 MSEK, Q3’24: 12 MSEK) and clearly exceeded our estimate of 9 MSEK. We believe this reflects the impact of the subscription service launched in late September, along with the franchise sales, and highlights the title’s continued staying power. Third-party publishing (“3PP”) revenue decreased by 2 MSEK (q/q) to 5 MSEK (Q2’25: 7 MSEK, Q3’24: 6 MSEK) in line with our estimate and with the company's stated shift away from this area. We expect revenue from this segment to continue to decline in the coming quarters.

While not disclosed explicitly, FX effects are likely to have impacted the top line negatively during the quarter, and given current FX rates, we expect the stronger Swedish krona (against USD and EUR) to weigh on the financials in Q4 as well.

Adjusted EBIT miss driven by higher-than-expected amortization

Starbreeze reported a Q3 operating result (EBIT) of -285 MSEK (Inderes est: -259 MSEK), where the previously announced write-down of the Baxter project weighed on the result by -262 MSEK, slightly above the 255 MSEK Starbreeze guided for. Adjusting for this, EBIT was -24 MSEK (adj. Q2’25: -17 MSEK, Q3’24: -63 MSEK). The y/y improvement is primarily driven by the revenue growth and lower amortization levels (Q3’25: 39* MSEK, Q3’24: 70 MSEK). However, this was below our estimate of -4 MSEK, primarily driven by higher normalized game amortization of 39 MSEK versus our estimate of 28 MSEK, suggesting that capitalized development costs are being amortized more aggressively than we anticipated.

Cash flow from operating activities after WC changes was 22 MSEK (Q3’24: -16 MSEK) and investments for the quarter totaled 37 MSEK (Q3’24: 63 MSEK), leading to a free cash flow of  -15 MSEK (Q2’25: -65 MSEK, Q3’24: -79 MSEK). The quarter’s operating cash flow was positively impacted by changes in working capital (3 MSEK) due to settled receivables linked to PD3. Cash balance decreased by -21 MSEK quarter-on-quarter to 135 MSEK (Q2’25: 156 MSEK), with virtually no debt (excl. leasing).

Although the work-for-hire projects tie up some working capital, the acquisition of full publishing rights should enhance Starbreeze's cash flow going forward, as the company can now collect cash from game sales on different platforms faster. Following the discontinuation of the Baxter project, CAPEX decreased clearly in the quarter, and we expect CAPEX to be at a slightly lower level going forward, as the in-house development will be primarily focused on the PAYDAY franchise. 

Looking ahead: execution remains key

Before the Q3 report, our FY25 revenue estimate stood at 238 MSEK (FY24: 186 MSEK), with adjusted EBIT of -22 MSEK (-229 MSEK). While Q3 revenue was in line with our estimates, the revenue mix in terms of PAYDAY-related revenue was surprising, and we will reassess our assumptions on these in the coming update. Given the weaker-than-expected adjusted EBIT, coupled with soft player activity in PD3 for a large part of Q4 and the next DLC scheduled in January, we expect some downward pressure on our FY25 estimates. Management’s commentary on execution progress offered no tangible new information relative to prior communication, and the report did not provide any concrete details on the timing for an accelerated content cadence in PAYDAY 3. On the work-for-hire side, visibility also remains limited. The report offered few indications of where the company currently stands in ongoing discussions, which adds uncertainty to our revenue assumptions for 2026. We have modelled a work-for-hire contribution of similar scope to the KRAFTON engagement, and the timing of any new partnership therefore has a direct impact on our 2026 estimates. We hope to gain further clarity on these topics during the earnings call at 10:00 a.m. CEST

With the investment case now resting primarily on the turnaround potential of the PAYDAY franchise, it will be important that Starbreeze quickly shows clear tangible results from upcoming content and update launches to restore confidence in the new strategy, considering the expanded focus, CAPEX, and team resources allocated to the franchise.

*Adjusting for the impairment of Baxter of 262 MSEK