Starbreeze Q3'25: The outlook remains hard to gauge

Starbreeze delivered in-line Q3 revenue, but adjusted EBIT was below expectations, primarily due to higher amortization levels. PAYDAY 3 revenue was particularly soft relative to our estimates, but this was offset by renewed strength from PAYDAY 2 following the subscription model introduction. To our understanding, monthly content updates for PD3 will begin from December onwards, with the company providing shorter, ongoing content roadmaps rather than year-long plans. However, visibility on new work-for-hire projects remains limited, and with the KRAFTON partnership nearing completion, we have lowered our revenue assumptions due to timing effects. This, coupled with revisions to our expected revenue mix and slightly higher amortization, resulted in downward estimate adjustments. Given the continued low player activity in PD3, we believe the company has much to prove before a stronger scenario can be priced in with confidence. Despite the low absolute valuation, the lack of clear short-term drivers keeps us on the sidelines. We reiterate our Reduce recommendation and lower the target price to SEK 0.14 (was SEK 0.15).

Revenue mix surprised, and EBIT was below our estimates

Q3 revenues reached 58 MSEK, which was in line with our estimates and 37% higher than last year. While PAYDAY-related revenue more or less aligned with our forecast, the composition surprised, PD2 on the upside and PD3 on the downside. The launch of a subscription model along with the franchise sale during the quarter showed a greater impact on PD2 revenue than we expected, and we feel this highlights the title’s enduring appeal, despite limited efforts put into the game. On PD3, contribution from new content releases, as well as the impact from acquiring full publishing rights, was muted during the quarter. Reported EBIT was significantly impacted by the announced discontinuation of Project Baxter, leading to an impairment of 262 MSEK in the quarter. Adjusted for this, EBIT amounted to -24 MSEK, which was well below our -4 MSEK estimate. The shortfall was primarily driven by higher normalized game amortization (39 MSEK vs Inderes est: 28 MSEK), as OPEX otherwise aligned with our estimates.

We revise our estimates down following Q3

Following the Q3 report and management commentary, we revised our estimates. For PD3, we lowered our FY25-27e revenue assumptions by 14-3% given the weak Q3 outcome and declining player activity post Q3, though we continue to expect the accelerated monthly content updates to drive strong revenue growth in 2026. These revisions are somewhat offset by our raised estimates for PD2, where Q3 revenue and the contribution of the newly launched subscription model clearly exceeded our expectations. We lowered FY26 assumptions for work-for-hire due to limited pipeline visibility beyond the KRAFTON partnership. In aggregate, we have reduced our FY25 revenue estimate by 2% to 232 MSEK and FY26-27 estimates by 2-5%, with EBITDA down 2-6% for FY26-27.

We remain cautious on the investment case

The shift away from becoming a multi-title studio removed some of the short-term triggers from our previous investment case. Despite the low absolute valuation (2025e EV: 97 MSEK, EV/S: 0.4x), we currently see limited near-term triggers. While the PAYDAY IP has big potential, in our view, Starbreeze still has much to prove after recent years’ challenges with PD3. Our DCF now indicates a value per share of SEK 0.18 (was SEK 0.20), reflecting a scenario where we assume the company will operate with a leaner cost base, realizes a near-term boost in PAYDAY-related revenue through greater resource allocation, and continues securing work-for-hire projects. Over time, we expect PAYDAY-related revenue to gradually decline from a higher base, with new activities around the franchise providing modest support. However, given weaker short-term triggers and ongoing execution risks, we see limited justification for leaning too heavily on our DCF valuation until visibility into PD3 performance improvement builds up.