GameStop Stock Drops 17% as Revenue Misses Expectations

GameStop, the electronic game retailer, has faced a significant setback in its stock performance following its foray into the Bitcoin market. Despite achieving profitability for the fourth consecutive quarter, the company's first-quarter revenue fell short of expectations, leading to a post-market stock price decline. The revenue for the first quarter decreased by 17% year-over-year, dropping from $8.818 billion to $7.324 billion, while analysts had anticipated $7.5 billion.

The decline in revenue can be attributed to the shifting consumer preference towards digital downloads over physical store purchases. This trend has posed a challenge for GameStop, which has traditionally relied on its brick-and-mortar stores. The company has been struggling to adapt to the rapid changes in the gaming industry, where consumers are increasingly opting for digital downloads, game streaming, and online shopping.

GameStop has attempted to expand its e-commerce platform to include digital downloads and online product sales, but these efforts have not yet fully capitalized on the transition. The hardware and accessories segment, which includes the sale of new and used electronic games, saw a revenue decline of approximately 32%. Following the closure of nearly 600 stores in the United States in 2024, the company announced plans to shut down a significant number of additional stores this year, indicating that its retail business remains sluggish despite reform efforts.

Through cost-cutting measures, GameStop managed to achieve a net profit of $44.8 million (or $0.09 per share) for the first quarter, compared to a net loss of $32.3 million (or $0.11 per share) in the same period last year. This marks the company's fourth consecutive quarter of profitability. The adjusted earnings per share were $0.17, significantly exceeding analysts' expectations of $0.08.

In early May, GameStop sold its Canadian subsidiary, which operated its stores and e-commerce business in Canada. The company expects the sale of its French business to be completed within the 2025 fiscal year. During the quarter, GameStop incurred an operating loss of $10.8 million, which included a $35.5 million impairment charge related to international restructuring.

Notably, GameStop disclosed that it used cash to purchase 4,710 bitcoins between May 3 and June 10. Earlier this year, the company's board unanimously approved an update to its investment policy to include Bitcoin as part of its financial reserve assets. This move was inspired by the business software company, which had previously adopted a similar strategy. The company's decision to invest in Bitcoin reflects its efforts to diversify its financial holdings and potentially benefit from the cryptocurrency's growth.