Ubisoft’s Pivot to Live Services: A Strategic Buy for Gaming’s Subscription Future

The global gaming industry is undergoing a seismic shift from one-time software sales to recurring revenue models. At the forefront of this transition is Ubisoft, which has spent years retooling its business to capitalize on live services, subscriptions, and franchise longevity. Despite near-term headwinds, the company’s strategic moves now position it as a compelling buy for investors seeking exposure to gaming’s subscription-driven future. Here’s why the stock could be primed for a resurgence.

The Rise of Recurring Revenue: A Structural Shift

Ubisoft’s first-half 2025 earnings revealed a stark but promising trend: back-catalog net bookings now account for 76.9% of total revenue, up from 74.2% in 2023. This reflects the power of its live-service strategy, where franchises like Assassin’s Creed, Far Cry, and Rainbow Six Siege are being revitalized through ongoing content updates, player engagement campaigns, and cross-platform accessibility. For example, Rainbow Six Siege’s playtime and session days rose 9% and 6% year-over-year, while its monthly active users hit 37 million—a sign that older titles can retain audiences through iterative updates.

The crown jewel of this shift is Ubisoft+, its subscription service offering over 100 games and DLCs. While exact financials remain opaque, the service’s growth is evident: digital sales rose 18% year-over-year in Q1 2025, fueled by VR releases like Assassin’s Creed Valhalla and catalog revivals. Management’s focus on bundling AAA titles with premium experiences (e.g., VR, story expansions) positions Ubisoft+ as a low-cost, high-margin revenue stream.

Cost Discipline: Turning the Profitability Corner

For years, Ubisoft was criticized for bloated costs and inefficient R&D spending. That’s changing. The company has slashed fixed costs by 6% year-over-year, reduced headcount by 2,000 over two years, and prioritized “quality over quantity” in game development. The result? Non-IFRS operating income is on track to break even in 2025, a major milestone after years of volatility.

The focus on retention and employee morale is paying off: senior developers are rejoining teams, and iterative improvements to underperforming titles like Star Wars Outlaws (via story packs and combat updates) demonstrate a leaner, more agile approach. Meanwhile, Tencent’s $1.2 billion investment in a key subsidiary—valued at €4 billion pre-money—has reduced net debt by €500 million, lowering its debt/EBITDA ratio to 1.28x. This financial flexibility is critical for sustaining R&D while avoiding costly missteps.

Valuation: A Bargain Compared to Peers

Ubisoft’s valuation is a stark contrast to its peers. While EA trades at 19x EV/EBITDA and Take-Two at 118x EV/EBITDA, Ubisoft’s multiple sits at just 3.35x—80% better than the industry median. This discount persists despite Ubisoft’s €4 billion+ lifetime revenue from franchises like Assassin’s Creed and its growing live-service ecosystem.

The gap is partly due to near-term risks: Star Wars Outlaws’ underperformance and margin pressures (non-IFRS operating income fell to €-252 million in H1 2025). Yet, these are manageable. By contrast, EA and Take-Two face their own challenges—EA’s reliance on FIFA amid licensing risks, and Take-Two’s volatile margins from hit-driven releases like Grand Theft Auto. Ubisoft’s undervaluation is a rare opportunity to buy a AAA publisher at a fraction of its peers’ multiples.

Catalysts for Growth: Upcoming Launches and Expansion

The next 12 months will test Ubisoft’s strategy. Key catalysts include:
1. Assassin’s Creed Shadows: A high-profile return to the franchise’s stealth roots, set for 2025. Positive early reviews and iterative development (à la Rainbow Six Siege) could make this a sleeper hit.
2. Ubisoft+ Expansion: Plans to boost subscriptions via exclusive content, such as VR releases and classic remasters, could drive recurring revenue growth.
3. Far Cry 7: A potential franchise renaissance, leveraging the open-world action that defined Far Cry 6 but with live-service hooks like seasonal events and cosmetic DLC.

Risks to Consider

• Macro Risks: Gaming is cyclical, and a prolonged economic downturn could hit discretionary spending on subscriptions and premium games.
• Competitor Threats: EA and Activision Blizzard dominate live-service markets with established franchises like FIFA and Call of Duty.
• Execution: Iterative updates and live-service launches require flawless execution—a lesson learned from Star Wars Outlaws’ rocky launch.

Conclusion: A Buy for the Subscription Era

Ubisoft’s transition to live services and subscriptions is far from complete, but the groundwork is laid. Its undervalued stock, cost discipline, and high-margin recurring revenue streams make it a standout play in an industry pivoting toward subscriptions. While risks exist, the 3.35x EV/EBITDA multiple offers a margin of safety. For investors with a 3–5-year horizon, now is the time to position for the next era of gaming.

The path to profitability is clear. Buy Ubisoft for its structural upside—and brace for a rebound as live services take center stage.