Source: Inderes

Starbreeze's Q2 results were mixed versus our expectations. Reported revenue came in below our estimate, but the entire shortfall stemmed from our — in hindsight too optimistic — assumption of a longer work-for-hire tail, which we had extended after Q1's stronger-than-expected contribution. Both work-for-hire and third-party publishing contributed nothing this quarter, whereas the core PAYDAY franchise was broadly in line with our estimate. Profitability trailed our estimates on the EBIT level due to the revenue shortfall and elevated amortization, though cost discipline kept EBITDA well aligned with our expectations. We view the recent recovery in PAYDAY 3 player sentiment as a positive sign, even though monetization has yet to follow. With the cash balance down to ~52 MSEK and free cash flow still negative, we see the path to the company's stated 2026 cash flow positive target as increasingly unlikely.

Fading work-for-hire tail, not the franchise, drove the revenue miss

Starbreeze reported Q2 revenue of 26 MSEK (Q2'25: 54 MSEK), which was 22% below our 33 MSEK estimate and down roughly 52% year-on-year. The miss was, however, entirely attributable to work-for-hire and third-party publishing, which contributed no revenue at all in the quarter (0 MSEK, versus a combined ~26 MSEK a year ago) as the KRAFTON partnership rolled off completely. We had penciled in a longer work-for-hire tail after Q1's contribution came in above expectations, an assumption that, in hindsight, proved too optimistic and accounts for the full top-line shortfall. The core PAYDAY franchise, by contrast, was broadly in line with our 26 MSEK estimate at ~25 MSEK, even though the mix differed from our estimate. PAYDAY 3 undershot at 11 MSEK (Inderes estimate: 13 MSEK) while PAYDAY 2 came in higher at ~14 MSEK (Inderes estimate: 12 MSEK). In our view, the soft PD3 print signals that the monthly update cadence and June's Update 3.6 have yet to translate into a meaningful monetization inflection. Encouragingly, engagement improved, with management reporting PAYDAY 3 MAU of ~158k and, in July, recent Steam reviews turned "Mostly Positive", a tentative sign that player trust is being gradually rebuilt, even if revenue has yet to follow.

Cost discipline cushions EBITDA, but elevated amortization weighs on EBIT

Adjusted operating profit (EBIT) came in at -36 MSEK (Q2'25: -17.4 MSEK), below our -32 MSEK expectation. The year-on-year deterioration was mainly driven by the lower revenue base and still-elevated depreciation and amortization (~40 MSEK), where the latter, yet again, was above our estimate (36 MSEK). However, adjusted EBITDA remained positive at 3 MSEK (Q2'25: 6 MSEK) and broadly in line with our 4 MSEK estimate, indicating that the underlying operating expense trajectory continues to adjust to the lower revenue environment. SG&A came in at 17 MSEK, below the comparison period (Q2'25 adj. SG&A: 22 MSEK) and broadly in line with Q1'26 (16 MSEK), signaling that the rightsizing measures initiated in Q4 are continuing to materialize, with full effects expected to be visible from Q3 onwards.

Operating cash flow was positive at 7 MSEK (Q1'26: 2 MSEK; Q2'25: 39 MSEK), reflecting continued cost discipline. However, continued own-game investment (23 MSEK) kept free cash flow negative, and the cash balance fell by ~22 MSEK to 52 MSEK (Q1'26: 75 MSEK) — roughly two to three quarters of runway at the current run-rate. With free cash flow still negative and no clear signs of a meaningful monetization inflection, the path toward the 2026 cash flow positivity target looks increasingly unlikely, in our view. The expected full effect of the cost actions from Q3, combined with a stabilization in PAYDAY 3 monetization, will be critical to reduce the cash flow pressure in the coming quarters.

Franchise expansion initiatives accelerate, but near-term case hinges on the core

Heading into the report, our FY26 estimates stood at 143 MSEK revenue and -99 MSEK adj. EBIT, reflecting a view that PD3 would stabilize at depressed levels while cost reductions partially offset the revenue headwind. We expect to make downward revisions to our near-term non-core revenue estimates following the abrupt drop in work-for-hire, and we continue to look for tangible evidence that improved PAYDAY 3 player sentiment translates into a financial turnaround. Strategically, Starbreeze is broadening the franchise through partner-funded, capital-light initiatives alongside its monthly update cadence. These include, for example, the PUBG crossover in May and the native Fortnite (UEFN) launch in August. Additionally, the VICE Studios screen adaptation added Curtis '50 Cent' Jackson and G-Unit Film & Television as executive producers. While we view these initiatives as sensible ways to leverage the brand without heavy internal capital commitments, we expect their near-term financial impact to remain immaterial. In our view, the investment case remains firmly tied to the turnaround of PAYDAY 3, where tangible evidence of sustained player retention and monetization is still lacking.