Starbreeze Q4'25: The path forward has narrowed

Starbreeze delivered Q4 revenue clearly below our expectations, with the shortfall primarily driven by a particularly weak PAYDAY 3 (“PD3”) contribution. Profitability also came in significantly below our estimates, reflecting not only lower revenue but also a cost base that is adjusting more slowly than anticipated. While the Skills 2.0 release represented a major milestone, the muted impact on player activity and on revenue reinforces our view that fundamental engagement challenges remain unresolved. With visibility on the work-for-hire pipeline now even more limited, after management's cautious commentary and the conclusion of the KRAFTON partnership, we believe the path to 2026 cash-flow positivity has become increasingly uncertain. As Starbreeze operates as a single-IP studio with mounting execution pressure, we believe it still has much to prove before a stronger scenario can be priced in with confidence. We reiterate our Reduce recommendation and lower our target price to SEK 0.09 (was SEK 0.14).

Lower headline figures across the board

Q4 revenues reached 41 MSEK (Q4’24: 46 MSEK), which was 22% below our estimates. The shortfall was primarily driven by PD3's particularly weak performance, with lower-than-expected third-party publishing revenue providing an additional headwind. PAYDAY franchise revenue reached 23 MSEK (Inderes est.: 35 MSEK), with PD3 contributing 8 MSEK versus our 21 MSEK estimate. We find this especially concerning, given the December release of Skills 2.0, a major overhaul that management had positioned as an important milestone for retention and engagement ahead of the 2026 monetization push. PD2 delivered 15 MSEK, in line with our estimate, demonstrating continued resilience from the subscription model. We think the stark divergence between PD2's stability and PD3's decline highlights the fundamental challenges the company faces in its core strategic priority. Along with the revenue miss, EBIT amounted to -62 MSEK, well below our -10 MSEK estimate. Amortization levels and overall OPEX were higher than estimated, suggesting that the cost base is adjusting more slowly than anticipated following the Q3 rightsizing measures.

We revise our estimates downward following Q4

Following Q4, we have made material downward revisions to our estimates across the forecast period. For PD3, we have lowered our revenue assumptions for FY26-27 by around 50%. We think the muted response after the Skills 2.0 release suggests that achieving sustained improvement will be more challenging than previously assessed. Early player activity data on the January Shopping Spree release also suggests a similarly muted reception. We believe the persistent weakness showcases that there are no quick fixes and indicates the current content-driven strategy may be insufficient without more fundamental improvements to the game's core appeal or technical performance. For work-for-hire, we have reduced our FY26 assumptions following management's cautious commentary, now modeling a more modest contribution than the KRAFTON-scale engagement we had previously assumed. Despite higher-than-expected amortization and OPEX in Q4, we have kept our cost estimates largely unchanged for FY26, given the initiated rightsizing efforts in Special Operations. In aggregate, we have reduced our FY26-27 revenue estimate to 164-159 MSEK (was 260-252 MSEK,    -37%), with FY26 EBIT down to -60 MSEK (was 39 MSEK).

Low valuation alone is insufficient to justify a more positive view

The Q4 outcome reinforced our cautious stance on Starbreeze and has lowered our confidence in the company's ability to execute on its strategic priorities in the near term. The shift toward operating as a single-IP studio has not yet translated into tangible improvements and instead highlights the considerable execution challenges that remain. Despite the low absolute valuation (2026e EV: ~100 MSEK, EV/S: 0.6x), 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 0.09 (was SEK 0.18), reflecting a scenario where we assume the company operates with a leaner cost base, stabilizes PD3 revenues at current levels rather than achieving meaningful growth, maintains PD2's contribution, and secures selective work-for-hire projects at reduced scope.