Starbreeze Q4’25 flash comment: Lower headline figures across the board

Source: Inderes

Starbreeze delivered Q4 revenue clearly below our expectations, with the shortfall primarily driven by weaker PAYDAY 3 contribution. Profitability also came in well below our estimates, reflecting the lower revenue and higher costs overall. We believe the weak outcome underscores the continued challenges the company faces in revitalizing PAYDAY 3 player engagement and raises questions about the achievability of the 2026 cash-flow positivity target. We expect to make downward revisions to our estimates following the report.

Revenue miss driven by weak PAYDAY 3 performance

Q4 revenues reached 41 MSEK (Q3'25: 58 MSEK, Q4'24: 46 MSEK), which was -22% below our 53 MSEK estimate and -11% lower than last year. The year-on-year decline was primarily driven by weak PAYDAY 3 performance and lower-than-expected third party-publishing revenue (1 MSEK vs Inderes estimate: 5 MSEK)

PAYDAY franchise revenue reached 23 MSEK, below our estimate of 35 MSEK. PAYDAY 3 revenue came in at around 8 MSEK versus our estimate of 21 MSEK, which is particularly concerning given the December release of Skills 2.0, a major overhaul of the progression system that was positioned as critical for retention ahead of the 2026 monetization push. The muted revenue contribution suggests that player engagement remains weak and that the Skills 2.0 release has yet to translate into sustained momentum. PAYDAY 2 delivered 15 MSEK, more or less in line our 14 MSEK estimate and therefore continues to show resilience and momentum following the subscription model that was introduced in Q3.

The KRAFTON work-for-hire partnership contributed 17 MSEK, which was above our estimate of 14 MSEK, reflecting a stronger final quarter contribution than expected. With KRAFTON now completed, visibility on new work-for-hire projects is increasingly clouded. The management noted in the report that it has taken right-sizing measures primarily within its Special Operations segment, and emphasized that work-for-hire is a viable part of the business when the right opportunity comes. We believe this indirectly tells that a new work-for-hire project is not within the near-horizon, which will impact our revenue estimates for 2026.

Third-party publishing revenue came in at 1 MSEK versus our 5 MSEK estimate, which in one hand is in line the company's communicated strategy to deprioritize this segment, but the revenue drop was bigger than expected. We expect minimal contribution from this area also going forward.

While not disclosed explicitly, FX effects are likely to have impacted the top line negatively during the quarter, and given current FX rates, we expect the stronger Swedish krona (against USD and EUR) to weigh on the financials in Q1 as well.

Profitability was well below our estimates

Starbreeze reported Q4 EBIT of -62 MSEK (Q3'25: -24 MSEK, Q4'24: -52 MSEK), which was significantly below our -10 MSEK estimate. The shortfall was driven by lower the revenue and higher-than-expected direct costs and SG&A costs, where amortization costs (46 MSEK) were well above our estimated 26 MSEK and SG&A costs amounted to 28 MSEK, versus our estimated 21 MSEK. We think suggests that the cost base is adjusting more slowly than anticipated following the rightsizing measures in Q3. While not explicitly stated, Starbreeze recorded an impairment of intangible assets in Q4, and based on our estimates, there were about 5-7 MSEK, which would correspond to a -55-57 MSEK in adjusted EBIT.

Cash flow from operating activities after working capital changes was -3 MSEK (Q3'25: 22 MSEK, Q4'24: 0 MSEK), with investments totaling -25 MSEK, leading to free cash flow of -29 MSEK (Q3'25: -15 MSEK). The cash balance decreased by -32 MSEK to 103 MSEK (Q3'25: 135 MSEK), with virtually no debt excluding leasing obligations.

We think the continued cash outflow raises questions about achieving the 2026 cash flow positivity target. With the cash balance now at around 100 MSEK and the KRAFTON partnership concluding, visibility on new work-for-hire projects and improved PAYDAY 3 monetization becomes increasingly critical in our view.

The near-term outlook remains increasingly clouded

The Q4 shortfall reinforces our cautious view on Starbreeze's near-term outlook and raises questions about the achievability of the 2026 cash flow positivity target. Weak PAYDAY 3 performance despite Skills 2.0 suggests fundamental engagement challenges persist, and the limited work-for-hire visibility creates notably revenue risk for our 2026 estimates. Before the Q4 report, our FY26 revenue estimate stood at 260 MSEK with EBIT of 39 MSEK. We expect to make downward revisions in our upcoming report.

The investment case continues to hinge on the turnaround potential of the PAYDAY franchise and it will be important that Starbreeze quickly shows clear tangible results from upcoming content and update launches to restore confidence in the new strategy, considering the expanded focus, CAPEX, and team resources allocated to the franchise.