GameStop’s newly released second-quarter earnings contain a number that would have sounded almost impossible during the retailer’s years of restructuring: $160.2 million in operating income, the highest second-quarter operating profit in the company’s history. The headline numbers were equally eye-catching. GameStop reported $790.2 million in revenue, $298.7 million in net income and diluted earnings of $0.51 per share for the quarter ended August 1, while adjusted net income reached $161.1 million and adjusted EBITDA more than doubled to $174 million. Management also raised its full-year fiscal 2026 adjusted EBITDA outlook from more than $600 million to more than $650 million.
Yet the most important development for GameStop stock earnings may be hidden underneath those profit figures. GameStop’s total sales still fell 18.7% from $972.2 million a year ago, but the composition of the business changed dramatically. Collectibles revenue surged 57% to $356.3 million and represented an astonishing 45.1% of quarterly sales, almost twice its 23.4% share a year earlier. At the same time, selling, general and administrative expenses fell to $187.1 million from $218.8 million. In other words, GameStop is shrinking in some of its traditional businesses while becoming considerably more profitable—and trading cards, collectibles and disciplined cost control are increasingly responsible for that transformation.
That is a much more consequential story than whether adjusted EPS beat one Wall Street estimate by a few cents. Data providers differed on the exact consensus heading into the report, but revenue of $790.2 million was comfortably above the roughly $757 million estimate reported by several services. The real question for investors now is whether GameStop has finally found a sustainable operating model—or whether investment gains and a booming collectibles market are temporarily making a declining retailer look stronger than it really is.
The Core Business Finally Produced a Number the eBay Stake Can’t Explain Away
GameStop’s $298.7 million net profit requires an obvious caveat. The company had already warned investors that quarterly earnings would include approximately $238 million in net gains associated with its eBay derivative and subsequent direct equity investment, partly offset by around $75 million in losses on digital assets and related receivables. Those investment swings make GAAP net income much less useful for judging the underlying retail operation.
Operating income is different, and that is why the $160.2 million figure deserves so much attention. It increased from $66.4 million in the comparable quarter, while adjusted operating income rose to $158.7 million from $64.7 million. Gross profit increased to $345 million from $283.1 million even though revenue fell by $182 million, and gross margin expanded dramatically to 43.7% from 29.1%. The operating margin reached 20.3%, compared with only 6.8% a year earlier.
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Those numbers show that GameStop’s profitability improvement is not simply an accounting illusion created by the movement of eBay shares. Investment gains unquestionably inflated net income, but the underlying company also produced substantially more gross profit and operating income on a smaller revenue base. That is a much stronger outcome than investors saw during many previous quarters, when GameStop’s balance sheet and meme-stock status often overshadowed a core business struggling to generate consistent profits.
The challenge is proving that these margins are repeatable. One strong quarter does not establish a permanent earnings structure, particularly in a retail business exposed to product launches, consumer trends and holiday seasonality. But GameStop has now given bulls a fundamentally stronger argument: the company is not merely sitting on billions of dollars while waiting for Ryan Cohen to invest them. The operating business itself is making money.
Collectibles Have Quietly Become Almost Half of GameStop
The most dramatic transformation is happening in the sales mix. Collectibles revenue reached $356.3 million, up from $227.6 million a year ago, meaning the category now contributes 45.1% of total revenue. Traditional video-game sales, meanwhile, fell to $263.2 million from $494.6 million, while pre-owned and refurbished revenue declined to $170.7 million from $250 million.
That means collectibles are no longer a side business attached to a video-game retailer. They are now GameStop’s largest reported sales category.
The shift explains several seemingly contradictory parts of the quarter. Overall revenue dropped sharply, partly because GameStop was comparing against last year’s Nintendo Switch 2 launch, closing stores and no longer consolidating its French operations. But the products replacing some of that lost revenue appear to carry economics strong enough to push gross profit higher despite lower total sales. Barron’s noted that trading cards and collectibles were the standout growth engine as management positions the company toward a U.S. collectibles market expected to exceed $100 billion by 2033.
That is potentially the most important strategic change GameStop has made in years. The old business depended heavily on physical video-game hardware and software at a time when software distribution increasingly moved online. Collectibles are different: trading cards, graded products, figures and related services benefit from physical scarcity, enthusiast communities and resale activity that cannot be digitally downloaded away.
There is still significant risk. GameStop itself lists dependence on the popularity and sale of trading cards among the factors that could affect future results. Collectibles demand can be cyclical, and a category producing nearly half of revenue creates concentration of its own. But if GameStop can maintain momentum while expanding services around authentication, grading and resale, the company may be building a business with better economics than the legacy model it is replacing.
Revenue Fell 19% — and Investors Shouldn’t Pretend That Doesn’t Matter
The bullish numbers do not erase the most obvious weakness in the report: GameStop is still getting smaller. Revenue dropped to $790.2 million from $972.2 million, with the company attributing the decline mainly to the prior-year Nintendo Switch 2 launch, planned store closures and the divestiture of its French operations.
Some of that decline is intentional. Closing unproductive stores can reduce sales while increasing profitability, and divesting an entire geography mechanically lowers year-over-year comparisons. The unusually strong Switch 2 launch in the comparable period also makes the video-game category look particularly weak this quarter. That means the 18.7% decline should not automatically be interpreted as an 18.7% deterioration in the remaining business.
Still, investors eventually need revenue stabilization. Cost cutting has limits, and even an increasingly profitable collectibles franchise cannot indefinitely compensate for collapsing legacy categories unless it becomes large enough to replace them. GameStop’s new sales disclosure makes that tension unusually visible: video games and pre-owned products together lost more than $310 million of quarterly revenue year over year, while collectibles added about $129 million.
That is why the next few quarters matter so much. If collectibles continue expanding while operating margins remain strong, GameStop could emerge as a smaller but structurally healthier company. If collectibles growth slows before the traditional gaming decline stabilizes, the top-line problem will return to the center of the investment debate.
The eBay Position Has Turned GameStop Into Something Much Stranger Than a Retailer
Then there is the balance sheet. GameStop ended the quarter with $5.4 billion in cash, cash equivalents, marketable securities, digital assets and related receivables, including approximately $5.1 billion in cash and securities. Separately, it owned about 43.4 million eBay shares valued at $4.9 billion as of August 1.
That makes GameStop increasingly difficult to analyze using conventional retail metrics. The eBay position alone is several times larger than GameStop’s quarterly revenue and can generate enormous swings in reported earnings. This quarter included a $166.3 million gain on the derivative asset and a $72.1 million unrealized gain on the direct equity position, while digital assets produced a $75 million loss.
The company also completed privately negotiated exchanges on September 3 that retired approximately $1.4 billion of convertible senior notes, reducing total long-term debt to about $2.8 billion. That move leaves GameStop with considerable liquidity while simplifying part of a capital structure that had grown more complicated through multiple financing transactions.
For shareholders, the implication is unavoidable: buying GME increasingly means buying both an operating company and Ryan Cohen’s capital-allocation strategy. The quarterly retail results matter more now because they are improving, but billions of dollars sitting in eBay, cash, securities and digital assets can still dominate changes in shareholder value.
Raising the Outlook May Be the Strongest Signal Management Gave Investors
GameStop’s new guidance arguably provides the clearest evidence that management believes the operating improvement is durable enough to continue. The company now expects fiscal 2026 adjusted EBITDA above $650 million, up from its June target of more than $600 million. For comparison, adjusted EBITDA was $345.4 million in fiscal 2025, according to Barron’s.
GameStop has already produced $339.7 million of adjusted EBITDA during the first six months of fiscal 2026, meaning it has crossed more than half of its new minimum full-year target before reaching the seasonally important holiday period. The company generated $174 million in Q2 alone, compared with $75.7 million a year earlier.
That guidance upgrade matters more than the $238 million eBay gain because adjusted EBITDA strips out many of the investment-related items that make net income so volatile. Management is effectively telling investors that stronger profitability is not expected to disappear simply because eBay’s share price moves differently next quarter.
The market’s initial response was restrained rather than euphoric. GameStop shares finished Tuesday around $18.94 and were slightly lower in post-market trading despite the stronger outlook, suggesting much of the quarter had already been anticipated after the company published preliminary net-income and balance-sheet figures at the end of August.
That muted reaction may actually put more emphasis on the next report. Investors have now seen the preliminary profit surprise and the full operating details. From here, GameStop has to demonstrate repetition.
GameStop Stock Earnings: This Was More Than an eBay Quarter
The easiest way to dismiss these results is to point at the $238 million eBay gain and conclude that GameStop’s enormous net profit is mostly financial engineering. That interpretation contains some truth—but it misses the strongest part of the report.
GameStop generated record second-quarter operating income, expanded gross margin by more than 14 percentage points, cut SG&A by roughly $32 million, more than doubled adjusted EBITDA and turned collectibles into 45% of its sales base. Those are operating achievements, not fluctuations in an investment portfolio.
The bearish case has not disappeared. Revenue is still shrinking quickly, video-game and pre-owned sales remain under pressure, the investment portfolio creates substantial volatility and the increasingly concentrated bet on collectibles brings its own risks. Investors also still have limited visibility into how Cohen intends to use GameStop’s extraordinary balance sheet over the longer term.
But after these GameStop stock earnings, the debate has changed. The question is no longer simply whether GameStop can survive while sitting on a mountain of cash. The company has now shown that its remaining stores and rapidly expanding collectibles business can produce serious operating profits.
If collectibles keep growing and margins remain near current levels, GameStop could be undergoing a genuine business-model transformation beneath all the noise surrounding eBay, Bitcoin and meme-stock trading.
If those margins prove temporary, Tuesday’s record quarter may instead become the high-water mark.
The next earnings report will tell investors which version of GameStop they actually own.
Disclaimer
This article is for informational purposes only and does not constitute financial or investment advice. Readers should conduct their own research and consider consulting a qualified financial advisor before making investment decisions. This article was researched and drafted with the support of AI, then reviewed, fact-checked and edited by the editorial team before publication.
