GameStop Corp. surged over 8% in after-hours trading on Tuesday (Wednesday AEDT) despite reporting a significant decline in third-quarter revenue as the video game retailer continues to face challenges amid reduced discretionary spending and a shift towards online shopping platforms.
The company’s revenue dropped 20% year-over-year to US$860 million, down from $1.08 billion in the same quarter last year.
Despite the revenue slump, GameStop delivered net income of $17.4 million for the quarter, a sharp turnaround from a $3.1 million net loss a year ago, largely driven by effective cost management, including reductions in selling, general, and administrative (SG&A) expenses.
The unexpected profitability boosted investor confidence, as reflected in the post-market trading rally.
GameStop’s struggles reflect broader industry trends, including weaker hardware sales and intense competition from e-commerce giants like Amazon and eBay.
The company also contends with a challenging macroeconomic environment, marked by persistent inflation and a slow recovery in gaming sector demand.
By 8:55 am AEDT (9:55 pm GMT), Gamestop's stock price (GME) was US$28.87, up 6.9% from the close of regular trade. The stock saw a day low of $26.85 and a day high of $28.39. It has a market cap of $11.49 billion.