GameStop (GME) shares extended their post-earnings rally on Thursday, as investors focused on the company's improved profitability outlook rather than the headline net income figure. The stock traded at $20.35 by 2:20 p.m. ET, up 2.3% on the day and 7.7% from Tuesday's close, according to delayed NYSE data.
The retailer now expects fiscal 2026 adjusted EBITDA to exceed $650 million, up from its previous guidance of at least $600 million. This upward revision reflects a fundamental shift in the company's sales mix and a continued focus on cost discipline.
Why the New EBITDA Target Looks Achievable
GameStop generated $339.7 million in adjusted EBITDA during the first half of the fiscal year, according to its second-quarter release. To hit the new full-year floor, the company needs to deliver more than $310.3 million in the second half—a target that historically aligns with the holiday quarter, though management notes seasonality has moderated.
Second-quarter adjusted EBITDA more than doubled to $174.0 million from $75.7 million a year earlier. Operating income reached a record $160.2 million for the quarter, up from $66.4 million, while adjusted operating income came in at $158.7 million. These figures exclude the impact of investment gains and losses, providing a clearer picture of the underlying business.
Collectibles Become the Core Engine
Collectibles sales surged 57% to $356.3 million, representing 45.1% of total revenue—up sharply from 23.4% a year ago. Management has expanded floor space and installed new fixtures for the category, while its partnership with PSA gives stores a role in card authentication and grading.
This shift helps explain how gross profit could rise even as net sales fell 18.7% to $790.2 million. Gross profit increased 21.9% to $345.0 million, while SG&A expenses declined 14.5% to $187.1 million. The company is not relying on interest income or investment gains to drive operating profit.
However, the growing reliance on collectibles introduces concentration risk. Demand for trading cards and pop-culture merchandise can be cyclical, and GameStop itself identifies trading card popularity as a potential variable affecting results. With collectibles now nearly half of sales, investors should track this segment separately from the shrinking video-game base.
Net Income Is Not the Full Picture
GAAP net income rose to $298.7 million from $168.6 million, but several large investment items sit below operating income. The quarter included a $166.3 million gain on the eBay derivative, a $72.1 million unrealized gain after conversion to eBay shares, and a $75.0 million loss on digital assets. Adjusted net income, which strips out these items, was $161.1 million.
At August 1, GameStop held approximately 43.4 million eBay shares valued at around $4.9 billion. With EBAY trading at $105.14 on Thursday, that stake would be worth roughly $4.56 billion—about $340 million below the quarter-end mark. This is an intraday estimate, not a forecast of future reported gains or losses.
The balance sheet also showed $5.4 billion in cash, marketable securities, digital assets, and related receivables at quarter-end. However, a subsequent Form 10-Q filing revealed that GameStop used about $358.4 million in cash and issued approximately 55.5 million shares to retire $1.4 billion of convertible notes, reducing long-term debt to about $2.8 billion but causing material dilution.
What Could Drive Another Leg Higher?
The most straightforward upside scenario is that collectibles remain strong through the holidays, cost discipline holds, and second-half adjusted EBITDA clears $310.3 million without further deterioration in the underlying sales base. In that case, the new guidance could prove conservative.
The bear case is that investors are effectively paying for two businesses with very different risk profiles: a profitable but contracting retailer and a concentrated investment vehicle. A falling eBay price, Bitcoin volatility, or an expensive acquisition could offset store-level gains. GameStop also authorized a $2 billion repurchase program but had not bought any shares by quarter-end, instead issuing stock in the debt exchange.
For GME, the $650 million EBITDA floor is the next operating hurdle, not a complete valuation answer. The more durable signal will be whether GameStop can sustain gross profit growth as collectibles become the dominant revenue stream—and whether management's capital allocation adds more per-share value than the dilution it creates.
