The meme stock darling posted a massive net income boost thanks to a $238 million gain from its eBay investment, while amending $1.4 billion in convertible notes.
GameStop’s revenue is shrinking. Its profits are ballooning. And the reason has less to do with selling video games than it does with owning a chunk of eBay.
The company released preliminary unaudited results for its fiscal second quarter ending August 1, 2026, showing net sales projected between $780 million and $800 million. That’s a meaningful step down from the $972.2 million it posted in the same quarter last year, a decline driven by store closures, its exit from France, and the fading tailwind of the Nintendo Switch 2 launch.
Profits tell a different story
While the top line contracted, GameStop’s bottom line went in the opposite direction. Operating income is expected to land between $150 million and $170 million, more than double the $66.4 million from Q2 2025.
Net income looks even more dramatic, projected at $290 million to $310 million. That’s roughly 75% higher than the $168.6 million posted a year ago.
The engine behind that profit surge: a net gain of approximately $238 million tied to GameStop’s investment in eBay. The company converted a derivative position into direct ownership of 43.4 million eBay shares, a stake valued at roughly $4.947 billion at quarter’s end.
The eBay gains didn’t arrive without company. GameStop also disclosed an approximately $75 million loss on digital assets during the quarter, partially offsetting the investment windfall.
Cash position shifts as eBay bet crystallizes
GameStop’s cash and cash equivalents are projected between $5.05 billion and $5.07 billion, a steep drop from the $8.694 billion sitting on the balance sheet in Q2 2025.
The decline makes sense when you trace where the money went. Converting a derivative into direct equity ownership means cash got swapped for stock, in this case nearly $5 billion worth of eBay shares.
Convertible notes get a makeover
Alongside the earnings preview, GameStop announced an amendment to its convertible senior notes. The revised terms affect roughly $1.4 billion in aggregate principal amount.
Under the new structure, the exchange will result in the issuance of approximately 55.5 million shares, with about $358.4 million settled in cash from existing resources. The deal is expected to close around September 3, 2026.
After the exchange, approximately $2.8 billion of the original convertible notes will remain outstanding.
The retail business keeps contracting
Strip away the investment gains and financial engineering, and the core retail picture remains challenging. A roughly 18% to 20% year-over-year revenue decline isn’t trivial, even when it’s partly by design through planned store closures and international divestitures.
The full earnings report on September 8 should provide clearer visibility into segment-level performance and management’s forward guidance. Until then, investors are left parsing a company that lost roughly $175 million in quarterly revenue but nearly doubled its net income.
