GameStop Q2 margins jump as collectibles drive revenue growth
GameStop reported a significant margin expansion in Q2 FY2027, driven by a 57% surge in collectibles sales that pushed gross margins to 43.7%.
GameStop (NYSE:GME) reported second-quarter fiscal 2027 revenue of $790.2 million, exceeding market estimates by 4.41%. Adjusted earnings per share matched consensus at $0.27, while adjusted EBITDA climbed to $174 million from $75.7 million in the same period last year. The primary driver of this improvement was a substantial mix shift toward higher-margin goods, specifically collectibles, which now represent the largest single revenue category for the retailer.
Collectibles revenue reached $356.3 million, marking a 57% year-over-year increase and accounting for 45.1% of total net sales. This structural change lifted the company’s gross margin from 29.1% to 43.7%. According to data from GN markets/earnings (en-US), this margin expansion is the core operational improvement behind the quarter's results, distinguishing the current performance from the previous year's lower-margin video game focus.
Management raises full year EBITDA outlook
Looking ahead, GameStop management raised its fiscal 2026 Adjusted EBITDA guidance to exceed $650 million. This forward-looking figure provides a concrete benchmark for the company's operational trajectory. The increased guidance reflects management's confidence in the sustained strength of the collectibles segment and the associated margin benefits embedded in the current sales mix.
Capital position supports strategic flexibility
The balance sheet remains a key component of the company's value proposition. GameStop holds $4.85 billion in cash, providing significant liquidity for future operations. Additionally, the company has a $2 billion share buyback authorization available to return capital to shareholders. These financial resources stand alongside an equity stake in eBay valued at approximately $4.9 billion, which remains a substantial asset on the books pending resolution of capital allocation strategies.
Market valuation reflects operational turnaround
Despite the operational improvements, GME shares have underperformed, falling 5.93% year-to-date and 18.65% over the past year. The stock closed at $18.89, a level that some market participants view as undervalued relative to the new margin profile. The 14x forward multiple cited in recent analyses is considered defensible by those who highlight the company's margin advantage over competitors like Best Buy in the collectibles space.
