Gamestop's 1Q 2025 Earnings Preview: What To Expect

GameStop's Q1 2025 revenue is projected to fall 14.5% year-on-year to US$754.2 million, down from US$881.8 million a year earlier. Despite the weaker topline, the company is expected to report a net profit of US$20.9 million, marking a sharp reversal from the US$36.7 million loss a year ago. However, this turnaround is primarily driven by cost reductions rather than improved sales.

A more fundamental business shift—consistent improvements in both revenue and profitability, along with stronger margins—may be needed to support a sustained trend reversal, rather than short-lived rallies driven by market speculation

Share price remains stuck in a months-long range

In May 2024, GameStop’s share price surged nearly 500% in just two weeks, fuelled by the return of "Roaring Kitty"—the influential figure behind the 2021 meme stock frenzy. However, with the rally driven largely by market speculation and social media hype rather than meaningful improvements in GameStop’s fundamentals, the gains quickly faded within a short span of one month. The stock has since entered a prolonged consolidation phase, marked by declining volumes and waning trader interest.

Fundamentals and growth prospects in focus as speculation fades

For Q4 2024, GameStop’s results showed a sharp 28.5% year-over-year revenue decline to $1.283 billion from $1.794 billion, with the company relying on cost-cutting efforts to deliver improved profitability. Particularly, the surge in net income to US$136 million is supported by operational streamlining – the exit from Italy and Germany, whose impact will be one-off.

Looking to its Q1 2025 results, GameStop’s share price may face downside pressure if it fails to deliver a revenue beat—as seen in the 12% post-earnings drop in September 2024 when revenue disappoints. While the collectibles segment shows some modest momentum, GameStop’s core business in traditional gaming hardware and software continues to underperform amid fierce competition from online retail giants like Amazon and eBay.

Beyond the headline numbers, investors will be watching closely for signs of sustainable growth. Previously, the stock plunged over 22% after GameStop announced a US$1.3 billion convertible bond offering to fund Bitcoin purchases—a move that drew scepticism. Market participants were clearly hoping for evidence of a strengthening core business, rather than speculative pivots into crypto to mask its ongoing struggles in its retail operations.

Effect of short-squeeze may be less prominent now

The reason behind GameStop’s dramatic share price surge in January 2021 was no secret—it was largely driven by a short squeeze and gamma squeeze, as market makers scrambled to hedge call option exposure, further fuelling the rally. At its peak, short interest hit nearly 285 million shares, helping propel the stock by an astonishing 2,252% in just two weeks. Today, however, the odds of a similarly outsized move appear lower, with short interest down to around 50 million shares—suggesting any future short-covering would likely have a far more muted impact than the explosive dynamics of early 2021.

Technical Analysis – Break above consolidation range needed for bullish conviction

GameStop’s share price has been trading within a prolonged consolidation range, with relatively low volumes reflecting subdued traders’ interest since its May/June 2024 surge. Near-term momentum appears to be improving, as the daily Relative Strength Index (RSI) finds some support above its midline. The stock is currently retesting immediate horizontal resistance at the US$29.33 level, while a more significant hurdle awaits near the upper boundary of the range at the US$33.70 level. A decisive breakout above this level on stronger volume would likely be required to confirm renewed bullish conviction.