TTWOTake-Two Interactive

2024 in On January 5, 2026, the E.U. and U.K. Although OECD released new administrative guidance outlining a "side-by-side" arrangement following agreement on key elements by the OECD/G20 Inclusive Framework on Pillar Two. It provides new safe harbors for U.S. has not yet enacted multinational companies which would exempt U.S.-parented groups from two of the three Pillar Two legislation, many other countries top up taxes, extend the current Transitional Country-by-Country Reporting Safe Harbor by one year through the end of our fiscal year ending March 31, 2028, and make the Simplified Effective Tax Rate Safe Harbor permanent. The tax law is complex and additional interpretive guidance may be issued that could affect the interpretations and assumptions we have implemented similar legislation with varying effective dates in the future. Many aspects made, as well as actions we may take as a result of additional Pillar Two became effective for the fiscal year ended March 31, 2025. It is possible that Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than the 15% minimum rate and could have an adverse impact on our effective tax rate, tax payments, and financial condition in future periods. Additionally, certain jurisdictions have modified or are seeking to modify their tax incentives to align with the Pillar Two criteria. The U.S. has not yet enacted Pillar Two legislation, including aligning certain tax incentives with Pillar Two requirements and there is a risk that the under taxed profits rules would allow foreign countries to tax U.S. companies on U.S. income. Changes, or the failure to change tax incentive provisions to be Pillar Two compliant could have an adverse impact. guidance. We will continue to monitor legislative and regulatory developments to assess the potential impact. impact of Pillar Two. In addition, an increasing number of countries have enacted, or are considering enacting, revenue-based taxes on digital services. These digital services taxes target various business activities, including online advertising and, in some cases, video game sales. While the scope and applicability of these taxes often remains unclear, digital services taxes that ultimately apply to us could have an adverse impact on our business.

We determine if an arrangement is a lease at contract inception. If there is an identified asset in the contract (either explicitly or implicitly) and we have control over its use, the contract is (or contains) a lease. In certain of our lease arrangements, primarily those related to our data center arrangements, judgment is required in determining if a contract contains a lease. For these arrangements, there is judgment in The assessment involves evaluating if the arrangement provides us with an asset that is physically distinct, or that represents substantially all of the capacity of the asset, and if we have the right to direct the use of the asset. Lease assets and liabilities are recognized based on the present value of future lease payments over the lease term at the commencement date. Included If there is an identified asset in the lease liability are future lease payments that are fixed, in-substance fixed, contract (either explicitly or payments based on an index or rate known at implicitly) and we have control over its use, the commencement date contract is (or contains) a lease. This assessment is required for certain of the lease. Variable lease payments are recognized as lease expenses as incurred. The operating lease right-of-use (“ROU”) asset also includes any lease payments made prior our arrangements, primarily those related to commencement, initial direct costs incurred, and lease incentives received. our data centers.

Net revenue from mobile increased by $194.0 $391.0 and accounted for 52.2% 50.1% of our total net revenue in the fiscal year ended March 31, 2025, 2026, as compared to 51.4% 52.2% in the prior year. year period. The increase was primarily due to an increase in driven by higher net revenue from Match Factory! Color Block Jam and Toon Blast. These increases were partially offset by a decrease in our Grand Theft Auto franchise, Merge Dragons!, and as a result of a divestiture. Net revenue from console games decreased increased by $68.2 $498.2 and accounted for 37.3% 39.0% of our total net revenue in the fiscal year ended March 31, 2025, 2026, as compared to 40.5% 37.3% in the prior year. year period. The decrease increase was primarily due to a decrease in driven by higher net revenue from our Grand Theft Auto and NBA 2K franchises, and LEGO 2K Drive, which released in May 2023. These decreases were partially offset by an increase in net revenue from TopSpin 2K25, which released in April 2024, and our Sid Meier's Civilization franchise. Borderlands franchises. Net revenue from PC and other increased by $158.2 $133.6 and accounted for 10.5% 10.9% of our total net revenue in the fiscal year ended March 31, 2025, 2026, as compared to 8.1% 10.5% in the prior year. year period. The increase was primarily due to an increase in driven by higher net revenue from our Borderlands, Grand Theft Auto, and NBA 2K franchises, partially offset by lower net revenue from our Sid Meier's Civilization franchise; our Risk of Rain franchise, which was acquired in connection with our acquisition of Gearbox in June 2024 (refer to Note 20 - Acquisitions); and our Grand Theft Auto and NBA 2K franchises. franchise.