GameStop stock jumps after record profit, $2B buyback approval

GameStop GME shares rose on Wednesday after the video game retailer reported record quarterly earnings and unveiled a new $2 billion share repurchase program, even as its recent bid to acquire eBay failed to gain traction.

The company's stock climbed 6.12% to $22.21on Wednesday after it posted what it described as the highest quarterly net income in its history and the strongest first-quarter operating profit on record.

GameStop reported first-quarter net income of $389.6 million, or 66 cents per share, compared with $44.8 million, or 9 cents per share, during the same period a year earlier.

Revenue increased 14% year over year to $835.3 million from $732.4 million, with the company attributing the growth primarily to strength in its collectibles business.

Adjusted net income, which excludes impairments, gains on digital assets and related receivables, unrealized gains on derivative assets, and certain other items, rose to $179.3 million from $73 million a year ago.

On an adjusted basis, the company earned 30 cents per share.

Collectibles business drives sales growth

The latest results suggest GameStop's ongoing efforts to diversify beyond traditional video game retailing are gaining momentum.

The company said year-over-year sales growth was largely driven by its collectibles segment, an area it has increasingly emphasized as physical game sales across the industry have come under pressure.

Operating income reached $143.3 million, marking the company's strongest first-quarter operating performance on record.

The earnings report comes despite limited Wall Street coverage of the company.

Board approves new $2 billion buyback program

Alongside the earnings release, GameStop announced that its board of directors had approved a new $2 billion stock repurchase authorization.

The program will remain in effect through June 2, 2029, replacing a previous authorization established in March 2019.

Share buyback programs typically reduce the number of shares outstanding and can provide additional support for earnings per share over time.

The announcement added to positive investor sentiment following the stronger-than-expected profitability and revenue growth reported for the quarter.

eBay takeover bid remains in focus

The earnings release follows GameStop's recent attempt to acquire eBay in a transaction valued at approximately $56 billion in cash and stock.

Late last month, eBay said its board and independent advisers had reviewed the proposal and decided to reject it, citing uncertainty surrounding financing, leverage, and the leadership structure of a combined company.

Despite the rejection, GameStop subsequently disclosed that it had increased its ownership stake in eBay to 6.55% of the company's outstanding shares, up from roughly 5%.

The retailer has also recently asked shareholders to approve an increase in its authorized share count as well as a 100% performance-based option award for Chief Executive Officer Ryan Cohen.

While the proposed acquisition did not move forward, GameStop's latest results and substantial buyback authorization shifted investor attention back toward the company's improving financial performance and evolving capital allocation strategy.