ATVI Activision Blizzard Inc

Take-Two Interactive Software Inc. Wednesday said it didn't benefit as much this year from post-holiday momentum, and it signaled business will slow in the current year.

The videogame company, which publishes the "Grand Theft Auto" and "NBA 2K" franchises, said adjusted revenue fell 20% to $342.5 million in its fiscal fourth quarter from a year earlier. Adjusted profit fell to 46 cents a share from 49 cents.

Take-Two's results, though, handily beat Wall Street's expectations, which were marginally more optimistic than what the company projected three months ago. Analysts had expected adjusted revenue of $306 million and profit of 26 cents a share, according to Thomson Reuters.

Royalties paid as part of profit-sharing deals with key employees were $72.6 million, significantly lower than $271.9 million a year before.

Under U.S. accounting rules, videogame companies defer some revenue from certain online-enabled games. Adjusted revenue counts all sales in the quarter, and can exclude other factors Wall Street and companies don't consider a regular part of business.

Take-Two said it had a tough comparison against the prior year, when the company launched a new game called "Evolve" and continued to rack up sales from a meatier portfolio of games released during the holidays months earlier. The company's release slate for the latest quarter wasn't as robust and it didn't put out any blockbusters in the third quarter.

Still, the industry's shift to digital downloads—and the fatter profit margins that come with them -- continues to help companies such as Take-Two, Electronic Arts Inc. and Activision Blizzard Inc. outperform Wall Street's expectations.

In the fourth quarter, Take-Two's adjusted sales of full-game downloads, expansion packs and virtual goods sold inside games rose 12% to $226.6 million. Digital made up 66% of adjusted revenue in the quarter, compared with 47% a year earlier.

The increase in digital sales was driven by new content released for "Grand Theft Auto Online," Chief Executive Strauss Zelnick said. The game updates are free, he said, "but it does give consumers an opportunity to re-engage and buy virtual currency."

Take-Two's outlook, though, suggests a tougher road ahead.

For the upcoming full year, Take-Two expects adjusted revenue of $1.5 billion to $1.6 billion, on par with fiscal year 2016's haul of $1.56 billion. But it expects only $1 to $1.25 a share in profit on an adjusted basis, down sharply from $1.96 in fiscal 2016.

For the first quarter, Take-Two expects adjusted revenue of $225 million to $260 million, down from $366.4 million in the prior year. It expects a loss of 30 cents to 40 cents a share on an adjusted basis, compared with profit of 31 cents a share in the year-earlier quarter.

"We see the results moderating in this year," Mr. Zelnick said, citing a drop-off in player engagement in "Grand Theft Auto Online," which came out in September 2013. "It's natural at a certain point in time that the [game's] results would moderate."

Under generally accepted accounting principles, Take-Two's revenue in the fourth quarter rose to $377.2 million from $300.1 million. The company swung to a profit of $46.4 million, or 48 cents a share, from a year-earlier loss of $242.8 million, or $2.99 a share.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

(END) Dow Jones Newswires

May 18, 2016 17:55 ET (21:55 GMT)

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