GameStop Corp. (NYSE: GME), the world’s largest video game retailer, saw its shares surge by 11% during today’s trading session. The stock rallied after the company smashed Q4 earnings expectations and announced plans to invest in Bitcoin, capitalizing on its massive cash reserves. The bullish momentum has driven GME to over 100% gains in the past year, although the stock remains down 16% in 2025.
Q4 Earnings Blow Past Estimates
GameStop’s Q4 results exceeded Wall Street’s expectations, thanks to its aggressive cost-cutting measures. The company reported net income of $131.3 million or $0.30 per share, far outpacing the anticipated EPS of $0.09. This marked a significant improvement from the $63.1 million or $0.22 per share reported in the same quarter last year.
However, the strong earnings came despite a revenue miss. Q4 sales came in at $1.28 billion, falling short of the $1.45 billion consensus estimate. Sales also declined from $1.79 billion in the previous year’s quarter, reflecting ongoing struggles with revenue growth as more gamers shift to digital purchases and face competition from major retailers like Amazon (AMZN), Walmart (WMT), and Best Buy (BBY).
Full-Year Performance: Rising Profits Despite Falling Sales
For the fiscal year 2025, GameStop posted annual earnings of $0.33 per share, a substantial increase from $0.06 in FY24. Yet, total revenue continued its downward trend, dropping to $3.82 billion from $5.27 billion the prior year.
The decline in sales highlights the broader industry trend of physical game sales losing ground to digital downloads. However, GameStop’s ability to drive profits through efficiency and cost controls is giving investors renewed optimism.
Massive Cash Reserves and Bitcoin Investment Plans
One of the most notable revelations from GameStop’s earnings call was its decision to invest in Bitcoin. This move comes as the company’s cash and equivalents have swelled to $4.75 billion, a massive increase from $921.7 million a year ago.
GameStop’s balance sheet has significantly strengthened, with total assets of $5.87 billion compared to $945.6 million in total liabilities. With a strong cash position, the company is looking to diversify and potentially benefit from the rising popularity of cryptocurrencies.
The Bitcoin investment strategy could serve as a hedge against inflation and introduce new growth potential. However, it also adds risk and volatility to GameStop’s portfolio, making it a bold but uncertain move.
Should Investors Chase the Rally?
While the post-earnings surge in GME stock may be tempting, investors should consider the valuation risks. Even after the earnings beat, GameStop trades at a premium, with its current price around $28 per share.
Although the company’s turnaround efforts and balance sheet improvement are commendable, the consistent decline in revenue remains a concern. Investors should be cautious about chasing the current rally, as there could be better buying opportunities ahead.
Bottom Line
GameStop’s impressive Q4 earnings and growing cash reserves have reignited investor confidence, driving the stock higher. The company’s decision to invest in Bitcoin adds a new layer of potential growth but also introduces additional volatility.
Despite GameStop’s operational improvements, its revenue challenges persist, making it a stock to watch carefully. Long-term investors may want to wait for a better entry point, while short-term traders could benefit from the current bullish momentum.
