TAKE TWO INTERACTIVE SOFTWARE INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Take-Two Interactive Software, Inc. (the "Company," "we," "us," or similar pronouns) was incorporated in the state of Delaware in 1993. We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, and Zynga. Our products are currently designed for console gaming systems, mobile, including smartphones and tablets, and personal computer ("PC"). We deliver our products through digital download, online platforms, cloud streaming services, and physical retail.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements are unaudited and include the accounts of the Company and its wholly-owned subsidiaries and, in our opinion, reflect all normal and recurring adjustments necessary for the fair presentation of our financial position, results of operations, and cash flows. Interim results may not be indicative of the results that may be expected for the full fiscal year. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of these Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in these Condensed Consolidated Financial Statements and accompanying notes. As permitted under U.S. GAAP, interim accounting for certain expenses, including income taxes, is based on full year assumptions when appropriate. Actual results could differ materially from those estimates, which may affect economic conditions in a number of different ways and result in uncertainty and risk.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), although we believe that the disclosures are adequate to make the information presented not misleading. These Condensed Consolidated Financial Statements and accompanying notes should be read in conjunction with our annual Consolidated Financial Statements and the notes thereto, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.

Certain immaterial reclassifications have been made to prior period amounts to conform to the current period presentation.

Recently Issued Accounting Pronouncements

Government Grants

In December 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The ASU establishes the accounting and presentation for government grants received by a business entity. ASU 2025-10 is effective for fiscal years and interim periods within fiscal years beginning after December 15, 2028 (April 1, 2029 for the Company). We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements and related disclosures.

Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU amends the existing standard to remove all references to prescriptive and sequential software development project stages. Under this guidance, eligible software development costs will begin capitalization when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. In evaluating whether it is probable the project will be completed, management is required to consider whether there is significant uncertainty associated with the development activities of the software.

ASU 2025-06 is effective for fiscal years beginning after December 15, 2027 (April 1, 2028 for the Company) and interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual reporting period. Entities may adopt the guidance using a prospective, retrospective, or modified retrospective approach. We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements and related disclosures, including the appropriate transition method.

Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional, disaggregated disclosure about certain income statement expense line items. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 (April 1, 2027 for the Company) and interim periods within fiscal years beginning after December 15, 2027 (April 1, 2028 for the Company). We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements and related disclosures.

2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

Timing of recognition

Net revenue recognized at a point in time is primarily comprised of the portion of revenue from software products that is recognized when the customer takes control of the product (i.e. upon delivery of the software product).

Net revenue recognized over time is primarily comprised of revenue from our software products that include game related services, separate virtual currency transactions, and in-game purchases, which are recognized over an estimated service period. Net revenue recognized over time also includes in-game advertising, which is recognized over a contractual term.

Net revenue by timing of recognition was as follows:

Content

Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising.

Full game and other revenue primarily includes the initial sale of full game software products, which may include offline and/or significant game related services.

Net revenue by content was as follows:

Platform

Net revenue by platform was as follows:

Distribution Channel

Our products are delivered through digital online services (digital download, online platforms, and cloud streaming) and physical retail and other. Net revenue by distribution channel was as follows:

Deferred Revenue

We record deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations. The balance of deferred revenue, including current and non-current balances as of September 30, 2026 and March 31, 2026 were $1,042.1 and $1,189.6, respectively. For the six months ended September 30, 2026, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the three months ended September 30, 2026 and 2025, $355.8 and $322.2, respectively, of revenue was recognized, that was included in the deferred revenue balance at the beginning of each respective period. During the six months ended September 30, 2026 and 2025, $971.5 and $855.4, respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of September 30, 2026, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $1,492.5, which includes our deferred revenue balances and amounts to be invoiced and recognized as revenue in future periods. We expect to recognize approximately $1,117.9 of this balance as revenue over the next 12 months, and the remainder thereafter. This balance does not include an estimate for variable consideration arising from sales-based royalty license revenue in excess of the contractual minimum guarantee.

As of September 30, 2026 and March 31, 2026, our contract asset balances were $0.0 and $89.7, respectively. The decrease was driven by our right to consideration becoming unconditional.

Accounts Receivable sale program

On May 19, 2025, we entered into an arrangement to sell designated pools of high credit quality accounts receivable under an uncommitted accounts receivables purchase facility in an initial aggregate amount of up to $215.0 to an unaffiliated financial institution on a true sale basis. As these accounts receivable are sold without recourse, we do not retain the associated risks of lack of payment due to insolvency of the account debtors following the transfer of such accounts receivable to such financial institution. We will continue to collect cash from our account debtors and remit to the financial institution. We will derecognize the carrying value of the financial assets transferred and recognize a net gain or loss on the sale under Interest and other, net on our Consolidated Statements of Operations. The proceeds from these arrangements will be reflected as cash provided by operating activities in the Consolidated Statements of Cash Flows.

No receivables were sold under this facility during the six months ended September 30, 2026. We may utilize this facility in future periods depending on cash flow needs and market conditions.

3. MANAGEMENT AGREEMENT

We have a management agreement (the "2022 Management Agreement") with ZMC Advisors, L.P. (“ZMC”), which became effective May 23, 2022 and replaced our previous management agreement. Pursuant to the 2022 Management Agreement, ZMC will continue to provide financial and management consulting services to the Company through March 31, 2029, Strauss Zelnick continues to serve as Executive Chairman and Chief Executive Officer of the Company, and Karl Slatoff continues to serve as President of the Company. The 2022 Management Agreement provides for an annual management fee of $3.3 for the term of the agreement and a maximum annual bonus opportunity of $13.2 for the term of the agreement, based on the Company achieving certain performance thresholds. In connection with the 2022 Management Agreement, we have granted and expect to grant time-based, market-based, and performance-based restricted stock units to ZMC.

In consideration for ZMC's services, we recorded consulting expense within General and administrative expenses on our Condensed Consolidated Statements of Operations of $2.7 and $3.9 during the three months ended September 30, 2026 and 2025, respectively, and $5.2 and $6.6 during the six months ended September 30, 2026 and 2025, respectively. We recorded stock-based compensation expense for restricted stock units granted to ZMC, which is also included in General and administrative expenses, of $16.7 and $16.3 during the three months ended September 30, 2026 and 2025, respectively, and $32.6 and $31.0 during the six months ended September 30, 2026 and 2025, respectively.

In connection with the 2022 Management Agreement, we granted restricted stock units (in thousands) to ZMC as follows:

(1) Represents the maximum number of shares eligible to vest

Time-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2027 will vest on June 1, 2027, June 1, 2028, and June 1, 2029, and those granted in fiscal year 2026, partially vested on June 1, 2026 and will also vest in part on June 1, 2027 and June 1, 2028. Time-based restricted stock units granted in fiscal year 2025, partially vested on June 1, 2025 and June 1, 2026 and will also vest in part on June 1, 2027.

Market-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2027 are eligible to vest on June 1, 2029, those granted in fiscal year 2026 are eligible to vest on June 1, 2028, and those granted in fiscal year 2025 are eligible to vest on June 1, 2027. Market-based restricted stock units are eligible to vest based on the Company's Total Shareholder Return (as defined in the relevant grant agreement) relative to the Total Shareholder Return (as defined in the relevant grant agreement) of the companies that constitute the NASDAQ 100 index under the 2022 Management Agreement (as defined in the relevant grant agreement) as of the grant date measured over athree-year period, as applicable. To earn the target number of market-based restricted stock units (which represents 50% of the number of the market-based restricted stock units set forth in the table above), the Company must perform at the 50 th percentile, with the maximum number of market-based restricted stock units earned if the Company performs at the 75 th percentile.

Performance-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2027 are eligible to vest on June 1, 2029, those granted in fiscal year 2026 are eligible to vest on June 1, 2028, and those granted in fiscal year 2025 are eligible to vest on June 1, 2027. The performance-based restricted stock units are tied to "RCS" (as defined in the relevant grant agreement) and are eligible to vest based on the Company's achievement of certain performance metrics (as defined in the relevant grant agreement) of "RCS" measured over athree-year period. The target number of performance-based restricted stock units that may be earned pursuant to these grants is equal to 50% of the grant amounts set forth in the above table (the numbers in the table represent the maximum number of performance-based restricted stock units that may be earned). At the end of each reporting period, we assess the probability of each performance metric and upon determination that certain thresholds are probable, we record expense for the unvested portion of the shares of performance-based restricted stock units.

The unvested portions of time-based, market-based, and performance-based restricted stock units held by ZMC were 1.1 and 1.3 as of September 30, 2026 and March 31, 2026, respectively. During the six months ended September 30, 2026,0.4 restricted stock units previously granted to ZMC vested, and 0.1 restricted stock units were forfeited by ZMC.

4. FAIR VALUE MEASUREMENTS

Recurring fair value measurements

The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, prepaid expenses and other, accounts payable, and accrued expenses and other current liabilities, approximate fair value because of their short maturities.

We follow a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of "observable inputs" and minimize the use of "unobservable inputs." The three levels of inputs used to measure fair value are as follows:

•Level 1—Quoted prices in active markets for identical assets or liabilities.

•Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data.

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which is measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the six months ended September 30, 2026.

Nonrecurring fair value measurements

We hold equity investments in certain unconsolidated entities without a readily determinable fair value. These strategic investments represent less than a 20% ownership interest in each of the privately-held affiliates, and we do not maintain significant influence over or control of the entities. We have elected the practical expedient in Topic 321, Investments-Equity Securities, to measure these investments at cost less any impairment, adjusted for observable price changes, if any. Based on these considerations, we estimate that the carrying value of the acquired shares represents the fair value of the investment. For certain of these investments where an observable transaction involves a different class of equity securities, we estimate fair value using an option pricing model calibrated to the observable transaction price, which included significant unobservable Level 3 inputs, such as expected volatility, time-to-liquidity event, discount for lack of marketability, and dividend yield.

During the six months ended September 30, 2026, we acquired non-voting equity shares in a privately-held entity with an initial value of $62.1 in a non-cash transaction.

At September 30, 2026, and March 31, 2026, we held $93.0 and $18.5, respectively, of such investments in Other assets within our Condensed Consolidated Balance Sheet.

5. SHORT-TERM INVESTMENTS

Our Short-term investments consisted of the following:

The following table summarizes the contracted maturities of our short-term investments at September 30, 2026:

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Our risk management strategy includes the use of derivative financial instruments to reduce the volatility associated with changes in foreign currency exchange rates on earnings, cash flows, and certain balance sheet amounts. We do not enter into derivative financial contracts for speculative or trading purposes. We recognize derivative instruments as either assets or liabilities on our Consolidated Balance Sheets, and we measure those instruments at fair value. We classify cash flows from derivative transactions as cash flows from operating activities in our Consolidated Statements of Cash Flows.

The following table shows the gross notional amounts of foreign currency derivative contracts:

For the three months ended September 30, 2026 and 2025, we recorded a gain of $4.8 and a loss of $0.6, respectively, and for the six months ended September 30, 2026 and 2025, we recorded a gain of $10.6 and a loss of $13.0, respectively, related to foreign currency derivative contracts in Interest and other, net on our Condensed Consolidated Statements of Operations. Our foreign currency derivative contracts are not designated as hedging instruments under hedge accounting and are used to reduce the impact of foreign currency on certain balance sheet exposures. These instruments are generally short-term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates.

7. SOFTWARE DEVELOPMENT COSTS AND LICENSES

Details of our capitalized software development costs and licenses were as follows:

During the three months ended September 30, 2026, $0.2 of impairment charges were recorded within Cost of revenue.

During the six months ended September 30, 2026, $43.6 of impairment charges were recorded within Cost of revenue and were primarily related to a decision not to proceed with further development of certain interactive entertainment software products.

8. INVENTORY

Inventory balances by category are as follows:

9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

10. DEBT

The components of Long-term debt, net on our Condensed Consolidated Balance Sheets were as follows:

The components of Short-term debt, net on our Condensed Consolidated Balance Sheets were as follows:

The interest expense as it relates to our debt is recorded within Interest and other, net in our Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2026 and 2025, respectively, and was as follows:

The following table outlines the aggregate amount of maturities of our borrowings, as of September 30, 2026:

For a complete description of the terms, conditions, and covenants governing our Senior Notes, Credit Agreement and Convertible Notes, refer to Note 11 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.

Senior Notes

The Senior Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations. Interest is payable semi-annually. During the six months ended September 30, 2026, we made interest payments of $57.4.

During the three months ended September 30, 2026 and 2025, we recognized $0.9 and $1.2, respectively, of amortization of debt issuance costs and $0.1 and $0.3, respectively, of amortization of the original issuance discount, within Interest and other, net. During the six months ended September 30, 2026 and 2025, we recognized $1.8 and $2.5, respectively, of amortization of debt issuance costs and $0.2 and $0.2, respectively, of amortization of the original issuance discount, within Interest and other, net.

On March 28, 2026, we repaid our 2026 Notes with a principal amount of $550.0, with proceeds from our May 2025 equity issuance.

On April 14, 2025, we repaid our 2025 Notes with a principal amount of $600.0, with proceeds from our June 2024 note offering.

Credit Agreement

Our credit agreement dated as of May 23, 2022, (as amended on May 19, 2025, the "2022 Credit Agreement"), provides a $1,000.0 unsecured five-year revolving credit facility that matures on May 19, 2030, subject to certain extension options.

Loans under the 2022 Credit Agreement will bear interest at a rate of (a)0.000% to 0.625% above an alternate base rate (7.00% at September 30, 2026) or (b)1.000% to 1.625% above Secured Overnight Financing Rate ("SOFR"), approximately 3.91% at September 30, 2026, which rates are determined by the Company's credit rating.

As of September 30, 2026, there wereno borrowings under the 2022 Credit Agreement, and we had approximately $997.9 available for additional borrowings.

Information related to availability on our 2022 Credit Agreement for each period was as follows:

Convertible Notes

In conjunction with the acquisition of Zynga on May 23, 2022, we assumed Zynga's outstanding 0.25% Convertible Senior Notes due 2024 (the “2024 Convertible Notes”) and 0.00% Convertible Senior Notes due 2026 (the “2026 Convertible Notes” and, together with the 2024 Convertible Notes, the “Convertible Notes”). We have elected to account for these Convertible Notes, which are considered derivatives, using the fair value option (Level 2) under ASC 825, as the Convertible Notes were initially recognized at fair value under the acquisition method of accounting in connection with the acquisition of Zynga and we do not expect significant fluctuations in fair value through maturity. Any subsequent adjustments are recorded within Interest and other, net.

2026 Convertible Notes. The 2026 Convertible Notes mature on December 15, 2026, unless earlier converted, redeemed, or repurchased in accordance with their terms, prior to the maturity date. The 2026 Convertible Notes do not bear regular interest, and the principal amount does not accrete. An aggregate principal amount of $29.4 of the 2026 Convertible Notes remained outstanding at September 30, 2026. We recorded $29.8 as the fair value of the remaining outstanding 2026 Convertible Notes, within Short-term debt, net, in our Condensed Consolidated Balance Sheet as of September 30, 2026. During the three months ended September 30, 2026 and 2025, we recognized a gain of $0.9 and a loss of $0.2, respectively, and during the six months ended September 30, 2026 and 2025, we recognized a gain of $0.2 and loss of $2.8, respectively, within Interest and other, net in our Condensed Consolidated Statements of Operations.

11. LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share:

We incurred a net loss for the three and six months ended September 30, 2026 and 2025; therefore, the diluted weighted average shares outstanding excludes the effect of unvested common stock equivalents because their effect would be antidilutive.

For the three months ended September 30, 2026, we had 0.8 potentially dilutive shares from share-based awards and 0.1 of shares from Convertible Notes that are excluded due to the net loss for the period. For the six months ended September 30, 2026, we had 1.1 potentially dilutive shares from share-based awards and 0.1 of shares from Convertible Notes that are excluded due to the net loss for the period.

During the six months ended September 30, 2026,1.6 restricted stock awards vested, we granted 1.9 unvested restricted stock awards, and 0.2 unvested restricted stock awards were forfeited.