GameStop (GME) Q2 2026 Earnings: $4.9B eBay Stake vs the Stores, 10-Q Explained
Listen to this report
In the quarter ended August 1, 2026, GameStop booked $238.4M of gains on eBay stock against $160.2M of operating income from everything it sells. None of the eBay gain is cash, the store business improved more than the headline sales decline suggests, and the bid behind the stake was rejected by eBay's board in May.
RoboSystems initiating coverage · Retail, computer and computer software stores (SIC 5734) · Source filing: Form 10-Q for the quarter ended August 1, 2026 (Q2 fiscal 2026), filed September 9, 2026 (accession 0001326380-26-000055, CIK 0001326380). GameStop's fiscal year ends near January 31: fiscal 2026 is the year ending January 30, 2027, and every year-over-year comparison below pairs Q2 fiscal 2026 with Q2 fiscal 2025 (ended August 2, 2025). Supporting primary sources: GameStop's Schedule 13D and amendments on eBay, GameStop 8-Ks filed August 3, August 31 and September 8, 2026, eBay's 8-K of May 12, 2026 and eBay's 10-Q filed August 6, 2026. Share prices are market data at the September 16, 2026 close and are labeled wherever used. Not investment advice. No price target.
1. The Hook
GameStop $GME reported $420.2M of income before taxes for its second quarter of fiscal 2026. Here is where it came from, straight off the statement of operations:
| Pre-tax income, by line | Q2 FY2025 | Q2 FY2026 |
|---|---|---|
| Operating income (the stores, ecommerce and corporate) | $66.4M | $160.2M |
| Interest income, net | $79.6M | $77.1M |
| Gain on derivative asset, net (eBay Put/Call Pairs) | $0 | $166.3M |
| Unrealized gain on equity investment (eBay shares) | $0 | $72.1M |
| Loss (gain) on digital assets (bitcoin) | gain $28.6M | loss $75.0M |
| Other income, net | $0 | $19.5M |
| Income before income taxes | $174.6M | $420.2M |
The two eBay lines total $238.4M, or 56.7% of pre-tax income. Operating income, the entire retail business, was $160.2M, or 38.1%. For the six months the eBay lines were $506.8M of $926.6M, 54.7%. At August 1, 2026 GameStop owned 43,390,383 eBay shares, about 9.8% of eBay, carried at $4,946.9M, which is 44.4% of GameStop's $11,144.8M of total assets.
So the obvious read holds on the income statement: an eBay position out-earned the stores. It needs three corrections before it is the whole story. First, every dollar of that $238.4M is a mark-to-market gain, while the cash went the other way: GameStop paid $4,427.5M for the shares, and Q2 operating cash flow fell 47% to $62.4M. Second, the store business did not simply shrink; most of the Q2 sales decline is a comparison against last year's Nintendo Switch 2 launch, and the quarter before it grew sales 14.0%. Third, the takeover bid that started all of this was rejected by eBay's board on May 12, 2026, and nothing filed since says it has been revived or withdrawn.
2. Company Snapshot
GameStop sells games, collectibles and trading cards through stores and ecommerce. It now reports two geographic segments, United States and Australia, effective July 8, 2026, after divesting France (its last European operation) during Q2 and Canada a year earlier. It closed 727 US stores in fiscal 2025 and says it does not expect to close a significant number in fiscal 2026.
This quarter it changed how it describes itself. Net sales are now reported as Collectibles, Video Games, and Pre-Owned and Refurbished, replacing Hardware and accessories / Software / Collectibles, because, in the filing's words, "consumer engagement has shifted toward collectibles and trading cards, which now represent our largest product category." Collectibles were 45.1% of Q2 net sales, up from 23.4%.
The MD&A is explicit that the retail business is no longer the whole plan: "Our strategy has evolved into two distinct but complementary pillars," capital allocation ("utilizing our significant capital resources to actively evaluate and execute on opportunities to acquire, invest in, or partner with businesses") and operational excellence ("maximizing the cash flow of our legacy retail business"). The board has delegated management of the company's cash, and review of acquisition and control opportunities, to an Investment Committee of Chairman and CEO Ryan Cohen and two independent directors.
3. The Financial Story
How the eBay position was built
On May 3, 2026 GameStop delivered a non-binding proposal to acquire all of eBay at $125.00 per share, in cash and stock. In connection with it, GameStop entered into what the filing calls Put/Call Pairs. The 10-Q describes the structure this way: "Each Put/Call Pair, consisting of a non-transferable embedded purchased call option and a non-transferable embedded written put option entered into contemporaneously with the same counterparty, was accounted for as a single forward contract." The pairs "were settleable solely in cash until the Company provided the counterparty with evidence that all applicable filings had been made and any required waiting periods had expired or approvals had been obtained under the Hart-Scott-Rodino Antitrust Improvements Act of 1976," which the filing defines as the HSR Act Condition. That condition was satisfied on June 3, 2026.
GameStop's Schedule 13D filings on eBay track the build:
| 13D filing | Position reported | Share of eBay |
|---|---|---|
| Original, May 4, 2026 | 25,000 shares plus pairs on 22,176,000 | about 5.0% |
| Amendment 1, May 19, 2026 | pairs on a further 6,902,699 | about 6.55% |
| Amendment 2, May 28, 2026 | pairs on a further 5,430,291 | about 7.78% |
| Amendment 3, June 5, 2026 | 827,648 shares plus pairs on 39,046,658 | about 9.0% |
| Amendment 4, July 17, 2026 | 43,390,383 shares held directly | about 9.8% |
Percentages are GameStop's, computed on the 444 million eBay shares eBay reported outstanding at April 24, 2026.
On July 15 GameStop exercised every pair, acquiring 39,046,658 shares for $3,955.2M in cash at an average strike of $101.30, and it bought 4,343,725 shares in the open market for $472.3M ($108.73 average). The 10-Q's cost-basis table nets $41.2M of funding and execution costs, which were expensed, to a total cost basis of $4,386.3M, or $101.09 a share, against a fair value of $4,946.9M at $114.01 on August 1. That $560.6M of appreciation was recognized in two places: $488.9M through the derivative line before settlement (less $54.2M of fees and transaction costs in the same line) and $72.1M through the unrealized gain line after it. GameStop classifies the shares as a noncurrent investment, "reflecting management's intent to hold the investment on a long-term basis." The $983.3M of cash collateral posted under the pairs came back in full at settlement, so it nets to zero.
Where the bid stands, from primary sources only
- eBay rejected it. eBay's 8-K of May 12, 2026 carries its board's letter to Cohen: "We have concluded that your proposal is neither credible nor attractive," citing eBay's standalone prospects, "the uncertainty regarding your financing proposal," the leverage and leadership of a combined company, and "GameStop's governance and executive incentives." eBay also filed the one document that came with the proposal that GameStop had not made public: a TD Securities letter saying it was "highly confident" up to $20.0B of funded debt could be raised, and stating plainly that it was not a commitment to lend.
- eBay says nothing has changed. eBay's 10-Q filed August 6, 2026 says its board determined on May 12 "that the proposal was neither credible nor attractive and, to date, no changes to this proposal that would alter our Board's view have been proposed."
- GameStop has not withdrawn it. Amendment 3 to its 13D refers to GameStop's "current intention to seek to acquire control" of eBay, and Amendment 4 did not change that. GameStop's September 8 earnings release still lists "the Company's ability to complete its proposed acquisition of eBay" among its forward-looking risks. The most recent communication GameStop filed about eBay under Rule 425, on July 20, reproduces a Financial Times interview in which Cohen says "I want to own eBay."
- Nothing is binding. GameStop's 10-Q says it "has no binding agreements for a specific transaction at this time." No tender offer, registration statement or proxy contest for eBay appears in either company's filings through September 16. GameStop's stockholders did approve raising authorized Class A shares from 1.0B to 2.5B on July 7, and at Cohen's request GameStop withdrew a proposed CEO performance award from that meeting's ballot.
The fair frame, then, is not "a takeover in progress." It is a rejected, unwithdrawn proposal and a $4.9B stock position, and the position is what now moves GameStop's earnings.
The store business: better than the sales line, weaker than the margin line
| Store business | Q2 FY2025 | Q2 FY2026 | Change |
|---|---|---|---|
| Net sales | $972.2M | $790.2M | -18.7% |
| Collectibles | $227.6M | $356.3M | +56.5% |
| Video Games | $494.6M | $263.2M | -46.8% |
| Pre-Owned and Refurbished | $250.0M | $170.7M | -31.7% |
| Gross margin | 29.1% | 43.7% | +14.6 pts |
| SG&A | $218.8M | $187.1M | -14.5% |
| Operating income | $66.4M | $160.2M | 2.4x |
Read the Video Games line before reading the total. The filing attributes the Video Games and Pre-Owned declines "primarily" to "the prior-year launch of the Nintendo Switch 2, with no such launch in the current year period," and it attributes the gross margin jump to mix: Video Games, which "carry the lowest gross margin of our product categories, particularly new hardware," fell to 33.3% of sales from 50.9%. Q2 fiscal 2025 was a console launch quarter, heavy on low-margin hardware, so it flatters this year's margin comparison and exaggerates this year's sales decline.
The cleaner test is Q1, when neither year had a launch. Taking the six months less Q2: Q1 fiscal 2026 net sales were $835.3M against $732.4M, up 14.0%, gross margin was 40.7% against 34.5%, and operating income was $143.3M against a $10.8M loss (that prior-year loss carried $35.5M of Canada and France impairments). Six-month sales fell only 4.6%, to $1,625.5M, despite the 727 US store closures of fiscal 2025 and the Canada and France exits. SG&A fell $31.7M in Q2, $18.5M of it store rent and occupancy. On a trailing basis operating income is $480.0M (fiscal 2025's $232.1M plus the first half's improvement), against an operating loss of $26.2M in fiscal 2024. The company's own release calls the $160.2M the highest second-quarter operating income in its history. The improvement is real, it predates the eBay position, and it runs on trading cards.
The cash did not follow the earnings
The Q2 cash flow statement in GameStop's September 8 earnings release (8-K Exhibit 99.1) shows operating cash flow of $62.4M, down from $117.4M, and free cash flow of $60.7M against $113.3M. Inside Q2's operating section, the prepaid and payable income tax line used $42.8M, receivables used $37.8M, and payables contributed $7.5M against $53.6M a year earlier. The six-month figure is still up, $399.8M against $309.9M, because Q1 was strong. None of the eBay gain appears in it: the cash-flow statement subtracts the gains back out, and the $4,386.3M cost basis sits in investing activities.
Cash, equivalents and marketable securities fell from $9,013.8M at January 31 to $5,060.3M at August 1. The filing attributes Q2's lower interest income, $77.1M against $79.6M, to "lower average Cash and cash equivalent and Marketable securities balances resulting from the investment in the eBay Common Stock." Settlement came on July 17, two weeks before quarter end, so Q3 is the first full quarter on the smaller balance. Bitcoin was the other drag: a $75.0M loss on digital assets and related receivables as the price fell, partly offset by a $16.1M gain on covered calls written on that bitcoin, which the 10-Q records within other income (the Q2 amount is from the release's reconciliation). GameStop bought 4,710 bitcoin for $500M in Q2 fiscal 2025, pledged 4,709 of them to Coinbase Credit under a collateral agreement, and now carries them as a $294.1M receivable.
Taxes: charged at a full rate, the cash figure not disclosed
GameStop was charged $121.5M of income tax in Q2, a 28.9% effective rate, against $6.0M (3.4%) a year earlier. The filing explains the jump: the prior year "benefited from the utilization of U.S. net operating loss carryforwards and the related release of valuation allowances, which were substantially exhausted by the end of fiscal 2025." That is why pre-tax income rose 140.7% while net income rose 77.2%, to $298.7M (diluted EPS $0.51 against $0.31).
The 10-Q does not disclose how much of that charge left as cash; it tags no cash tax figure for the quarter. What the cash flow statements do show is that $62.1M of the Q2 charge, and $123.5M of the six-month $238.3M, was added back as deferred income taxes, a non-cash item. On the balance sheet, deferred tax assets fell to $16.9M from $86.8M at January 31, and other long-term liabilities rose to $70.2M from $15.1M. The latest disclosed cash figure is annual: $33.8M of income taxes paid in fiscal 2025, a year in which the income statement showed a $34.4M net tax benefit. Stripping out the eBay, bitcoin and impairment items and tax-effecting them at roughly 24%, the company's own non-GAAP adjusted net income was $161.1M against $138.3M, up 16.5%.
The note exchange: less debt, more shares, some cash
On August 2 GameStop agreed to exchange about $400M of its 0.00% 2030 notes and $1.0B of its 0.00% 2032 notes, roughly $1.4B of principal, for Class A shares only. On August 31 it amended the deal, ending the 35-trading-day pricing period early and paying the unelapsed portion in cash. The exchange closed September 3, 2026: about 55.5M new shares and about $358.4M in cash, which GameStop said it would fund from cash on hand. About $2.8B of notes remain ($1.1B of 2030s, $1.7B of 2032s). The 10-Q says GameStop "expects to recognize a non-cash charge in connection with the Exchange" and does not give the amount.
Two ways to measure the dilution, both honest:
- Against shares outstanding it is 12.3%. The balance sheet shows 449.1M Class A shares at August 1; the 10-Q cover reports 504,500,990 at September 3.
- Against what the notes would have converted into, holders received more. Using the conversion rates in the fiscal 2025 10-K (33.4970 shares per $1,000 for the 2030 notes, a $29.85 conversion price; 34.5872 for the 2032 notes, $28.91), $400M and $1.0B of principal convert into about 48.0M shares. The exchange delivered about 55.5M shares plus $358.4M of cash. The Q2 diluted share count of 592.6M already included 143.6M shares for all $4.2B of notes, so the diluted per-share effect is smaller than the basic one, but it is not zero.
4. Valuation: What It Is Worth as a Normal Business
At $21.98 per GameStop share (September 16, 2026 close, market data, not from the filing) on the 504.5M shares the 10-Q cover reports, market capitalization is $11.09B. eBay closed the same day at $109.17 (market data), which values GameStop's 43,390,383 shares at $4,736.9M: $210.0M below the August 1 carrying value, $350.6M above cost basis, and 12.7% below the $125 GameStop proposed. If eBay stays there, that difference runs through Q3 earnings as a loss.
The honest way to value GameStop is by parts, because roughly half of it is a checking account and a single stock:
| Component | Value | Per GME share | Basis |
|---|---|---|---|
| Cash and marketable securities | $4,701.9M | $9.32 | $5,060.3M at Aug 1 less $358.4M exchange cash |
| eBay stake | $4,736.9M | $9.39 | 43,390,383 shares at $109.17, Sept 16 close |
| Bitcoin receivable | $294.1M | $0.58 | carrying value at Aug 1, not repriced |
| Convertible notes remaining | $(2,800.0)M | $(5.55) | principal per the Aug 31 8-K |
| Net liquid assets | $6,932.9M | $13.74 | |
| Market capitalization | $11,088.9M | $21.98 | |
| Implied value of the operating business | $4,156.0M | $8.24 | market cap less net liquid assets |
The market values the retail business at 8.7 times trailing operating income of $480.0M, before tax, or about 11.4 times after the company's roughly 24% blended statutory rate. This ignores tax on the unrealized eBay gain if sold, $165.4M of operating lease liabilities, 59.1M warrants struck at $32 that expire October 30, 2026, and any movement in bitcoin since August 1.
Scenario discounted cash flow for the operating business. Assumptions stated plainly: after-tax operating income at a 24% tax rate as the free-cash-flow proxy (capital expenditure was $6.2M in the half, depreciation $9.1M), five explicit years, then a terminal value, added to the $6,932.9M of net liquid assets and divided by 504.5M shares.
| Scenario | Starting operating income | Growth | Discount rate | Terminal growth | Implied value per share |
|---|---|---|---|---|---|
| Bear: the card boom fades | $232.1M (fiscal 2025) | -5% a year | 11% | -2% | $16 |
| Base: trailing level holds | $480.0M (trailing) | 0% | 10% | 0% | $21 |
| Bull: guidance is a floor | $600M | +5% a year | 9% | 2% | $29 |
| Current price | $21.98 |
The bull case starts from $600M because the company raised its fiscal 2026 Adjusted EBITDA outlook to "in excess of $650 million" on September 8 (from over $600M on June 26), with $339.7M delivered in the first half; Adjusted EBITDA adds back stock compensation and depreciation that $600M of operating income does not. That outlook is non-GAAP company guidance, not a filed result.
Re-rating grid. Applying enterprise-value-to-operating-income multiples to the $480.0M trailing figure and adding net liquid assets: 6x implies $19.45 a share, 8x $21.35, 10x $23.26, 12x $25.16 and 15x $28.01.
What today's price implies. At a 10% discount rate and no terminal growth, $21.98 prices after-tax operating income growing about 3.2% a year for five years, not a heroic assumption for a business whose first-half operating income rose to $303.5M from $55.6M. The bigger swing factor is not the stores. Every $10 move in eBay's share price moves GameStop's net liquid assets by $433.9M, about 86 cents per GameStop share, and the eBay stake alone is 42.7% of GameStop's market value. These are implied values under stated assumptions, not price targets and not advice.
5. Risks
Concentration in one stock, marked through earnings. GameStop's own release lists "concentration of the Company's investment portfolio into one or fewer holdings" and "the recognition of losses in a particular investment even if the Company has not sold the investment" as risks. Because the stake is carried at fair value through net income, eBay's share price now decides the sign of GameStop's quarterly earnings more than trading cards do. Q2's $238.4M gain would have been a loss at September 16 prices.
A bid with no agreed path. eBay's board rejected the proposal and cited financing, leverage and GameStop's governance and incentives. A cash-and-stock deal for a company of eBay's size would require new debt, new shares or both; the only financing document on file is a letter that says it is not a commitment. If GameStop pursues control, the 2.5B authorized shares are room for dilution. If it does not, the question becomes what a long-term 9.8% minority stake is for.
The operating comparison gets harder, and the cash yield gets smaller. Collectibles grew 56.5% and carried the margin; a fading trading-card cycle is the bear case. Q3 is the first full quarter of interest income on roughly $4.7B of cash and securities rather than $9.0B. Bitcoin is still on the balance sheet and lost $75.0M this quarter.
Dilution and instruments. 55.5M shares were issued in September on terms richer for holders than the notes' own conversion rates, a non-cash charge of undisclosed size is coming, $2.8B of notes remain, and 59.1M warrants struck at $32 expire October 30, 2026.
Cash conversion. Q2 operating cash flow fell to $62.4M while net income rose to $298.7M. One quarter is not a trend, but the income statement and the cash flow statement are now describing different quarters.
6. The Bottom Line
GameStop is two things in one ticker. One is a retailer that closed 727 US stores, pivoted to trading cards and turned an operating loss into $480.0M of trailing operating income, a real improvement that the Switch 2 comparison makes look better on margin and worse on sales than it is. The other is a $4.7B position in a single company whose board rejected GameStop's bid, carried at market value through earnings. In Q2 the second one reported more pre-tax profit than the first, and none of it was cash. On September 10, Cohen bought 1,000,000 GameStop shares at a weighted average of $20.38, per his Form 4.
What to watch: whether GameStop files a 13D amendment that changes its stated intention toward eBay, in either direction; the size of the non-cash charge on the note exchange in the Q3 10-Q; whether Q3 collectibles growth holds up against a quarter that no longer includes a console launch in the comparison; and operating cash flow, which fell in Q2 while every earnings line rose.
Every figure above was read out of GameStop's Form 10-Q for the quarter ended August 1, 2026 (accession 0001326380-26-000055) and its fiscal 2025 Form 10-K (0001326380-26-000013), GameStop's 8-Ks of August 3, August 31 and September 8, 2026 (0001326380-26-000042, -000046, -000050), GameStop's Schedule 13D on eBay and its amendments (latest 0001193125-26-307988), a Form 4 filed September 10, 2026 (0000921895-26-002531), and eBay's 8-K of May 12, 2026 (0001552781-26-000322) and 10-Q filed August 6, 2026 (0001065088-26-000177), via RoboSystems. The September 16, 2026 closing prices for GameStop and eBay are market data and are attributed as such. Nobody wrote this by hand, and the same pipeline reads any company that files with the SEC. Nobody wrote this by hand: separating what the stores earned from what the eBay mark earned came straight from the lines GameStop tagged on its own statement of operations, the same pipeline reads those lines for any company that files with the SEC, and a private company reporting in the same format is the same job.