GungHo Online Entertainment (3765): FY2025 Results Summary — Operating Profit Down 71.1% as Mobile Sales Slow and Costs Rise

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GungHo Online Entertainment, Inc. (fiscal year ended December 31, 2025) reported consolidated net sales of 93,242 million yen for FY2025, down 10.0% year on year, and operating profit of 5,056 million yen, down 71.1%. According to the company, the decline reflects slower non-consolidated net sales, mainly from mobile titles including “Puzzle & Dragons”, together with higher consolidated SG&A expenses driven by advertising at subsidiary Gravity and personnel expenses following the full acquisition of Alim in December 2024. Profit attributable to owners of parent fell 87.4% to 1,407 million yen. The fourth quarter recorded an operating loss of 811 million yen. Figures in this article are taken from the company’s English-language “Financial Results Briefing FY2025” (February 13, 2026) and the accompanying “Consolidated Financial Results for FY 2025 Supplementary Material”.

Consolidated Results (Full-Year Actual)

Consolidated net sales for FY2025 were 93,242 million yen, a decrease of 10,358 million yen year on year. For “Puzzle & Dragons”, the company continued initiatives to broaden its user base, including anime broadcasts and offline events, but there were fewer collaboration events with famous characters from other companies than in the previous year, and full-year net sales fell below the prior-year level. Subsidiary Gravity Co., Ltd. continued to release new “Ragnarok”-related titles, mainly in Southeast Asia and in Taiwan, Hong Kong and Macau, and achieved a year-on-year increase in full-year net sales, helped by titles such as “Ragnarok M: Classic” and “Ragnarok: Twilight”.

Gross profit decreased 20.8% to 42,328 million yen, and the gross profit margin declined by 6.2% to 45.4%, mainly due to a lower sales composition of subsidiary Gravity in consolidated net sales. SG&A expenses rose 3.8% to 37,271 million yen; salary and allowances increased 15.4% following the full acquisition of Alim Co., Ltd. at the end of 2024, while advertising expenses decreased 3.8%. As a result, operating profit was 5,056 million yen, a decrease of 12,434 million yen year on year, and the operating profit margin fell to 5.4% from 16.8%.

Item (Millions of Yen)	FY2025	FY2024	Change (YoY)
Net sales	93,242	103,600	▲10.0%
Cost of sales	50,913	50,185	+1.5%
Gross profit	42,328	53,415	▲20.8%
SG&A	37,271	35,923	+3.8%
Salary and allowances	7,461	6,466	+15.4%
Advertising expenses	10,768	11,198	▲3.8%
Others	19,041	18,258	+4.3%
Operating profit	5,056	17,491	▲71.1%
Operating profit margin	5.4%	16.8%	▲11.4%
Ordinary profit	6,780	20,013	▲66.1%
Profit before income taxes	6,576	19,838	▲66.8%
Profit attributable to owners of parent	1,407	11,171	▲87.4%

In the fourth quarter (October–December 2025), net sales were 19,646 million yen, a decrease of 3,361 million yen quarter on quarter, and gross profit was 8,453 million yen, a decrease of 1,959 million yen, with the gross profit margin at 43.0%. Salary and allowances rose to 2,517 million yen (an increase of 776 million yen quarter on quarter) due to bonus payments, while advertising expenses were 2,340 million yen (a decrease of 331 million yen), covering promotion of existing titles such as “Puzzle & Dragons”, the new title “LET IT DIE: INFERNO”, and Gravity’s new “Ragnarok”-related titles. The quarterly operating result was a loss of 811 million yen, a decrease of 1,659 million yen quarter on quarter. The company states that 4Q net sales and operating profit decreased both quarter on quarter and year on year. At the end of the fourth quarter, GungHo had 459 non-consolidated employees (an increase of 15 year on year) and 1,614 consolidated employees (an increase of 31 year on year).

Quarter (Millions of Yen)	Net sales FY2025	Net sales FY2024	Operating profit FY2025	Operating profit FY2024
1Q	23,775	25,736	2,831	6,266
2Q	26,812	27,918	2,189	5,941
3Q	23,007	22,828	848	3,614
4Q	19,646	27,116	-811	1,669

Net Sales Breakdown: GungHo vs. Gravity

The company breaks down consolidated net sales into sales excluding Gravity and sales of subsidiary Gravity. In 4Q FY2025, sales excluding Gravity were 7,752 million yen and Gravity’s sales were 11,893 million yen. The company attributes the QoQ and YoY decline in net sales primarily to non-consolidated mobile titles and Gravity’s “Ragnarok”-related titles. On a quarter-on-quarter basis, non-consolidated net sales were generally flat, while Gravity saw a reactionary decrease in sales of “Ragnarok”-related titles. Year on year, non-consolidated SG&A expenses decreased mainly in outsourcing and advertising expenses, but sales of mobile titles including “Puzzle & Dragons” decreased.

Quarter (Millions of Yen)	Excluding Gravity FY2025	Excluding Gravity FY2024	Gravity FY2025	Gravity FY2024
1Q	10,239	12,909	13,536	12,827
2Q	9,742	14,385	17,070	13,532
3Q	8,634	9,096	14,373	13,732
4Q	7,752	13,576	11,893	13,540

Globalization: Overseas Net Sales Ratio

The overseas net sales ratio reached 65.9% in FY2025, up from 56.2% in FY2024 and 11.4% in 2016. By area, FY2025 net sales were 34% from Japan, 50% from Asia (excluding Japan), 10% from North America, 3% from Latin America and 3% from others. The company plans to increase net sales especially in North America and Europe by launching new titles. Under its new title development policy (non-consolidated), GungHo is shifting away from development mainly for the Japanese mobile game market toward development and distribution for the growing global market, centered on consoles and PCs, focusing on action game development with new IP as a pillar of growth.

Key Topics: Global Titles and Ragnarok

GungHo has 9 new pipelines of global titles across smartphone, console and PC, and aims to expand its development system, increasing the development ratio of global titles for PlayStation, Steam (PC) and Nintendo Switch, and citing room for growth on the new Nintendo Switch 2 platform. “LET IT DIE: INFERNO”, a rogue-lite survival action game developed by SUPERTRICK GAMES, Inc. and published by GungHo, launched globally in December 2025 on PlayStation 5 and Steam, with multilingual support and three editions (Standard Edition $24.99, Deluxe Edition $44.99 and Ultimate Edition $59.99). Since launch, the company has held a team battle mode event (“KIL Match”), kicked off Season 1 and run SNS campaigns. The earlier global titles “LET IT DIE” and “Ninjala” have reached 9 million and 11 million downloads, respectively.

At Gravity, “Ragnarok: Twilight” launched in Southeast Asia on October 23 and “Ragnarok: Back to Glory” launched in China on December 25, while “RAGNAROK ONLINE 3” received an ISBN in China on October 21. Among the topics listed for 2026 1Q onward, “Ragnarok X: Next Generation” launched in Europe, the Middle East and North Africa on January 14, “Ragnarok: The New World” launched in Taiwan, Hong Kong and Macau on January 15, and “RAGNAROK ONLINE 3” and “Ragnarok Abyss” are planned to be launched in China. In Japan, “Puzzle & Dragons” held a 5,000-days anniversary appreciation celebration from November to December, “RAGNAROK ONLINE” celebrated its 23rd anniversary and “Ragnarok X” its 1st anniversary, and preparations are underway for the Japanese service of “RAGNAROK ONLINE 3”.

Outlook and Shareholder Returns

The FY2025 results briefing materials do not present a numerical full-year forecast for the fiscal year ending December 31, 2026, nor do they describe dividends or other shareholder return measures. This cannot be confirmed from the materials.

This article is an analysis based on publicly available information and is not a recommendation to buy or sell any specific securities. Investment decisions are your own responsibility.