Analysis Ubisoft Stabilizes Ship with Tencent Cash and Assassin's Creed Resurgence
yesterday, the French publisher announced that H1 net bookings amounted to €772.4 million, which is 20.3% up from a year earlier, based on a performance in Q2 that significantly surpassed guidance.
But the headlines only tell half the story. The real story is about the imminent closing of the Tencent transaction, an all-important liquidity injection which avoids a technical breach of covenant with Tencent and clears the runway for their new "Creative Houses" strategy.
Key Financial Highlights
- Q2 Performance Net bookings of €490.8m beat guidance of €450m. Strong partnerships and a back-catalog that grew 50% YoY drove this.
- Profitability Non-IFRS operating income returned positive at €27.1m, after a massive loss turnaround from €(252.1)m in the same period last year.
- Debt Non-IFRS net debt stands at €1.15bn-but the figure is effectively about to be neutralized by the incoming Tencent investment.
The Tencent Lifeline and Vantage Studios
The report confirms that all conditions for the Tencent transaction have been met and it will close "in the coming days." Tencent is investing €1.16 billion to acquire a minority stake in Vantage Studios, a new subsidiary housing Ubisoft's crown jewels: Assassin's Creed, Far Cry, and Rainbow Six.
Why this matters: It is like making an investment. More than that, it is a rescue mission. The fine print (Page 6) of Ubisoft's acknowledgment states that an accounting error regarding revenue recognition (IFRS 15) caused them to breach their leverage covenant ratio as of September 30, 2025. Under normal circumstances, this would mean catastrophe. However, the €1.16bn cash infusion allows them to immediately pay down the Term Loan and Schuldschein loans (€286m total), thus correcting the covenant breach and deleveraging the group.
Portfolio Performance The Old Guard Carries the Weight
Ubisoft's GaaS and back-catalog strategy does the heavy lifting.
- Assassin's Creed The franchise is in good health. Mirage reached 10 million players, and the back-catalog is actually giving 35% more engagement than the two-year average. The hype steam for AC Shadows (dropping on Nintendo Switch 2) is palpable.
- Rainbow Six Siege Shows cracks in the armor. While unique players are up, a "surge in cheating" has impacted revenue. Ubisoft is fighting back aggressively, ramping up anti-cheat updates in Season 4.
- Nintendo Switch 2 Success Report confirms Star Wars Outlaws launched on Nintendo Switch 2 in September with a strong reception, validating Ubisoft's strategy of supporting new hardware early.
Our View The Verdict
1. The Vantage Studios Spin-Off is a Double-Edged Sword
Ubisoft is effectively ring-fencing its most valuable IP (Assassin's Creed, Rainbow Six, Far Cry) into Vantage Studios to secure the Tencent money.
The Good This secures Ubisoft's independence and financial solvency. They can now focus on making games instead of ducking bankruptcy.
The Bad This means that they have sold off some of the future upside on their best assets. If Vantage Studios were to explode in value, Tencent captures some of that growth. This also raises questions about the "rest" of Ubisoft-what will happen to the studios not included in Vantage
2. The Accounting Error is Concerning
The restatement of FY2024-25 accounts that is based upon the inventory of a partnership deal statement under IFRS 15 is a red flag regarding internal control. While management has remediated it, a breach of a leverage covenant is a major slip in financial discipline. Investors ought to pay close attention to administrative agility until the reorganization of the Creative Houses embeds accountability.
3. The Switch 2 Catalyst
Historically, Ubisoft has performed tremendously well on the launch windows of new Nintendo consoles (think Rabbids on Wii or Just Dance on Switch). The report highlights Star Wars Outlaws already performing well on Switch 2, while Assassin's Creed Shadows launches on this platform on December 2. We believe the market is vastly underestimating the revenue potential of having two AAA titles out during the first holiday season for Switch 2.
4. Operational Turnaround
The cut of €69m in fixed costs YoY and cutting of 1,500 employees show that Yves Guillemot means serious business about being lean. The transition to "Creative Houses" in Jan 2026 suggests a move away from the centralized committee roadblock that plagued Ubisoft games in early 2020s. This decentralization is what the creative teams actually need.
Ubisoft now seems to be recovering from the very edge. H1 figures show that selling Assassin's Creed and keeping live services up and running is a profitable core business. The Tencent deal clears off any debt concern.
What We Think
Cautiously optimistic. The existential threat of liquidity issue has passed. The focus now returns to execution. Should Assassin's Creed Shadows deliver critically and commercially on the Switch 2 and other platforms this holiday, and should they mitigate cheating in Siege, then Ubisoft is grossly undervalued.
The Company has gone from being a distressed asset to being a clear turnaround. The floor is now safe; the ceiling will depend on whether the new Creative Houses can bring up a hit that is not a sequel.
