Ubisoft H1 FY25-26: Back-Catalog Masking Structural Weakness as Cash Burn Accelerates

Executive Summary

The elephant in the room is Ubisoft's severe cash burn and covenant pressure, which management glosses over while highlighting "above-guidance net bookings." The company posted negative €240m operating cash flow, nearly double last year's burn. This deterioration persists despite large-scale layoffs and a multi-year cost-reduction program.

While net bookings rose +20% YoY, this was driven overwhelmingly by back-catalog (+50% YoY) rather than new content. Relying on old IP to prop up results is not sustainable. New launches continue to slip, live services are under strain, and Ubisoft remains dependent on a €1.16bn Tencent cash injection simply to remain within covenants.

Bottom line: Bearish. Ubisoft is stabilizing headline metrics while financial health erodes beneath the surface.

Key Financial Metrics (YoY Comparison)

Metric	H1 2025-26	H1 2024-25	YoY Change	Commentary
IFRS Sales	€657.8m	€671.9m	-2.1%	Decline reflects weak new release contribution.
Net Bookings	€772.4m	€642.3m	+20.3%	Boosted by partnerships and back-catalog, not new IP.
Non-IFRS Operating Income	€27.1m	-€252.1m	Sharp swing	Driven by restructuring and accounting—not true profitability.
IFRS Net Income	-€161.4m	-€246.5m	Loss narrows	Still deeply negative.
Operating Cash Flow	-€240.3m	-€106.1m	Deterioration	Burn nearly doubles. Critical red flag.

Portfolio Performance - Forensic Analysis

Back-catalog carries the company

Back-catalog bookings grew +50% YoY, now representing 96% of total bookings. This signals heavy dependence on legacy franchises rather than successful new content.

Assassin's Creed - Strength with limits

Engagement rose +35%, but monetization relies on expansions and reworks rather than organic adoption. The franchise is carrying disproportionate weight.

Rainbow Six Siege - Monetization cracks

Management praises acquisition growth, but ignores:

Cheating surge impacting retention
Lower-than-expected monetization
Free access shifts squeezing ARPU

Classic vanity metrics masking weakening fundamentals.

The Division 2 - DLC-dependent

The "strong performance" results from one DLC (Battle for Brooklyn). Last year's weak baseline inflates YoY figures.

Avatar: Frontiers of Pandora

Engagement is being propped up by content updates and third-person reworks - reactive measures to declining core interest.

Future Outlook & Pipeline - Unrealistic Optimism

Ubisoft promises a stacked FY25-26 slate: Anno 117, expansions, POP remake, mobile launches, and an unannounced game.

However:

Pipeline is heavily back-weighted, increasing delay risk.
POP remake has suffered repeated delays.
Mobile market is oversaturated; Ubisoft has no established mobile hit.
Claims of "positive FCF in FY27" contradict current burn rate and high R&D.

Risk Assessment

Visible Risks

Liquidity dependence on Tencent cash.
Rising cash burn despite headcount cuts.
Overreliance on back-catalog.
Live-services instability.
Heavy amortization pipeline.

Unspoken Risks

Weak new IP momentum.
Potential covenant breaches.
Organizational disruption from reorgs.
Overconcentration in North America.

Management Commentary - Spin Over Substance

Yves Guillemot highlights the Tencent investment as a "pivotal milestone" a euphemism for a lifeline. Management avoids discussing:

Covenant risks
Monetization weakness
New IP underperformance
Severe cash burn

The language focuses on transformation and creative vision while avoiding operational weaknesses.

Conclusion

The release paints a superficially improved picture driven by accounting and old franchises. However, under the surface Ubisoft faces:

Worsening cash burn
Heavy franchise dependence
Live-services fragility
A risky, back-weighted pipeline
No meaningful new IP momentum

The bearish thesis remains intact: Ubisoft's underlying fundamentals continue to deteriorate despite headline booking growth.