Nazara Technologies Q1 FY26: Profits Double as 'Gaming First' Strategy Takes Center Stage – What's Next?
Nazara Technologies Limited, India’s leading diversified gaming and sports media platform, just dropped its Q1 FY26 earnings, and the numbers tell a compelling story of strategic shifts and aggressive growth. In a quarter where the broader Indian market has seen some correction due to cautious guidance and global uncertainty, Nazara’s performance stands out, especially its focus on “Gaming First”. But what does this really mean for investors looking at future earnings? Let’s dive in.
The Big Picture: A Surge in Revenue and Profitability
Nazara has kicked off FY26 with a bang! The company reported a consolidated revenue from operations of INR 498.8 crore, a phenomenal 99.4% increase year-on-year (YoY). This wasn’t just a top-line story; Profit After Tax (PAT) more than doubled, soaring 117.6% YoY to INR 51.3 crore.
While these headline figures are impressive, the slight dip in consolidated EBITDA margin from 10.0% to 9.5% (despite a 90.4% EBITDA growth) hints at underlying dynamics. A closer look reveals a strategic reshaping underway, focusing intensely on core gaming IP and streamlining its portfolio.
Orders and Backlog: Not Your Typical B2B Model
Unlike traditional B2B companies, Nazara doesn’t operate on an order-book model. Its revenue streams are driven by consumer engagement, in-app purchases, subscriptions, advertising, and event ticket sales. Therefore, discussions around order volumes or backlogs aren’t applicable here. Instead, we’ll focus on the drivers of its sales (revenue) performance: user acquisition, engagement, and monetization across its diverse gaming and content portfolio.
Sales Analysis: Growth Engine Firing on Multiple Cylinders (with a few misfires)
Nazara’s nearly 100% YoY revenue growth is staggering. This significant jump can be attributed to a combination of strong performance in its core gaming segments and strategic acquisitions.
Let’s break down the segmental contribution to revenue:
| Segment | Q1 FY26 Revenue (INR Cr) | Q1 FY25 Revenue (INR Cr) | YoY Change |
|---|---|---|---|
| Gaming | 240.9 | 92.6 | +160% |
| Others | 260.2 | 157.5 | +65% |
| Consolidated (Pre-Unallocated Costs) | 498.8 | 250.1 | +99% |
- Gaming Segment: The Growth Driver: The star of the show is clearly the Gaming segment, which saw an incredible 160% YoY revenue growth. This includes contributions from recent consolidation of Curve Games (effective April 1, 2025, contributing INR 54.6 Cr in Q1 FY26) and Smaaash (consolidated from June 6, 2025, contributing INR 8.06 Cr for the period). Even excluding these, existing titles like Fusebox and Animal Jam showed strong traction.
- “Others” Segment: Mixed Performance: The “Others” segment also grew robustly at 65% YoY, primarily boosted by Datawrkz’s phenomenal 313% YoY revenue surge (helped by the Space and Time acquisition from October 2024). However, this segment includes Sportskeeda, which experienced a revenue decline from INR 60.9 Cr in Q1 FY25 to INR 48.1 Cr in Q1 FY26 due to Google algorithm updates – a significant headwind. Nodwin Gaming also contributed to this segment with a 49% YoY revenue growth, largely from media rights.
What does this tell us about future sales? The focus on “Gaming First” is a positive signal. New IP integrations across Fusebox (Big Brother, Big Boss), Kiddopia (Barbie, PJ Masks), and Animal Jam (Slinky) are strategic moves to drive future volume growth. The aggressive expansion of Funky Monkeys centers (8-9 new centers by March-26) and the planned Smaaash revamp (relaunch FY27) suggest a strong pipeline for offline gaming revenues.
However, the Google algorithm impact on Sportskeeda is a genuine concern. Management’s prompt cost rationalization (18% cost reduction in Q1 FY26) and a stated recovery timeline (2 quarters based on PFN experience) will be crucial to monitor. It shows proactive management, which is a good sign, but recovery isn’t guaranteed.
Key Business Metrics: A Deeper Look into Performance
Beyond just revenue, several key metrics shed light on Nazara’s operational health:
- Fusebox (Love Island, Big Brother): Revenue up 49% YoY to INR 73.0 Cr. This was driven by increased User Acquisition (UA) spend, a strategic move aimed at long-term monetization. The short-term impact was a dip in EBITDA margin, but the pipeline of new IP-based games (Bigg Boss, a major international IP in CY26) suggests strong future growth. This is a classic “grower” strategy: invest heavily now for future returns.
- Kiddopia (Early Learning): Revenue slightly down 7.2% YoY to INR 45.4 Cr, but there are nuances. Average Revenue Per User (ARPU) improved to $7.17 (from $7.13 in Q4 FY25) due to a price increase. More importantly, Cost Per Trial (CPT) improved to $34.1 (from $35.0), and Avg. Churn reduced to 5.2% (from 6.9%). While subscribers slightly declined, the improved unit economics and robust IP integrations (Barbie, PJ Masks) indicate a focus on sustainable, profitable growth.
- Animal Jam: This segment saw excellent EBITDA growth of 55% YoY to INR 5.9 Cr, with margins expanding to 22.3%. The strength here is driven by high player engagement and In-App Purchase (IAP) momentum. A new casual mobile game prototype with Slinky hints at further diversification.
- PokerBaazi (Associate): A significant story here. Net Revenue surged 54% YoY to INR 191.8 Cr, marking its best-ever quarter. Gross Gaming Revenue (GGR) grew 46% YoY to INR 434 Cr. However, it recorded a substantial EBITDA loss of INR (73.9) Cr (vs INR -29.3 Cr in Q1 FY25) due to front-loaded marketing costs, particularly for the IPL campaign. While this hit profitability now, it drove all-time high Daily and Monthly Active Users (DAUs/MAUs) and is expected to yield returns in coming quarters. This is a calculated investment for market share, crucial in the competitive RMG space.
Earnings Analysis: Core Gaming’s Profitability Shines Amidst Strategic Investments
Nazara’s Profit After Tax (PAT) doubled, but the overall consolidated EBITDA margin slightly contracted. The key to understanding this lies in the segmental EBITDA performance:
| Segment | Q1 FY26 EBITDA (INR Cr) | Q1 FY25 EBITDA (INR Cr) | YoY Change | Q1 FY26 Margin | Q1 FY25 Margin |
|---|---|---|---|---|---|
| Gaming | 58.7 | 14.3 | +311% | 24.4% | 15.4% |
| Others | (3.0) | 10.6 | -128% | -1.2% | 6.7% |
| Consolidated (Post Unallocated Costs) | 47.4 | 24.9 | +90.4% | 9.5% | 10.0% |
The Gaming segment’s EBITDA margin of 24.4% is stellar, up significantly from 15.4%. This segment is clearly Nazara’s profit engine. The losses in the “Others” segment (Nodwin, Sportskeeda) dragged down the overall consolidated margin.
Deconsolidation of Nodwin Gaming: A Game Changer for Margins This is perhaps the most significant development. Nazara’s decision to deconsolidate Nodwin Gaming (by not participating in its capital raise, diluting stake below 50%) is highly strategic. If Nodwin were already deconsolidated in Q1 FY26, Nazara’s pro-forma EBITDA margin would have been a robust 14.9% (vs 9.5% consolidated). This move clearly signals Nazara’s commitment to sharpening its focus on its higher-margin core gaming IPs and publishing businesses. It allows Nodwin to raise capital independently for its esports ambitions while freeing up Nazara’s capital for its primary growth areas.
How does this classify Nazara? Based on its aggressive revenue and earnings growth in core segments, coupled with strategic investments for future expansion, Nazara is firmly positioning itself as a fast grower, with aspirations to be a super grower in its specialized gaming niches. The willingness to incur short-term EBITDA impacts (Fusebox UA spend, PokerBaazi marketing) for long-term user base and monetization growth aligns with this classification.
Working Capital Analysis: Limited Visibility
The provided investor presentation focuses primarily on P&L and strategic updates, with limited direct information on the balance sheet and working capital specifics like accounts receivables, inventory levels, or cash conversion cycle days. While this limits a detailed analysis, the strong PAT generation suggests robust internal accruals are likely supporting operations. Investors would ideally look for stable or improving cash conversion metrics in future reports to ensure efficient working capital management.
Capital Expenditure (CapEx) Analysis: Investing for Future Footprint
Nazara is clearly investing for growth, particularly in its offline gaming ventures:
- Smaaash Revamp: The acquisition of Smaaash is a strategic entry into offline gaming. Management is undertaking a “comprehensive business revamp” with a relaunch expected in FY27. This implies significant CapEx for center refurbishments and new IP development.
- Funky Monkeys Expansion: After opening a new center in Surat, Funky Monkeys plans to open an aggressive 8-9 new centers by March 2026. This expansion will require substantial CapEx.
These CapEx plans are geared towards growth CapEx, aiming to expand Nazara’s physical footprint and entertainment offerings. The gestation periods for new centers and the Smaaash relaunch will mean that the full revenue and earnings impact of these investments will materialize in subsequent quarters (FY27 onwards for Smaaash). Nazara’s strong profit generation from its online gaming segments will likely fund a good portion of this, showcasing efficient capital allocation to diversify its portfolio.
Financing Analysis: A Strategic Capital Allocation
The deconsolidation of Nodwin Gaming is also a significant financing decision. By choosing not to participate in Nodwin’s fresh capital raise, Nazara effectively reduces its future capital commitment to esports, freeing up funds for its core gaming strategy. This is a smart move to ensure capital efficiency and a sharper strategic focus.
Furthermore, Nazara’s $1 million investment in Stan, a fast-growing gaming community platform, highlights its interest in adjacent growth areas within the gaming ecosystem. This indicates a disciplined approach to strategic investments that align with its broader vision.
Key Takeaways: Gaming First, Growth Ahead, But Watch the Headwinds
Nazara’s Q1 FY26 results underscore its aggressive pursuit of a “Gaming First” strategy.
- Core Gaming is King: The gaming segment is Nazara’s powerhouse, delivering stellar revenue and EBITDA growth with strong margins. This reinforces the company’s IP-led strategy.
- Strategic Deconsolidation: The planned deconsolidation of Nodwin Gaming is a pivotal move, poised to significantly improve Nazara’s consolidated profitability and allow for sharper focus on its core, high-margin gaming businesses.
- Investments for Future Growth: Increased UA spend in Fusebox and significant CapEx in Smaaash and Funky Monkeys are clear indicators of long-term growth ambitions. These investments, while impacting short-term profitability in some pockets, are crucial for future scale.
- Managing Headwinds: While Sportskeeda faced challenges from Google updates, management’s quick response with cost rationalization and a clear recovery plan is a positive. The aggressive marketing spend by PokerBaazi (an associate) is a calculated move to gain market share, whose returns will need to be closely monitored.
In the current Indian economic context, favoring domestic-growth themes, Nazara stands out as a compelling player. Its strong execution in core gaming and strategic portfolio shifts position it well. However, investors should keep a close eye on the recovery trajectory of Sportskeeda and the monetization efficiency of the significant marketing investments in PokerBaazi. Overall, Nazara looks set to continue its high-growth trajectory, with a clearer, more profitable focus on its gaming roots. 🎮🚀
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