CD Projekt's Q1 report: net profit grows, The Witcher 3 passes 50M mark, research expenses on new games gradually rise

CD Projekt has released its financial report for the first quarter ended March 31. The company announced a decline in revenue (but an increase in profit), while also sharing the updated sales figures for The Witcher 3 and providing more context about its development pipeline.

Financial highlights

• According to CD Projekt’s consolidated report for Q1 2023, revenue from sales of the company’s products was PLN 174.7 million ($41.4 million), down 19% year-over-year.
• CD Projekt RED, which operates the Cyberpunk and The Withcer brands, accounted for 77,3% of the total sum. GOG’s revenue was PLN 41.5 million ($9.8 million), up 2.8% year-over-year.
• Gross profit on sales was PLN 120 million ($28.5 million), down 28% year-over-year, but net profit increased by 1% to PLN 69.6 million ($16.5 million).
• 89.4% of all sales came from digital copies of games. CD Projekt’s first-party titles accounted for 75% of total revenue.
• In Q1 2023, North America accounted for 66% of the company’s total revenue, followed by Europe (20.6%) and Asia (8.2%).

How many people are now working on various CD Projekt games?

• As CD Projekt CEO Adam Kiciński told investors duing an earnings call, over 320 employees are now working on The Phantom Liberty expansion for Cyberpunk 2077.
• The second-biggest team, which is developing the next Witcher game codenamed Polaris, has grown significantly since December 31, 2022 and currently consists of 220 people.
• The composition of the Project Sirius team “has changed mainly on the Molasses Flood side”, as the studio was hit with layoffs after reevaluating the scope and defining a new framework for the game. But according to Kiciński, the size “will not be smaller” in the next quarter.
• He added that the GWENT team will continue to “gradually decrease in size till the end of this year” due to the previously announced decision to end content support for the game after 2023. Some developers have already been transferred to other projects, but the company will also have to “part ways with a number of team members” during the process.

How much money did CD Projekt spend on its games in Q1 2023?

• In the first quarter, CD Projekt increased service costs for its already released games compared to Q4 2022, mainly due to the recent launch of The Witcher 3’s next-gen update.
• Phantom Liberty, Polaris, and Sirius currently account for the bulk of development costs.
• As the company is getting closer to completing the Cyberpunk 2077 expansion, it starts allocating more funds towards initial research work on upcoming games. According to CD Projekt CFO Piotr Nielubowicz, these projects include Hadar (new IP) and Orion (Cyberpunk 2077 sequel). Both are far from the production stage.
• Kiciński noted that CD Projekt’s new Boston studio, which will be responsible for Project Orion, will start operating in 2024. Only after that, the cost item ‌for research work on this game should visibly increase.
• Total development and research costs in the first quarter amounted to roughly PLN 75 million ($17.7 million). And around PLN 12.5 million ($2.7 million) was spent on servicing the released games.

The Witcher 3’s new milestone and other takeaways

• The Witcher 3 has now surpassed 50 million units sold globally. Combining that with two earlier games, the entire franchise has sold over 75 million copies.
• “We are very pleased by the strength of this franchise, particularly in the context of our future projects set in the Witcher universe,” Kiciński said.
• The new milestone helped The Witcher 3 break into the top 10 best-selling games of all time, which is dominated by titans like Minecraft (238 million units sold), GTA V (180 million), and Tetris.
• During the earnings call, Kiciński also commented on buyout rumors that Sony was allegedly interesting in acquiring the company. “CD Projekt is not for sale. We want to remain independent,” he stated, also saying that “nothing has changed on our end.”