Embracer Group has disclosed intentions to spin off Fellowship Entertainment

Embracer Group has unveiled its financial outcomes for both the fourth quarter and the entire year, while laying out plans to create Fellowship Entertainment, a newly independently listed company.

The new entity, Fellowship Entertainment, will concentrate on its elite intellectual properties and development assets, featuring titles like Kingdom Come: Deliverance, Tomb Raider, Lord of the Rings, Dead Island, Darksiders, and Remnant.

The goal is to launch a minimum of two major gaming titles annually starting from the fiscal year 2027/28.

The remaining division of Embracer will home in on improving structural effectiveness, exercising stricter cost control, and adopting disciplined capital management. Embracer's chairman, Lars Wingefors, elaborated on the strategic choice in an open letter to investors.

To prepare for this transition, Embracer will initiate segment reporting in the first quarter of FY 2026/27. Group CFO Müge Bouillon is stepping into the role of deputy CEO to enhance governance within the company.

This strategic shift accompanies a report of a 24% drop in fourth-quarter net sales to SEK 3.9 billion ($414.5 million), alongside a non-cash impairment totaling SEK 7.2 billion ($765.2 million).

The impairment breakdown includes SEK 6 billion ($637.7 million) tied to goodwill and merger-related intangibles, plus SEK 1.2 billion ($127.5 million) associated with an ongoing undisclosed AAA gaming project.

Key Figures

Fourth Quarter (ending March 31, 2026)

Net Sales: SEK 3.93 billion ($414.5 million, a 24% decline)
PC/Console Games: SEK 1.55 billion ($159.5 million, a 46% drop)
Mobile: SEK 682 million ($72.5 million, a 28% decline)
Entertainment & Services: SEK 1.69 billion ($170 million, a 23% increase)

Full Year (ending March 31, 2025)

Net Sales: SEK 15.90 billion ($1.6 billion, a 25% decline)
PC/Console Games: SEK 6.6 billion ($702 million, down 29%)
Mobile: SEK 2.3 billion ($244.6 million, down 57%)
Entertainment & Services: SEK 6.9 billion ($734 million, up 6%)

Essential Insights

In the fourth quarter, Embracer's PC and console division recorded the most significant downturn, with new title sales contributing SEK 379 million ($40.3 million), reflecting a 72% reduction from the prior year. This decline largely stemmed from the earlier successful launch of Kingdom Come: Deliverance 2.

An innovative title, Reanimal, developed by Tarsier Studios and published by THQ Nordic, surpassed one million sales since its release in February 2026. Milestone-developed games Screamer and Ride 6 also bolstered sales in this segment.

Additionally, back-catalog sales grew by 4% to SEK 994 million ($105.7 million), supported by positive performances from Kingdom Come: Deliverance 2, Dead Island 2, and Echoes of the End.

The organization noted losses exceeding SEK 200 million ($21.2 million) due to financial write-downs and reductions in cooperative publishing and outsourced projects, along with a SEK 40 million ($4.2 million) write-down on non-core intellectual property.

The annual report indicates a scale-down in game development projects from 94 to 79, coupled with a workforce reduction from 6,875 to 6,090, including 4,485 dedicated game developers.

The mobile segment registered a 28% year-over-year decline in sales to SEK 682 million ($72.5 million), largely due to divesting Easybrain in January 2025.

The Entertainment & Services department, notably Middle-earth Enterprises, saw growth fueled by successful Plaion Partners releases and ongoing Lord of the Rings-related activities. This follows news that the Lord of the Rings MMO by Amazon, originally announced in 2023, was canceled after collaboration with Middle-earth Enterprises.