How GME (GameStop) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a video game retail and collectibles company like GME Income Statement Overview makes money is essential for investors and anyone interested in the business of gaming and specialty retail. In this post, we break down GME's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick GME Overview

GME Income Statement Overview operates a global network of retail stores and e-commerce platforms focused on video game hardware, accessories, collectibles, and software. Revenue comes primarily from selling gaming consoles, peripherals, licensed collectibles, and both new and pre-owned video game software. The business is organized into three main segments: Hardware and Accessories, Collectibles, and Software, each contributing differently to the top line.

Revenue Breakdown

• Total Revenue (Q3 2025): $972.2M (+21.8% YoY)
  • Hardware and Accessories Revenue: $592.1M (60.9% of total, +31.2% YoY)
  • Collectibles Revenue: $227.6M (23.4% of total, +63.3% YoY)
  • Software Revenue: $152.5M (15.7% of total, -26.6% YoY)
  • Growth is powered by surging demand for collectibles and a rebound in hardware sales, while software sales declined.

Gross Profit and Margins

• Gross Profit: $283.1M (29.1% gross margin)
  • Cost of Revenue: $689.1M (+25.4% YoY)
  • GME maintains moderate margins due to its retail model, with margin pressure from hardware discounting but offset by higher-margin collectibles.
• Most costs come from inventory procurement, logistics, and store operations.

Operating Income and Expenses

• Operating Income: $66.4M (flat YoY, 6.8% margin)
• Operating Expenses: $216.7M (+20.0% YoY)
  • R&D: Not separately disclosed for Q3 2025
  • SG&A: $218.8M (+19.2% YoY, 22.5% of revenue) — includes store labor, marketing, corporate overhead, and digital platform investments
  • GME continues to invest in omnichannel capabilities and brand expansion while maintaining cost discipline.

Net Income

• Pre-Tax Income: $172.5M (+885.7% YoY, 17.7% margin)
• Income Tax: $6.0M (3.5% effective tax rate)
• Net Income: $166.5M (+1025.0% YoY, 17.1% net margin)
• GME converts a significant portion of sales into profit due to improved operating leverage and a notably low effective tax rate.

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What Drives GME's Money Machine?

• Hardware and Accessories: 60.9% of revenue, driven by strong console and peripheral sales, especially during new product cycles.
• Collectibles Growth: Collectibles revenue surged 63.3% YoY, reflecting consumer demand for licensed merchandise and exclusive items.
• SG&A Investment: $218.8M in Q3 2025, supporting e-commerce, store experience, and brand marketing.
• Future Growth Areas: Digital transformation and collectibles expansion, though digital is not yet a major profit driver.

Visualizing GME's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant SG&A costs, 17.1% of revenue drops to the bottom line.

Key Takeaways

• GME's money comes overwhelmingly from hardware and accessories sales, with collectibles as a fast-growing secondary stream.
• High gross and net margins illustrate the power of GME's diversified retail model and improved cost structure.
• Heavy investment in SG&A and omnichannel retail, balanced by efficiency in inventory and store operations.
• Ongoing growth is driven by collectibles demand and hardware cycles, with digital initiatives as a future lever.

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FAQ About GME's Income Statement

1. What is the main source of GME's revenue in 2025?

GME generates over 60% of its revenue from hardware and accessories sales, including gaming consoles and peripherals. Collectibles and software sales are additional, with collectibles showing the fastest growth.

2. How profitable is GME in Q3 2025?

GME reported net income of $166.5M in Q3 2025, with a net margin of approximately 17.1%, reflecting strong profitability driven by higher-margin collectibles and improved operating leverage.

3. What are the largest expense categories for GME?

The biggest expenses on GME's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs, which reached $218.8M in Q3 2025 (22.5% of revenue), as GME prioritizes omnichannel investments and store operations.

4. Why does the software segment operate at a loss?

Software revenue, despite generating $152.5M, declined 26.6% YoY and faces margin pressure due to digital competition and lower in-store sales. GME continues to invest in digital transformation, believing these efforts will drive long-term growth—even if the segment is unprofitable today.

5. How does GME's effective tax rate compare to previous years?

GME's effective tax rate in Q3 2025 was 3.5%, significantly lower than prior years. This low rate is primarily due to favorable tax items and international structuring.