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

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Understanding how a specialty retail company like GME Income Statement Overview (GME) makes money is essential for investors and anyone interested in the business of retail and gaming merchandise. 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.

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Quick GME Overview

GME Income Statement Overview operates as a specialty retailer focused on gaming hardware, accessories, collectibles, and software. Revenue comes primarily from the sale of gaming consoles and accessories, pop culture collectibles, and video game software. The company’s business segments include Hardware and Accessories, Collectibles, and Software, each contributing distinctively to overall sales.

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 strong hardware sales, offsetting declines in software.

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 competitive pricing and inventory costs.
• 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)
  • SG&A: $218.8M (+19.2% YoY, 22.5% of revenue) — includes store payroll, rent, marketing, and corporate overhead
  • R&D: Not separately disclosed for Q3 2025
  • GME continues to control costs while expanding operations in collectibles and hardware, focusing on efficiency and selective investment.

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 cost controls and a favorable tax rate.

What Drives GME's Money Machine?

• Hardware and Accessories: 60.9% of revenue, driven by console cycles and accessory upgrades
• Collectibles Growth: Collectibles revenue surged 63.3% YoY, reflecting strong consumer demand for pop culture merchandise
• SG&A Efficiency: SG&A at 22.5% of revenue, with ongoing efforts to optimize store operations and marketing spend
• Future Growth Areas: Expansion into digital collectibles and omnichannel retail, though not yet profitable

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 costs, 17.1% of revenue drops to the bottom line.

Key Takeaways

• GME's money comes overwhelmingly from hardware and accessories sales
• High gross and net margins illustrate the power of GME's retail and collectibles-focused business model
• Heavy investment in store operations and marketing, balanced by efficiency in operating costs
• Ongoing growth is driven by collectibles demand and hardware cycles

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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. Collectibles and software are additional sources, 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 cost controls and a favorable tax rate.

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. SG&A reached $218.8M in Q3 2025, as GME prioritizes store operations, payroll, and marketing.

4. Why does Software Revenue operate at a loss?

Software Revenue, despite generating $152.5M in revenue, posted a YoY decline of -26.6% in Q3 2025. This is because GME faces competitive pressures and invests in digital transformation, believing these will drive long-term growth—even if the division 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%, lower than previous years. This low rate is primarily due to tax benefits from international structuring and share-based compensation.