Ubisoft shares drop as it uses more cash to develop games

(Reuters) - Ubisoft shares plunged around 20% on Thursday after the French video game maker said it would burn through more cash as it devotes extra time to developing some of its titles.

"We have decided to provide additional development time to some of our biggest productions," CEO Yves Guillemot said in an earnings statement late Wednesday, adding this should result in the release of "significant content" over the next two years.

The company behind the Assassin's Creed franchise said it expected to breakeven at the operating profit level for the year ending March 31, 2026, with net bookings flat year-on-year. It also said it expected to generate cash from next financial year.

Barclays analysts said they had expected Ubisoft to generate 96 million euros ($107 million) of free cash flow this financial year, and that the operating result guidance was also "well below" estimates.

"They have strong hopes for the years beyond but investors will believe in (free cash flow) when it is in front of them," they said in a note to clients.

Ubisoft reported on Wednesday a 20.5% drop in net bookings for the year to March 31, 2025, due to delayed releases and the underperformance of some of its leading titles.

During that year, the company delayed the latest Assassin's Creed instalment, "Shadows", several times and faced a lacklustre reception for another major title, "Star Wars Outlaws".

"We expected Assassin's Creed Shadows to turn around Ubisoft's financial performance in 2026 after recent weakness. The firm's outlook makes this seem unlikely," Morningstar analysts said.

The group has recently set up a subsidiary with China's Tencent to help with the costly development of Assassin's Creed and other major franchises, Far Cry and Tom Clancy's Rainbow Six.

Ubisoft shares were down 19.5% at 0823 GMT, heading for their biggest single-day drop in more than 11 years.

($1 = 0.8933 euros)

(Reporting by Piotr Lipinski. Editing by Jan Harvey and Mark Potter)