Why GameStop’s (GME) 2026 Outlook Trades Better Than It Looks

As the video game retailer GameStop (GME) heads into earnings—scheduled for this time next week—the original meme stock is trying to recover from its underperformance this year. With plenty of ups and downs, the stock is still down more than 26% year-to-date at the time of writing.

Even though GameStop is undeniably becoming a more fundamentally sound company—with revenues returning to growth, consistent net profits, and a massive cash balance—the lack of guidance and the highly unpredictable moves from management add a layer of mystery to a thesis that Wall Street continues to struggle to decipher.

What is clear, however, is the company’s unorthodox strategy: reach operational breakeven, issue convertible debt to inflate the balance sheet, build a giant cash position, and potentially deploy some of that cash into Bitcoin. And all of this is enabled by its meme-stock status, which allows it to raise capital at unusually favorable terms.

As FQ3 approaches, and despite the recent pessimism, I believe GameStop enters the quarter in a much stronger position than the market gives it credit for—improving fundamentals, soft comps that work in its favor, an extraordinary cash position, and potential catalysts (Bitcoin and a pause in convertible-note issuance) that could reignite the short-term narrative. For that reason, I think the setup warrants a cautious Buy.

GameStop’s Unorthodox Turnaround

GameStop’s latest quarterly report, covering the July quarter, was notable because it marked a real turning point after a long period of decline. After seven consecutive quarters of revenue shrinkage, the video game retailer finally returned to meaningful sales growth, reporting $972 million in Fiscal Q2—an increase of almost 22% YoY.

On the bottom line, GameStop delivered its fifth straight quarter of net profit, driven by a very well-executed strategy of frugality and cost-cutting, with SG&A dropping sharply to $218 million (19% lower YoY in FQ2 alone). But this profitability was also heavily supported by interest income, which has already totaled $245.5 million over the last twelve months. The company’s “growth strategy,” however, extends beyond operations and straight into its balance sheet—bringing a rather unorthodox twist to the story.

GameStop essentially went from $1 billion in total cash and investments in May of last year to $8.7 billion today—thanks to massive equity offerings totaling $3.5 billion between the August and November quarters of 2024, plus two convertible-note offerings of $1.3 billion and $2.2 billion. In other words, GameStop is using convertibles to expand its balance sheet and reshape its strategic profile—not to drive operational growth, but to raise huge amounts of cash and potentially deploy capital into Bitcoin, something that is anything but conventional.

Reading the Setup for GameStop’s FQ3

Typically, GameStop’s third fiscal quarter (August to October) tends to be seasonally weak, as it serves as a bridge to the much stronger holiday season in Q4. Game retail usually sees a sequential dip in Q3, which is completely normal for the sector.

However, given the solid inflection we saw in FQ2, the market will be looking for signs of continued operational efficiency—namely, another reduction in SG&A and the preservation of positive net income, even if much of it is still driven by interest gains. I would also expect moderate or flat top-line growth versus the same period last year, along with a stable gross margin, largely supported by the company’s focus on higher-margin collectibles.

Consensus estimates (based on a single analyst) call for around $0.20 in EPS and $987.28 million in revenue for FQ3. That would imply very strong results—over 200% YoY EPS growth and 14.8% revenue growth. It does look a bit overly optimistic on the top line, but not entirely unrealistic.

The Bitcoin Question, and the Convertible One

The other two points that could draw attention and move the needle are a new Bitcoin acquisition or any hint of a third convertible-note offering in Q3.

The initial purchase of 4,710 Bitcoins was not an isolated event—especially after GameStop’s board formally approved Bitcoin as a treasury asset, which naturally suggests continuity. With the massive amount of cash raised and no operational need for it, a new Bitcoin purchase becomes a logical next step. And because GameStop’s playbook is now looking a lot like (Micro)Strategy’s (MSTR)—raise cash, buy Bitcoin, raise more cash, buy more Bitcoin—the pattern practically speaks for itself.

GameStop has already completed steps one and two, so the natural next move is simply step two again. Considering Bitcoin’s ~22.7% dip over the past three months, the probability of a new purchase rises meaningfully, and I expect this could influence GME’s stock direction depending on the size of the buy, mainly because the stock reacts strongly to narrative-driven catalysts.

On the other hand, given that GameStop executed massive convertible-note offerings in the last two consecutive quarters, I see a third one now as less likely. The company has already raised more than $6 billion through equity offerings and convertibles over the last five quarters—leaving it with a cash balance roughly eight times its annual revenue.

Beyond that, issuing too much convertible debt too quickly tends to scare off institutional investors, and three giant offerings in a twelve-month window could easily be interpreted as financial stress, potentially raising the terms for any future issuance. The current cost of capital is also less favorable, which makes a third offering even less attractive.

And most importantly, unless the goal is to buy more Bitcoin, management has no incentive to raise additional capital right now. The company already has enough cash for years, has no CapEx plans, and technically doesn’t need to expose itself to the scrutiny that a third issuance would bring. With a balance sheet already saturated with newly issued debt, I would view the appearance of a third convertible note—without a sizable Bitcoin purchase attached to it—as a bearish development for GME stock.

Is GME A Buy, Hold, or Sell, According to Wall Street Analysts?

The vast majority of Wall Street analysts have abandoned coverage of GME ever since the company started trading more like a “meme stock” and less like a fundamentals-driven business. Even so, the few analysts still covering it have stayed mostly neutral over the past three months, with seven Hold ratings during that period.

A Setup That Favors the Upside

Although momentum in GameStop’s stock has been bearish and typically volatile since it reported its best quarter in years in Fiscal Q2, the company still looks poised to impress again in its Fiscal Q3 report. I wouldn’t rule out another round of top-line growth, largely thanks to the soft comps baked into this quarter. I also believe that the likelihood of a new Bitcoin purchase following the recent pullback in the cryptocurrency—and the absence of another convertible-note issuance—leans positive for the stock in the short term.

While the inherent unpredictability of the thesis forces a more neutral stance over the medium to long term, I would argue that over the next three to six months, an asymmetric Buy call on GME makes sense here.