Ubisoft Earnings Delay Exposes Audit Errors and Covenant Breaches

- Audit uncovers financial reporting errors, prompting earnings delay. - Ubisoft seeks to resolve covenant breaches with Tencent’s €1.16 billion investment. On November 21, 2025, French video game developer Ubisoft delayed its half-year earnings report for the 2025-26 fiscal year after its auditors discovered significant financial reporting errors. The auditors found Ubisoft had misclassified certain partnership sales under IFRS 15, which required a restatement of financial results. This restatement caused the company to violate the leverage covenant ratio tied to specific loan agreements as of September 30, 2025. The earnings delay prompted a temporary suspension in the trading of Ubisoft's shares and bonds, after which the company released its financial data to reaffirm transparency with investors. On the same day, Bloomberg reported that Ubisoft plans to address the breach using proceeds from a €1.16 billion investment from Tencent. This funding gives Tencent a 25% stake in Vantage Studios, Ubisoft’s newly formed subsidiary, which will manage the company's flagship franchises, including *Assassin’s Creed*, *Far Cry*, and *Tom Clancy’s Rainbow Six*. To restore compliance with its loan agreements, Ubisoft will make an early repayment of roughly €286 million in outstanding debt. Despite these accounting issues, Ubisoft exceeded expectations in its second fiscal quarter. The company announced net bookings of €490.8 million, a 39% year-on-year increase that surpassed its forecast of €450 million. Ubisoft also reaffirmed its full-year financial outlook, underscoring its confidence amid ongoing restructuring initiatives. To combat rising costs, Ubisoft reduced its global workforce by about 1,500 employees in the year leading up to September 2025. This restructuring effort aims to achieve €100 million in fixed-cost savings by the end of the 2026-27 fiscal year.