--- ticker: TTWO company: TTWO filing_type: 10-K year_current: 2026 year_prior: 2025 risks_added: 1 risks_removed: 1 risks_modified: 3 risks_unchanged: 44 source: SEC EDGAR url: https://riskdiff.com/ttwo/2026-vs-2025/ markdown_url: https://riskdiff.com/ttwo/2026-vs-2025/index.md generated: 2026-06-01 --- # TTWO: 10-K Risk Factor Changes 2026 vs 2025 > Source: U.S. Securities and Exchange Commission (EDGAR) > Generated: 2026-06-01 > All data extracted directly from official filings. No hallucinated content. ## Summary | Status | Count | |--------|-------| | New risks added | 1 | | Risks removed | 1 | | Risks modified | 3 | | Unchanged | 44 | --- ## New in Current Filing: Our ability to use net operating loss and tax credit carryforwards to reduce future years' taxes could be substantially limited under Internal Revenue Code Sections 382 and 383 if we experience an ownership change as defined in the Internal Revenue Code Section 382. Section 382 of the Internal Revenue Code contains rules that limit the ability of a company to use its net operating loss and tax credit carryforwards in years after an ownership change, which is generally defined as any change in ownership of more than 50% of its stock over a three-year testing period. These rules generally operate by focusing on ownership changes among stockholders owning directly or indirectly 5% or more of the stock of a company and/or any change in ownership arising from a new issuance of stock by the company. If, as a result of future transactions involving our common stock, including purchases or sales of stock by 5% stockholders, we undergo cumulative ownership changes which exceed 50% over the testing period, our ability to use our net operating loss and tax credit carryforwards would be subject to additional limitations under Sections 382 and 383. Generally, if an ownership change occurs, the annual taxable income limitation on the use of net operating loss and tax credit carryforwards is equal to the product of the applicable long-term tax-exempt rate and the value of the company's stock immediately before the ownership change. Depending on the resulting limitation, a portion of our net operating loss and tax credit carryforwards could expire before we would be able to use them. Our inability to fully utilize any net operating losses or tax credit carryforwards to reduce the tax liability in the future could have a material and negative affect on our future financial position and results of operations. --- ## No Match in Current: If the use of mobile devices as game platforms and the proliferation of mobile devices generally do not increase, our business could be adversely affected. *This section from the 2025 filing does not have a high-confidence textual match in 2026. It may have been removed, merged, or substantially reworded.* Following our acquisition of Zynga, an increased percentage of our operations consists of mobile gaming. The number of people using mobile Internet-enabled devices has increased dramatically over time, and we expect that this trend will continue. However, the mobile market, particularly the market for mobile games, may not grow in the way we anticipate. Our 10 10 10 future success is substantially dependent upon the continued growth of the market for mobile games. In addition, we do not currently offer our games on all mobile devices. If the mobile devices on which our games are available decline in popularity or become obsolete faster than anticipated, we could experience a decline in revenue and may not achieve the anticipated return on our development efforts. Any such declines in the growth of the mobile market or in the use of mobile devices for games could harm our business, financial condition or results of operations. --- ## Modified: Changes in our tax rates or exposure to additional tax liabilities could adversely affect our earnings and financial condition. **Key changes:** - Reworded sentence: "Further, our effective tax rate or tax payable could be adversely affected by a variety of factors, including changes in the business, the mix and level of earnings between countries with differing statutory tax rates, changes in the realizability of deferred tax assets, changes in the availability of local tax incentives and production tax credits, changes in legislation that could scale back or eliminate tax credits for software development (which have benefitted our results in the past and whose benefits could be lessened or eliminated through such legislation in the future), changes in tax elections, and changes in applicable tax laws." - Reworded sentence: "On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into law." - Added sentence: "The American Rescue Plan Act of 2021 ("ARPA") provides for numerous tax and other stimulus measures, one of which will expand the limitation of compensation deductions for certain covered employees of publicly held corporations to also include the next five highly compensated employees." - Added sentence: "This limitation will be effective for us beginning April 1, 2027 and could have a significant adverse impact on our effective tax rate, tax payments, and financial condition in future periods." - Added sentence: "In addition, TCJA added BEAT to prevent the reduction of tax liability through certain payments made to foreign related parties." **Prior (2025):** We are a multinational corporation with operations in the U.S. and various other jurisdictions around the world. Accordingly, we are subject to tax in the U.S. and in various other jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes, and, in the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We are required to estimate future taxes. Although we currently believe our tax estimates are reasonable, the estimation process is inherently uncertain, and such estimates are not binding on tax authorities. Further, our effective tax rate or tax payable could be adversely affected by a variety of factors, including changes in the business, the mix and level of earnings between countries with differing statutory tax rates, changes in the realizability of deferred tax assets, changes in tax elections, and changes in applicable tax laws. Additionally, tax determinations are regularly subject to audit by tax authorities, and developments in those audits could adversely affect our income tax provision. Should our ultimate tax liability exceed estimates, our income tax provision and net income or loss could be materially affected. We have recorded a valuation allowance against the majority of our deferred tax assets due to uncertainty with respect to their realization. We expect to provide for a valuation allowance until other significant positive evidence arises that suggests that the benefits associated with the deferred tax assets are more likely than not to be realized. The Tax Cuts and Jobs Act of 2017 ("TCJA") eliminated the ability to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them pursuant to IRC Section 174. Although Congress is considering legislation that would modify the capitalization and amortization requirement, we have no assurance that the requirement will be deferred, repealed, or otherwise modified. It is possible that a change in the requirement could have a significant impact on our effective tax rate, tax payments, and financial condition in future periods. In addition, TCJA added the Base Erosion Anti-Abuse Tax ("BEAT") to prevent the reduction of tax liability through certain payments made to foreign related parties. BEAT imposes a minimum tax on taxpayers to prevent profit shifting from such payments. It is possible that we could be subject to BEAT and that it could have a significant adverse impact on our effective tax rate, tax payments, and financial condition in future periods. The American Rescue Plan Act of 2021 ("ARPA") provides for numerous tax and other stimulus measures, one of which will expand the limitation of compensation deductions for certain covered employees of publicly held corporations to also include the next five highly compensated employees. This limitation will be effective for us beginning April 1, 2027 and could have a significant adverse impact on our effective tax rate, tax payments, and financial condition in future periods. The Inflation Reduction Act of 2022 (the "Inflation Reduction Act") includes a corporate alternative minimum tax ("CAMT") of 15% on the adjusted financial statement income (AFSI) of corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period. The CAMT became effective for the fiscal year ended March 31, 2024. It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income. We estimate no tax liability relating to the CAMT for the current fiscal year. We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods. It is possible that these changes could have an adverse impact on our effective tax rate, tax payments, and financial condition in future periods. Additionally, a number of countries are actively pursuing fundamental changes to the tax laws applicable to multinational companies like us and agreed to implement a global minimum tax regime, referred to as Pillar Two, intended to conform to the new and evolving Organisation for Economic Cooperation and Development ("OECD") guidelines. Countries may enact Pillar Two differently than the OECD model rules and on different timelines. For instance, on December 15, 2022, the E.U. Member States formally adopted the E.U.'s Pillar Two Directive requiring E.U. members to implement legislation. On July 11, 2023, the U.K. similarly enacted legislation. Pillar Two is generally effective for years beginning on or after January 1, 31 31 31 2024 in the E.U. and U.K. Although the U.S. has not yet enacted Pillar Two legislation, many other countries have implemented similar legislation with varying effective dates in the future. Many aspects of Pillar Two became effective for the fiscal year ended March 31, 2025. It is possible that Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than the 15% minimum rate and could have an adverse impact on our effective tax rate, tax payments, and financial condition in future periods. Additionally, certain jurisdictions have modified or are seeking to modify their tax incentives to align with the Pillar Two criteria. The U.S. has not yet enacted Pillar Two legislation, including aligning certain tax incentives with Pillar Two requirements and there is a risk that the under taxed profits rules would allow foreign countries to tax U.S. companies on U.S. income. Changes, or the failure to change tax incentive provisions to be Pillar Two compliant could have an adverse impact. We will continue to monitor legislative and regulatory developments to assess potential impact. In addition, an increasing number of countries have enacted, or are considering enacting, revenue-based taxes on digital services. These digital services taxes target various business activities, including online advertising and, in some cases, video game sales. While the scope and applicability of these taxes often remains unclear, digital services taxes that ultimately apply to us could have an adverse impact on our business. **Current (2026):** We are a multinational corporation with operations in the U.S. and various other jurisdictions around the world. Accordingly, we are subject to tax in the U.S. and in various other jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes, and, in the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We are required to estimate future taxes. Although we currently believe our tax estimates are reasonable, the estimation process is inherently uncertain, and such estimates are not binding on tax authorities. Further, our effective tax rate or tax payable could be adversely affected by a variety of factors, including changes in the business, the mix and level of earnings between countries with differing statutory tax rates, changes in the realizability of deferred tax assets, changes in the availability of local tax incentives and production tax credits, changes in legislation that could scale back or eliminate tax credits for software development (which have benefitted our results in the past and whose benefits could be lessened or eliminated through such legislation in the future), changes in tax elections, and changes in applicable tax laws. Additionally, tax determinations are regularly subject to audit by tax authorities, and developments in those audits could adversely affect our income tax provision. Should our ultimate tax liability exceed estimates, our income tax provision and net income or loss could be materially affected. We have recorded a valuation allowance against the majority of our deferred tax assets due to uncertainty with respect to their realization. We expect to provide for a valuation allowance until other significant positive evidence arises that suggests that the benefits associated with the deferred tax assets are more likely than not to be realized. On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into law. OBBB includes significant provisions, including but not limited to (1) permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017 ("TCJA"), (2) modifications to the international provisions relating to Base Erosion Anti Abuse Act ("BEAT"), Global Intangible Low-Tax Income ("GILTI") and Foreign Derived Deduction Eligible Income ("FDDEI"), (3) permanent reinstatement deduction for domestic research expenditures and 100% bonus depreciation for certain qualified property, and (4) modifications to tax credits. The legislation has multiple effective dates, with certain provisions effective in the fiscal year ended March 31, 2026 and others implemented in future periods. We have estimated the accounting for income tax effects of the OBBB, which reduced our estimated U.S. cash tax liability. It did not, however, impact our U.S. deferred tax assets or liabilities since we continue to maintain a full valuation allowance against U.S. net deferred tax assets. We are continuing to evaluate the impact of OBBB on the Company. It is possible that these changes could have an adverse impact on our effective tax rate, tax payments, financial condition, or results of operations. The new tax law is complex and additional interpretive guidance may be issued that could affect the interpretations and assumptions we have made, as well as actions we may take as a result of OBBB. The Inflation Reduction Act of 2022 (the "Inflation Reduction Act") includes a corporate alternative minimum tax ("CAMT") of 15% on the adjusted financial statement income ("AFSI") of corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period. The CAMT became effective for the fiscal year ended March 31, 2024. It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income. We estimate no tax liability relating to the CAMT for the current fiscal year. We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods. It is possible that these changes could have an adverse impact on our effective tax rate, tax payments, and financial condition in future periods. The American Rescue Plan Act of 2021 ("ARPA") provides for numerous tax and other stimulus measures, one of which will expand the limitation of compensation deductions for certain covered employees of publicly held corporations to also include the next five highly compensated employees. This limitation will be effective for us beginning April 1, 2027 and could have a significant adverse impact on our effective tax rate, tax payments, and financial condition in future periods. In addition, TCJA added BEAT to prevent the reduction of tax liability through certain payments made to foreign related parties. BEAT imposes a minimum tax on taxpayers to prevent profit shifting from such payments. It is possible that we could be subject to BEAT and that it could have a significant adverse impact on our effective tax rate, tax payments, and financial condition in future periods. Additionally, a number of countries are actively pursuing fundamental changes to the tax laws applicable to multinational companies like us and agreed to implement a global minimum tax regime, referred to as Pillar Two, intended to conform to the new and evolving Organisation for Economic Cooperation and Development ("OECD") guidelines. Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than a 15% minimum rate. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two differently than the model rules and on different timelines. Although the U.S., and certain other countries, has 32 32 32 not yet enacted Pillar Two legislation, it is possible that Pillar Two could have an adverse impact effective tax rate, tax payments, and financial condition in future periods. On January 5, 2026, the OECD released new administrative guidance outlining a "side-by-side" arrangement following agreement on key elements by the OECD/G20 Inclusive Framework on Pillar Two. It provides new safe harbors for U.S. multinational companies which would exempt U.S.-parented groups from two of the three Pillar Two top up taxes, extend the current Transitional Country-by-Country Reporting Safe Harbor by one year through the end of our fiscal year ending March 31, 2028, and make the Simplified Effective Tax Rate Safe Harbor permanent. The tax law is complex and additional interpretive guidance may be issued that could affect the interpretations and assumptions we have made, as well as actions we may take as a result of additional Pillar Two guidance. We will continue to monitor legislative and regulatory developments to assess the potential impact of Pillar Two. In addition, an increasing number of countries have enacted, or are considering enacting, revenue-based taxes on digital services. These digital services taxes target various business activities, including online advertising and, in some cases, video game sales. While the scope and applicability of these taxes often remains unclear, digital services taxes that ultimately apply to us could have an adverse impact on our business. --- ## Modified: The development, use, and incorporation of artificial intelligence ("AI") into our products and within our industry may present operational, reputational, financial, and competition risks. **Key changes:** - Reworded sentence: "The use and incorporation of these technologies are in the early stages of wider-spread commercial use in our industry; this presents social and ethical issues that may result in legal and reputational harm and liability." - Reworded sentence: "The AI regulatory landscape is evolving, and we may be required to dedicate additional operational and financial resources to ensure compliance with new legal requirements." - Reworded sentence: "courts or other federal or state laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement, other intellectual property misappropriation, or uncertainty regarding copyright ownership of AI-generated assets." **Prior (2025):** The growth of AI technologies in our industry has influenced game production for developers and gaming experience for players. The use of this new and emerging technology, which is in its early stages of wider-spread commercial use, presents social and ethical issues that may result in legal and reputational harm and liability. Any integration of any AI technologies into our products or services may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, negative user perceptions as to automation and AI, or other complications that could adversely affect our business, reputation, or financial results. Uncertainty around new and emerging AI technologies, such as generative AI, may require additional investment in the development of appropriate protections and safeguards for handling the use of data with AI technologies, which may be costly and could increase our expenses. Further, intellectual property ownership surrounding AI technologies has not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation. While the impact of AI on our industry is still emerging and uncertain, to the extent our competitors successfully implement AI technologies into their products or services and we fail to adopt AI technologies effectively or experience delays in integrating these technologies into our operations, we may face significant risks to our competitive position, financial performance, and long-term growth prospects. **Current (2026):** The growth of AI technologies in our industry has influenced game production for developers and gaming experience for players. The use and incorporation of these technologies are in the early stages of wider-spread commercial use in our industry; this presents social and ethical issues that may result in legal and reputational harm and liability. Any integration of any AI technologies into our products or services may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, negative user perceptions as to automation and AI, or other complications that could adversely affect our business, reputation, or financial results. The AI regulatory landscape is evolving, and we may be required to dedicate additional operational and financial resources to ensure compliance with new legal requirements. For instance, the European Union ("E.U.") Artificial Intelligence Act entered into force in August 2024, with some provisions becoming enforceable between February 2025 and August 2027, subject to a likely delay of the Act's high-risk enforcement until December 2027. In the U.S., some states have enacted general purpose AI laws, while others have enacted use-case specific AI laws; other states may enact similar laws in the future, which will add complexity to our compliance efforts. This uncertainty may require additional investments in oversight and the development of protections and safeguards to ensure compliance, including to the extent any personal information is processed by such technologies. However, even with safeguards and oversight in place, the development and deployment of AI technologies may nevertheless pose risks. For example, our employees, contractors, vendors, or other partners may use AI tools in ways that are inconsistent with our policies or expectations, including by entering confidential, proprietary, personal, or regulated information into third-party AI services, and some AI providers may have limited operating histories or governance processes, any of which could compromise our information, expose us to legal or regulatory claims, or harm our reputation. Additionally, the data sets used to train the underlying models may be flawed, the AI tools may function in an unexpected manner, or generate biased, incorrect, or inappropriate content, which could negatively impact the performance or perception of our products and brand, incur regulatory scrutiny, or impose legal liability. Further, intellectual property ownership surrounding AI technologies has not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement, other intellectual property misappropriation, or uncertainty regarding copyright ownership of AI-generated assets. While the impact of AI on our industry is still emerging and uncertain, to the extent our competitors successfully implement AI technologies into their products or services more effectively or efficiently than we do, are able to imitate or compete more easily with our products, or if we fail to anticipate and respond to changing industry standards or consumer demand, or experience delays in integrating these technologies into our operations, we may face significant risks to our competitive position, financial performance, and long-term growth prospects. --- ## Modified: Increased competition for limited promotional support from retailers could affect the success of our business and require us to incur greater expenses to market our titles. **Key changes:** - Reworded sentence: "While digital sales are increasingly important to our business, for physical sales, retailers have limited promotional resources." - Removed sentence: "Competition for retail shelf space is expected to continue to increase, which may require us to increase our marketing expenditures to maintain desirable sales levels of our titles." - Reworded sentence: "Accordingly, we may not be able, or we may have to pay more than our competitors, to achieve similar levels of promotional support." - Removed sentence: "Such placement is subject to many risks similar to the physical shelf space risks discussed above." **Prior (2025):** While digital sales are increasingly important to our business, for physical sales, retailers have limited shelf space and promotional resources. Competition is intense among newly introduced interactive entertainment software titles for adequate levels of shelf space and promotional support, with most and highest quality shelf space devoted to those products expected to be best sellers. We cannot be certain that our new products will consistently achieve bestseller status. Competition for retail shelf space is expected to continue to increase, which may require us to increase our marketing expenditures to maintain desirable sales levels of our titles. Competitors with more extensive lines and more popular titles may have greater bargaining power with retailers. Accordingly, we may not be able, or we may have to pay more than our competitors, to achieve similar levels of promotional support and shelf space. Similarly, as digital sales increase in importance to our business, there is increasing competition for premium placements of products on websites. Such placement is subject to many risks similar to the physical shelf space risks discussed above. **Current (2026):** While digital sales are increasingly important to our business, for physical sales, retailers have limited promotional resources. Competition is intense among newly introduced interactive entertainment software titles for adequate levels of promotional support. We cannot be certain that our new products will consistently achieve bestseller status. Competitors with more extensive lines and more popular titles may have greater bargaining power with retailers. Accordingly, we may not be able, or we may have to pay more than our competitors, to achieve similar levels of promotional support. Similarly, as digital sales increase in importance to our business, there is increasing competition for premium placements of products on websites. 23 23 23 --- *Data sourced from SEC EDGAR. Last updated 2026-06-01.*