Marketing Discipline Pays Off as GDEV Improves Operating Cash Flow

GDEV Inc., a NASDAQ-listed company (GDEV), experienced a decline in bookings from both in-app purchases and advertising in the second quarter of fiscal 2026. Revenue for the quarter decreased by 22% compared to the same period in the previous fiscal year, reaching $94 million. However, SG&A expenses and platform commissions were lower than in the same quarter last year.

Despite this, the company reported a net profit of $20 million, up from $17 million in the second quarter of 2025. The reduction in selling and marketing costs by 38% was a significant factor in this improvement, reflecting the company's focus on efficient user acquisition through targeted performance marketing. The equity accounted associates contributed a $2 million profit share, reversing a $2 million loss share from the previous quarter.

Cash flow from operating activities turned positive, moving from a negative $10 million in Q2 FY25 to a positive $10 million in the reported period. However, several operating metrics weakened, including a 23% year-over-year decrease in monthly paying users and a 15% decline in the first half of the year. The decline in platform commissions was due to lower revenues recognized from PC platforms, with PC's share of bookings falling to 36% from 39%.

The Q2 adjusted EBITDA was $20 million, down from $22 million in the previous year. Despite a slight increase in the number of smart money managers invested in the company, institutional interest remained low. Among the notable institutional investors, Mubadala Investment holds the largest stake, representing 2.06% of outstanding shares.

The company's second-quarter report presents a mixed picture, with cost discipline and cash generation providing some confidence to investors, but lackluster results for bookings and paying users highlight ongoing challenges for the top line. Whether GDEV's selective marketing approach can offset the weakening player engagement remains to be seen.

While GDEV shows potential as an investment, other AI stocks with greater upside potential and less downside risk are suggested.