Investors in Take-Two Interactive Software (NASDAQ:TTWO) are used to seeing the ups and downs of the video game industry. The maker of the Grand Theft Auto franchise has had plenty of success over its history, but coming into Wednesday's fiscal second-quarter financial report, Take-Two investors weren't certain that the company would be able to avoid a drop in earnings. The numbers that Take-Two posted showed that those concerns were warranted, but optimists hope that the company can keep up its forward momentum looking ahead.

Let's take a closer look at the latest from Take-Two Interactive Software and what the future might hold for the video game company.

Image source: Take-Two Interactive.

Take-Two knows how to play

Take-Two Interactive's fiscal second-quarter results showed signs of steady and substantial growth in its top line, but earnings remained under pressure. Revenue jumped 21% to $420.2 million, which just about doubled the growth rate that most investors were looking to see from Take-Two. Yet GAAP net income fell by a third from year-ago levels, and even after making allowances for extraordinary items, adjusted net income fell to $50.7 million. That worked out to $0.45 per share, which was down more than 10% compared to the second quarter of the previous fiscal year but was still better than the consensus forecast among those following the stock by $0.15 per share.

Taking a closer look at Take-Two's report, the key digital revenue figure continued to move in the right direction, albeit at a slower pace than the company's overall growth. Take-Two brought in $230.8 million from digitally delivered net revenue, which was up 14% from the previous year's period. The game maker said that the NBA 2K16, Grand Theft Auto V, and Grand Theft Auto Online games were the biggest contributors to its digital revenue. Recurring revenue accounted for 56% of digital revenue and almost a third of total net revenue, making up an increasingly important part of Take-Two's overall business.

However, Take-Two's costs also climbed, which resulted in part in the relatively modest earnings growth that the company experienced. Cost of goods sold jumped by more than two-fifths to $200 million on an adjusted basis. In addition, a huge jump of nearly half in selling and marketing costs sent overall overhead expenses higher, and that hurt Take-Two's bottom line.

Nevertheless, Take-Two CEO Strauss Zelnick wasn't unhappy with the way the company performed. "Our outstanding results were highlighted by the series' record-breaking launch of NBA 2K17, ongoing robust demand for Grand Theft Auto V, and increased recurrent consumer spending," Zelnick said. The CEO also pointed to better bookings growth, which climbed 28% from the year-ago quarter and pointed to increased retail excitement about the company's game offerings.

Can Take-Two keep winning?

Looking forward, Take-Two is happy about the way it's shaping up for the holiday season. As Zelnick put it, "Our holiday season is off to a great start, with a diverse array of successful new releases." Between Mafia III, WWE 2K17, and the latest Sid Meier's Civilization offering, Take-Two has high hopes for how it will finish the calendar year in the months to come.

Take-Two's guidance for the near future reflected some of its enthusiasm. The company said that it expects adjusted revenue in the fiscal third quarter of between $475 million and $525 million, and that should produce adjusted earnings of between $0.30 and $0.40 per share. Similarly, full-year fiscal 2017 revenue projections are now for between $1.75 billion and $1.85 billion, which is up considerably from previous projections. Full-year earnings on an adjusted basis of $2 to $2.25 per share also heartened investors who wanted to see evidence of continued strength.

Take-Two Interactive investors reacted quite favorably to the news, sending the stock higher by nearly 5% in after-hours trading following the announcement. Still, the real test will be how the holiday season goes for the company, but if it can keep up its positive momentum, Take-Two could see a new ramp-up in its fundamental growth going forward.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.