Video games have never been more popular, and Take-Two Interactive Software (NASDAQ:TTWO) has taken full advantage of the rise in interest in gaming to build its business. The company behind the Grand Theft Auto series of games has delivered big returns to shareholders, and even though some have grown skeptical of just how large Take-Two can grow, the pace of its expansion of revenue and profit has shown few signs of slowing down in the near future.

Coming into Tuesday's fiscal second-quarter financial report, Take-Two investors had high hopes that the game maker would be able to sustain its momentum and deliver another strong quarter. As we've seen at times in recent quarters, the extent of Take-Two's sales growth surprised even the most optimistic of investors, and the company believes that its efforts will remain successful well into the future. Let's take a closer look at Take-Two Interactive Software and what its latest performance says about its prospects.

Take-Two Interactive logos against different backdrops.

Image source: Take-Two.

Game over for Take-Two's critics

Take-Two's fiscal second-quarter results on the top line were stunning. GAAP revenue was up 6% to $443.6 million, but the company's preferred net bookings measure jumped 20% to $577 million, crushing expectations among investors for just $510 million. The company posted a modest GAAP loss, however, of $2.7 million. Even after accounting for stock-based compensation and other factors, adjusted earnings fell short of what most of those following the stock were hoping to see.

Investors focused their enthusiasm squarely on the pace of growth in key fundamentals. Recurrent consumer spending, which include virtual currencies, add-on content, and microtransactions, climbed by two-thirds compared to the prior year's fiscal second quarter. Those sources accounted for nearly half of Take-Two's overall revenue. Total digitally delivered net revenue climbed more than 30%. Take-Two's diverse lineup of games showed itself, as top contributors included the NBA 2K17 franchise as well as Grand Theft Auto, XCOM 2, and WWE SuperCard.

Take-Two also moved forward with new content releases to keep its customers interested in hot franchises. Free content updates for the online version of Grand Theft Auto supported the key franchise, and the launch of WWE 2K18 and NBA 2K18 helped sustain momentum for Take-Two's sports franchises.

CEO Strauss Zelnick was happy with Take-Two's numbers. "Our positive momentum continued in the second quarter," Zelnick said, "enabling Take-Two to deliver another period of better-than-expected results." He noted the best quarter yet for GTA Online as well as solid results from other key games in driving growth in units sold and recurring revenue.

Can Take-Two win again?

Take-Two still believes that fiscal 2019 will be a record year. In addition to the impending launch of Red Dead Redemption 2, Zelnick once again teased "a highly anticipated new title from one of 2K's biggest franchises."

As a result of its success, Take-Two once again increased its outlook for the full 2018 fiscal year. Fiscal third-quarter bookings should range between $610 million and $660 million, far above the $550 million that most of those following the stock were expecting to see. Take-Two expects a GAAP loss of $0.25 to $0.35 per share, but adjusted figures look much more favorable after taking into account the revenue that the game maker has to defer under current accounting rules. For the full year, the company raised its bookings guidance by almost $300 million, setting a new range of $1.93 billion to $2.03 billion. GAAP earnings of $0.55 to $0.80 per share again understate what most investors see as the company's true economic income.

Take-Two investors responded favorably to the upbeat guidance and solid future prospects, and the stock climbed 8% in after-hours trading following the announcement. New games are coming soon, and players are ready to play them -- and pay Take-Two for the privilege.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Take-Two Interactive. The Motley Fool has a disclosure policy.