It was a great year for Take-Two Interactive Software (NASDAQ:TTWO) in 2018, but you couldn't tell it by the stock price. The video game publisher matched the 6% decline of the S&P 500, after gaining as much as 24% earlier in the year, due to the year-end market correction. Late in the year, the company released the long-awaited sequel to Red Dead Redemption to near-perfect reviews and achieved a record-breaking debut for the title.

Investors will want to see if the company can regain its momentum when it reports its third-quarter results before the market opens on Wednesday, Feb. 6. Let's review the second quarter, a few recent announcements, and the company's guidance for any insight into what to expect when Take-Two reports earnings.

A screenshot from Red Dead Redemption 2 with a man and a woman on horseback, with the man holding a pistol, his head cocked to the side as it listening.

Red Dead Redemption 2 sales will be reflected in this quarter's earnings for Take-Two. Image source: Take-Two.

Soaring past expectations

For its fiscal second quarter, Take-Two reported net revenue of $493 million, up 11% year over year. Net bookings of $583 million increased 1% versus the prior-year quarter, resulting in adjusted earnings per share of $1.05. These metrics easily surpassed analysts' consensus estimates, which called for net bookings of $550 million and adjusted EPS of $0.91. 

Check out the latest Take-Two Interactive earnings call transcript.

For the uninitiated, net bookings includes the net amount of products and services sold digitally or sold physically in stores during the period, and includes licensing fees, merchandise, in-game advertising, strategy guides, and publisher incentives. For accounting purposes, this includes money that customers have spent, but the company has not yet earned, and therefore isn't included in revenue.

Take-Two said the biggest contributors to its success during the quarter were NBA 2K19 and NBA 2K18, Grand Theft Auto Online and Grand Theft Auto V, NBA 2K Online 2, Dragon City and Monster Legends, and WWE SuperCard. You'll note that there's no mention of Red Dead Redemption 2 affecting the results, as it was released after the end of the quarter.

Recurrent consumer spending -- which includes purchases of virtual currency and add-on content, and in-game purchases -- was also robust, increasing 12% versus the prior-year quarter, and representing half of total net revenue. Digitally delivered net revenue, which also includes digital downloads of games, grew 18% year over year and now accounts for 73% of total net revenue.

Recent events

Rockstar Games, the division behind Red Dead Redemption, recently provided an update and a few free in-game giveaways. as the company works to complete the beta testing of Red Dead Redemption Online, though we don't yet know when the final game will be released.

An even bigger announcement came earlier this month. Take-Two said that it had signed a $1 billion deal with the National Basketball Association to expand the existing partnership that made the NBA 2K video game "the top-rated and top-selling NBA video game simulation series for the past 17 years," and has sold 86 million units to date. The seven-year deal comes during the 20th anniversary of the franchise and on the heels of last year's NBA 2K18 selling a series-best 10 million copies.

A screenshot of game play in NBA 2K19 with players on a basketball court.

Take-Two expanded its deal with the NBA. Image source: Take-Two.

A look ahead

Due primarily to the overwhelming early success of Red Dead Redemption 2, Take-Two increased its guidance for fiscal 2019. The company is now anticipating revenue of between $2.55 billion and $2.65 billion, resulting in year-over-year growth between 42% and 48%. The company is also guiding for income before taxes in a range of $236 million to $272 million, which would represent year-over-year growth between 73% and 99%.

Take-Two also provided an ambitious forecast for the fiscal third quarter (which ended Dec. 31), calling for net revenue between $1.1 billion and $1.15 billion, which would represent a year-over-year increase between 129% and 139%. The company is also expecting income before taxes in a range of $44 million to $58 million, up between 260% and 374% versus the year-ago period.

This financial release should provide our first look at the impact of the record-breaking release of Red Dead Redemption 2, as well as insight into the new pact with the NBA.

We'll know much more when Take-Two reports earnings before the market opens on Feb. 6.