What happened

Shares of Take-Two Interactive Software (TTWO 0.01%) fell more than 10% on Friday morning after the video game giant posted weaker-than-expected results during the holiday quarter. The company sounded an optimistic tone about its pipeline and future prospects, but investors were in no mood to hear it.

So what

Take-Two, owner of game franchises including Grand Theft Auto, Civilization, and Red Dead Redemption, after markets closed Thursday reported fiscal third-quarter earnings of $1.43 per share, well short of the $1.75-per-share analyst consensus. Net bookings for the quarter came in at $888.2 million, short of analyst expectations and down 43% year over year.

Group of friends play video games together.

Image source: Getty Images.

Analysts had been expecting year-over-year comparisons to be difficult because Take-Two last year benefited from the launch of Red Dead Redemption 2, but they hadn't expected numbers to fall as much as they did. For the full fiscal year, Take-Two expects to earn between $3.38 and $3.58 per share. Analysts were expecting $4.86 per share.

Investors were already on edge due to the pre-earnings announcement that Dan Houser, one of the creative forces behind many of Take-Two's games, would be stepping away from the company.

Now what

Strauss Zelnick, chairman and CEO, in a statement said, "Take-Two's development pipeline over the coming years is the largest and most diverse in our history, including releases from our largest franchises, new IP and a broad mix of gameplay experiences, all designed to captivate and engage audiences well beyond initial release."

The question is how quickly that pipeline can produce a new hit that gets earnings, and the stock, moving in the right direction. Traders on Friday are betting that they can find better growth elsewhere.